Finra Series-7 General Securities Representative ination (GS) Exam Practice Test

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Total 400 questions
Question 1

The Bubba Corporation has 900,000 of common outstanding and holds 100,000 shares as treasury stock. At the end of the third quarter $450,000 is distributed as a dividend on the common.

How much is the dividend per share?



Answer : A

$0.45. Since treasury stock does not receive dividends, divide $450,000 by the outstanding 100,000 shares to arrive at $0.45 per share.


Question 2

The total assets of a corporation are $840,000, of which $350,000 are current items. Total liabilities are $460,000, of which $290,00 are fixed obligations.

How much is the corporation's working capital?



Answer : C

$180,000. Subtract current liabilities from current assets. Current liabilities are $170,000 ($460,000 - $290,000).


Question 3

In a corporation's financial statements, earned surplus is also recognized as:



Answer : C

earnings retained after payment of dividends to shareholders. The other choices are clearly incorrect. Earned surplus is also referred to as retained earnings.


Question 4

Bubba held one XYZ July 30 listed call option when XYZ split 2 for 1.

What is the resulting position, Bubba has on the Option Clearing Corporation's record?



Answer : D

long two XYZ July 15 calls. Double the number of contracts and half the strike price. This is similar to XYZ shareholders doubling the number of shares they hold at the lower price.


Question 5

Which of the following option positions is indicative of the same class of option?



Answer : B

long one XYZ October 20 call and one XYZ January 30 call. Options in the same class are either both puts or both calls on the same security.


Question 6

In comparing the premium cost of a LEAPS option with a premium of a traditional option on the same security and same strike price, which of the following is generally true?



Answer : B

the LEAPS premium will be higher than the traditional option premium. Because LEAPS have a longer time until expiration than traditional options, the premium should be higher.


Question 7

Bubba buys one XYZ September 50 call at $7 and sells one XYZ September 60 call at $3. At that time, XYZ stock is at $55. Bubba has no other stock positions.

What is Bubba's maximum possible profit?



Answer : B

$600. The maximum profit is the difference between strike prices less the debit amount. The debit amount is $4 ($7 - $3). The difference between strike prices is $10 ($60 - $50). Multiply the $6 difference by 100, which is the number of shares on one option.


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Total 400 questions