Finra Series-7 Exam Practice Test Instant Access

Question 1

Which of the following best describes depreciation?

Atax credit available to investors in heavy equipment

Bdeductions from gross income to offset lower value of equipment

Creturn of principal from real estate investors

Dcapitalized an amortized maintenance costs

Answer : B

deductions from gross income to offset lower value of equipment. Depreciation is the deduction of costs for capital assets as their value declines.

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

If a customer fails to pay for securities purchased in a cash account, the member firm broker will do which of the following?

Agrant an extension for a bona fide reason

Bplace the securities temporarily in a general account

Cpurchase the securities for the firm's error account

Dliquidate the securities or otherwise cancel the transaction

Answer : D

liquidate the securities or otherwise cancel the transaction. Reg T requires the position closed if the customer fails to comply with the rules. An extension may be granted, but not by the member firm. Only an exchange or the FINRA grants extensions for bona fide reasons.

Question 7

A short sale can be made in which of the following types of accounts?

Aspecial cash account

Ba custodian account

Cmargin account

Dspecial memorandum account

Answer : C

margin account. A margin account is required for short sales.

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