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

Which of the following options positions is characteristic of a short straddle?



Answer : C

long one put and short one call. This is a short straddle. A position that is long one put and long one call is a long straddle.


Question 3

In early September, Bubba buys 100 shares of XYZ for $83 per share and simultaneously writes one XYZ March 90 call for $4.

What is the price for XYZ stock at which Bubba will breakeven?



Answer : D

$79. Bubba's breakeven is his cost of the stock less the premium he received ($83 - $4).


Question 4

Bubba is long spot Canadian dollars at 0.7400. If he wants to buy one put option on Canadian dollars with a strike price of 74 and a cost of $0.35, what is Bubba's breakeven price for Canadian dollars?



Answer : D

0.7435. The put protects against a decline in the exchange rate for Canadian dollars. However, the cost of the put raises the breakeven point to 0.7435 (0.7400 + 0.0035).


Question 5

Bubba buys one XYZ November 65 call at $3 and one XYZ November 65 put at $2. XYZ is trading at $72. The put expires and the call is closed at its intrinsic value.

What is the resulting profit?



Answer : A

$200. Since XYZ is trading at 72, a November 65 call has an intrinsic value of $700. A sale at that value compared to the cost of $300 is a profit of $400. Subtract the loss of $200 on the expired put to obtain the profit of $200.


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?



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:



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.


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Total 400 questions