Finra Series-7 Exam Questions Instant Access

Question 1

Bubba owns 200 shares of XYZ at $90, and wishes to hedge the position while generating income.

What is the best recommendation?

Asell calls

Bsell puts

Cbuy calls

Dbuy puts

Answer : A

sell calls. Calls are covered by the underlying stock. If the calls were exercised, the stock would be delivered to meet the obligation. The income also reduces the break-even of the stock.

Question 2

With the Regulation T requirement at 50%, a firm wishes to impose house rules that require a minimum equity of 40%.

Which of the following is true?

Athis cannot be implemented because the level is below Reg T

Bthis cannot be implemented since maintenance requirements are only 25% of equity for long positions

Cthis is permissible

Dthis action must be approved by the FRB and FINRA

Answer : C

this is permissible. Firms may establish house rules as long as they are at least as strict as the minimum maintenance requirements. Reg T only dictates an initial requirement and does not address minimum equity.

Question 3

Which of the following is not true about mutual funds and variable annuities?

Aeach is regulated under the Investment Company Act of 1940

Bthe holder of each must pay income taxes on the dividends received each year

Cthe registered representative must have FINRA registration to solicit either one

Dthe payout of each depends on the investment results of the securities owned in the portfolio

Answer : B

the holder of each must pay income taxes on the dividends received each year. Only the holder of mutual fund shares must pay income tax on annual dividends. This is ''not'' true of annuity owners. The other choices are true statements.

Question 4

Bubba buys a 5% municipal bond maturing in 15 years that is trading at a market price of 85.

What is the current yield?

A5.00%

B5.88%

C6.49%

D5.10%

Answer : B

5.88%. The current yield is the annual interest divided by the price. The bond will pay $50 of interest per year ($1,000 face amount times 5%). Dividing by the price of $850 equals 5.88%.

Question 5

Which of the following best describes depreciation?

Aa tax credit available to investors in heavy equipment

Bdeductions from gross income to offset lower value of equipment

Creturn of principal from real estate investments

Dcapitalized and amortized maintenance costs

Answer : B

deductions from gross income to offset lower value of equipment. The cost of equipment is deducted from gross income over the life of the equipment, as its value declines.

Question 6

Which of the following holders of unregistered stock is precluded from selling shares under Rule 144?

Aan institutional investor

Ban officer of the issuing corporation

Ca broker/dealer firm

Da holder of more than 10% of the outstanding stock

Answer : C

a broker/dealer firm. A broker/dealer cannot use Rule 144 when selling stock.

Question 7

What expression is used to describe the application of income and revenues derived from the operation of a facility financed from proceeds of a revenue bond?

Adebt service

Bflow of funds

Crevenue funding

Ddisbursement of priorities

Answer : B

flow of funds. This is the definition of the term flow of funds.

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