Finra Series-7 Exam Practice Test Instant Access

Question 1

A stock with a current P/E of 17 is selling at $74.50 per share.

What are the company's earnings in the trailing 12 months?

Aabout $4.28

B$6.20

C$1.70

Dimpossible to calculate from this information

Answer : A

about $4.28. Divide the market price by the P/E.

Question 2

XYZ Corporation earned $2 per share last year and is selling at $20 per share. If it earns $3 per share this year and its price/earnings ratio stays the same, its price will be:

A$20

B$25

C$30

D$60

Answer : C

$30. The current P/E is 10. If earnings are $3 and the P/E is still 10, the share price equals $30 ($3 x 10).

Question 3

Which of the following would be least useful to an analyst making a technical market report?

Aadvances and declines

Bnew highs and lows

Cthe short interest

Dpredictions of recession in the economy

Answer : D

predictions of recession in the economy. All of the other choices are technical market indicators. An economic forecast is ''fundamental'' market data.

Question 4

Which of the following situations is possible for a writer of a covered call option?

Abuying the underlying stock if the call is exercised

Bdepositing margin into his account

Cpurchasing a put option to hedge against unlimited loss potential

Dselling the security, he already owns

Answer : D

selling the security he already owns. A ''covered'' call is written on stock already owned.

Question 5

Which of the following statements is not true about exchange traded options?

Athey are adjusted for stock dividends

Bthey are adjusted for stock splits

Cthey are adjusted for cash dividends

Dthey are adjusted for reverse splits

Answer : C

they are adjusted for cash dividends. This is the statement that is ''not'' true.

Question 6

In June, Bubba bought 100 shares of XYZ at $35. In November, he bought a listed put in XYZ with a $35 strike price and a July expiration for a premium of $600.

If the option expires without being exercised, how is the premium expense treated by Bubba?

Aas a $600 capital loss

Bas a $600 capital gain

C$600 is added to his acquisition cost for the stock

D$600 is held in abeyance until the stock is eventually sold

Answer : A

a $600 capital loss. The amount of premium paid is the cost and the recovery is zero, resulting in a $600 capital loss.

Question 7

The expiration date of a listed option is:

Athe last day of the expiration month

Bthe third Saturday of the expiration month

Cthe Saturday following the third Friday of the expiration month

Dthe third Friday of the expiration month

Answer : C

the Saturday following the third Friday of the expiration month. It is NOT the third Saturday. The final day to trade options is the third Friday of the expiration month. The options expire the next da y.

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