Finra Series-7 Exam Practice Test Instant Access

Question 1

An investment company incapable of issuing a long-term debt instrument is:

Aa face-amount certificate company

Ba unit investment trust

Ca closed-end investment company

Dan open-end investment company

Answer : D

an open-end investment company. By definition, open-end funds may not issue senior securities. They only issue ''voting stock''.

Question 2

Bubba's order to purchase investment company shares must be executed at a price based upon the net asset value of the shares:

Anext computed after receipt of the order by the dealer

Blast computed before receipt of the order by the dealer

Ccomputed the previous day at the close of the NYSE

Dcomputed the same day the order is received by the dealer

Answer : A

next computed after receipt of the order by the dealer. This is called ''forward pricing''.

Generally, the price is computed as of the close of the market on the day of the order. However, if the order is received after this computation, the order is executed based upon the next day calculation.

Question 3

The gross spread in a new issue depends upon which of the following?

Athe amount of the issue

Bthe type of industry in which the issuer is engaged

Cthe past record of the issuing corporation

Dall of the above

Answer : D

all of the above. The gross spread (or ''underwriting spread'') depends upon all of these factors.

Question 4

Bubba buys municipal bonds with a $100,000 principal amount at 89 on margin. His account has no cash or securities.

What is his minimum required deposit?

A$5,080

B$13,350

C$22,500

D$50,000

Answer : B

$13,350. Munis are not subject to Reg T. The NYSE maintenance requirement on munis is the greater of 15% of the market value or 7% of the principal amount.

Question 5

Bubba has a cash account and fails to make full and prompt payment for a purchase. The broker liquidated the transaction. Two weeks later, Bubba places another buy order for 100 shares of XYZ.

What does the broker do?

Arefuses the order

Bhandles the order after obtaining a promise from Bubba to effect prompt settlement

Crequires a 25% down payment before executing the order

Dexecutes the order at its own risk

Answer : A

refuses the order. Reg T requires that under these circumstances the account must be frozen for 90 days. Any trade prior to that, requires cash in advance.

Question 6

In the offering of new securities, members of the syndicate are permitted to sell to other dealers less the reallowance. The amount of the reallowance is determined by:

Athe FINRA

Bthe issuing corporation

Cthe syndicate manager

Dthe SEC

Answer : C

the syndicate manager. The reallowance as well as the selling concession given to selling group members are determined by the managing underwriters.

Question 7

Who owns a corporation?

Athe owners of debentures

Bthe holders of common stock

Cthe holders of common stock and the holders of preferred stock

Dthe government

Answer : C

the holders of common stock and the holders of preferred stock. The holders of all classes of stock are the owners. Each stock class has separate privileges, but all represent ownership. Even if the government is an owner, it holds shares of stock.

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