Weekend Special Limited Time 70% Discount Offer - Ends in 0d 00h 00m 00s - Coupon code: 70percent

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

Demo: 120 questions
Total 400 questions

Series 7 General Securities Representative Qualification Examination (GS) Questions and Answers

Question 1

Which of the following best describes phantom income?

Options:

A.

income from deductions and tax credits

B.

the non-taxable portion of a distribution

C.

income received but not reported

D.

income reported but not received

Question 2

Bubba Corporation has 3,500,000 shares of common stock outstanding and its trading volume in the few weeks has been as follows:

Week 1 - 43,000

Week 2 - 30,900

Week 3 - 37,500

Week 4 - 42,600

Week 5 - 33,000 (the most recent week)

If an affiliated person wanted to liquidate some of his holding of 100,000 shares pursuant to SEC Rule 144, how many shares could he sell?

Options:

A.

35,000

B.

36,000

C.

37,400

D.

38,500

Question 3

Commercial paper is typically issued with a maturity date not exceeding:

Options:

A.

90 days

B.

6 months

C.

270 days

D.

1 year

Question 4

Which of the following registered investment companies normally sells with an appropriate commission added to the contract price?

Options:

A.

an open-end investment company

B.

a unit investment trust

C.

a face-amount certificate company

D.

a closed-end investment company

Question 5

Under an initial federal requirement of 70% equity, Bubba purchases 100 shares of XYZ at $40 per share and wishes to satisfy the margin call by delivering another listed security into his account.

He may do so by depositing stocks with a market value of:

Options:

A.

$9,333

B.

$5,714

C.

4,000

D.

$2,800

Question 6

Under Rule 415 a corporation may file a single registration statement with the SEC covering its anticipated financing need for the next:

Options:

A.

one year

B.

two years

C.

three years

D.

five years

Question 7

The accounting statement that represents a company’s financial position on a particular date is the:

Options:

A.

income statement

B.

balance sheet

C.

Profit and Loss

D.

cash flow statement

Question 8

Which of the following persons would consider annual reports of a corporation as the most important factor in making investment decisions?

Options:

A.

a technical analyst

B.

a chartist

C.

a follower of the Dow theory

D.

a fundamental analyst

Question 9

Bubba sells short 100 XYZ at $60 and makes the required Regulation T deposit of 50%. XYZ then rises I price to $65.

At this point what is the credit balance?

Options:

A.

$2,500

B.

$3,500

C.

$6,000

D.

$9,000

Question 10

Bubba buys $100,000 of US Treasury 10½ s of 31 on margin. If the current market price is 92.16, what is Bubba’s minimum deposit requirement?

Options:

A.

$4,625

B.

$5,550

C.

$10,000

D.

$25,000

Question 11

What is the loan value on a call option held in a customer’s margin account?

Options:

A.

0

B.

50%

C.

30%

D.

the compliment of the FRB initial margin requirement for listed stocks

Question 12

Which of the following municipal securities carries the full faith and credit of the US government for payment of interest and principal if the issuer’s funds are insufficient?

Options:

A.

general obligation bonds issued municipalities

B.

special tax bonds issued by municipalities

C.

revenue bonds issued by municipal port authorities

D.

new housing authority bonds issued by a public housing authority

Question 13

Which of the following does not issue debt securities that trade in the open market?

Options:

A.

Fannie Mae

B.

Freddie Mac

C.

Federal Reserve Banks

D.

Federal Land Banks

Question 14

A company may pay a declared dividend in which of the following ways:

Options:

A.

with stock in a subsidiary company

B.

with property

C.

with cash

D.

all of the above

Question 15

What is represented by the net investment income of an open-end investment company?

Options:

A.

net profits from the investment company operation

B.

net gains on sales of portfolio securities

C.

dividends, interest, and net gains on sales of securities

D.

net income from dividend and interest paid on securities in the fund portfolio

Question 16

Bubba Brokerage Corporation announces through its wire system that it has a large block of stock for sale. Customers purchasing the stock will not pay a commission. The block is crossed on the NYSE floor and is printed on the NYSE tape. This is called a:

Options:

A.

special order

B.

exchange distribution

C.

secondary distribution

D.

specialist block purchase

Question 17

An “accumulation unit” of a variable annuity is used to determine which of the following?

