Finra Series-7 Exam Questions Instant Access

Question 1

Convertible preferred stock has all of the following characteristics except:

Aa lower dividend rate than non-convertible preferred

Ba dilution of earnings if converted into common stock

Ca requirement for shareholders to always accept the call price when called

Drequired dividend payments to shareholders before any dividends are paid to holders of common stock

Answer : C

a requirement for shareholders to always accept the call price when called. All of the other statements are true ''except'' this one. Convertible preferred shareholders have a n opportunity to convert to common stock. There is no forced call price.

Question 2

Under an initial federal requirement of 70% equity, Bubba purchases 100 shares of XYZ at $40 per share and wishes to satisfy the margin call by delivering another listed security into his account.

He may do so by depositing stocks with a market value of:

A$9,333

B$5,714

C4,000

D$2,800

Answer : A

$9,333. If Bubba were depositing cash, he would need $2,800 (70% x $4,000). Since he is depositing stock, he would have to deposit enough with loan value of $2,800. To arrive at this, divide $2,800 by the 30% loan value to obtain $9,333.

Question 3

Which of the following statements is not true about a letter of intent?

Athe letter of intent has a maximum duration of 13 months

Ba shareholder may not redeem any shares for 13 months

Ca letter of intent may be backdated by 90 days

Da certain portion of shares purchased are held in escrow until the terms of the letter are met

Answer : B

a shareholder may not redeem any shares for 13 months. Redemptions are permissible at any time. However, since escrowed shares are set aside to cover the difference in sales loads based on terms of the letter, redemptions prior to 13 months may liquidate the escrow account and thus return to the investor 100% of net asset value.

Question 4

How many days after the settlement date must a broker/dealer ''buy in'' a customer who has failed to deliver securities?

A10 days

B15 days

C30 days

D45 days

Answer : A

10 days. The customer has 10 days to deliver before the broker will buy in the account.

Question 5

Which of the following sets of prices is that of a closed-end investment company?

A$7.50 $8.10

B$10.10 $11.00

C$28.14 $27.75

D$20.15 $21.85

Answer : C

NAV=$28.14 and Asked Price=$27.75. In this case the ask price is less than NAV, which is never true of an open-end investment company.

Question 6

To qualify as an intrastate offering under SEC Rule 147, which of the following is true of the issue?

Ait must be approved by the SEC

Bit must be sold only to bona fide residents of one state

Cit cannot exceed $1,500,000 in value

Dit must consist of common stock only

Answer : B

it must be sold only to bona fide residents of one state. Under Rule 147 intrastate offerings are sold only to residents of one state and cannot be sold outside that state for nine months. All the other choices are incorrect about the rule.

Question 7

Smart Company, Inc., has cash it intends to use in six months for purchase of equipment. The most prudent investment during the six-month period is:

Acommon stock

Bpreferred stock

Ctreasury bills

Dtreasury bonds

Answer : C

treasury bills. The most prudent investment provides the cash in the six-month short-term period. Common and preferred stock are subject to significant price uncertainty. US treasury issues provide the most safety of principal. Treasury bonds have longer maturities than the six-month terms available for treasury bills.

Finra General Securities Representative Examination (GS) Series-7 Exam Questions