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

The price an investor pays for a listed option is called the



Answer : C

premium. That's the term for the option cost.


Question 7

At the time it underlying stock is trading at 48, Bubba buys a listed call option with a $50 strike price for $300. At what minimum price must that stock trade for Bubba to recover his investment (ignoring commission and taxes)?



Answer : D

$53. The breakeven price on the call is the premium plus the strike price. Since the premium is $3 per share, the breakeven price is $53.


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Total 400 questions