Options:

A.

the value of the annuitant’s contract before annuity payments begin

B.

the amount of annuity payments to be paid to the owner

C.

the amount to be passed to the annuitant’s beneficiary

D.

the amount returned to the annuitant upon redemption of the account

Question 18

Provisions of SEC Rule 145 normally apply to an exchange of one security for another as a result of:

Options:

A.

a stock split

B.

a change in par value

C.

a merger

D.

a “no-sale” ruling issued by the SEC

Question 19

Which of the following is not in the subscription agreement for a limited partnership offering?

Options:

A.

identification of the limited partners

B.

qualification of the limited partners for the subscription

C.

granting of power of attorney to the limited partners

D.

a record of sales of the partnership interests

Question 20

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

Options:

A.

buying the underlying stock if the call is exercised

B.

depositing margin into his account

C.

purchasing a put option to hedge against unlimited loss potential

D.

selling the security, he already owns

Question 21

In stabilizing a new issue, the manager may make a “syndicate penalty bid”. This means that:

Options:

A.

the underwriter will be penalized his profit on any securities repurchased from his clients

B.

all stock purchased will be returned to the issuing corporation

C.

the manager will charge the syndicate the value of the shares

D.

any shares repurchased are added to the treasury stock of the issuing corporation

Question 22

What is the maximum amount of gift to customers or other individuals related to the securities business that a registered representative is permitted to give?

Options:

A.

$500

B.

$200

C.

$100

D.

$50

Question 23

How many days after the settlement date must a broker/dealer “buy in” a customer who has failed to deliver securities?

Options:

A.

10 days

B.

15 days

C.

30 days

D.

45 days

Question 24

Bubba has a short margin account with equity of $15,000 and a credit balance of $28,000.

What is th e current NYSE minimum equity maintenance requirement on Bubba’s account?

Options:

A.

$3,900

B.

$4,500

C.

$3,250

D.

$3,750

Question 25

When a corporation issues a nonconvertible debenture, what is the effect upon its net worth?

Options:

A.

it increases

B.

if decreases

C.

if is unchanged

D.

none of the above

Question 26

The Bubba Insurance Company is not incorporated. It consists of Bubba and his two brothers as general partners, who maintain an active securities account in the name of the company. If one of the partners should suddenly die, what course of actions should be undertaken by the registered representative at the brokerage?

Options:

A.

freeze the account from further activity until a death certificate and new partnership agreement are furnished to the brokerage

B.

no special action is required because the death of a single partner does not terminate the partnership agreement

C.

distribute the assets in the account to the surviving partners

D.

execute sell orders but do not accept buy orders or distribute assets from the account until a new partnership agreement is provided to the brokerage

Question 27

Which of the following is not an attribute of US treasury bills?

Options:

A.

an unusually high degree of liquidity

B.

always sells at a discount to face value

C.

is most often issued with three-month, six-month, and one-year maturities

D.

interest is exempt from federal income taxes

Question 28

Bubba has a short margin account with a short market value of $22,000, a credit balance of $42,000, and SMA of $500.

What is the NYSE minimum equity maintenance for this account?

Options:

A.

$5,500

B.

$6,000

C.

$6,600

D.

$12,600

Question 29

Which of the following pairs of terms are synonyms in connection with most mutual funds?

Options:

A.

net asset value and offering price

B.

selling price and bid price

C.

net asset value and redemption price

D.

bid price and management fee

Question 30

A syndicate manager has just been informed that its bid has been accepted and all syndicate members are duly notified. Public information on the award will be most quickly available from:

Options:

A.

the Blue List

B.

the daily Bond Buyer

C.

the Wall Street Journal

D.

Munifacts

Question 31

If federal excise taxes were increased by the government, what would the typical investor do about his securities portfolio?

Options:

A.

sell treasuries and invest in municipal bonds

B.

sell corporate bonds and invest in treasuries

C.

sell municipal bonds and invest in high quality growth stocks

D.

take no action as a result of the tax increase

Question 32

The definition of debentures is:

Options:

A.

a loan secured by real estate

B.

collateralized securities

C.

a worthless security

D.

securities backed by the general credit of the issuers but no specific collateral

Question 33

The preferred stock of Greatest Technology Corporation has a $100 par and is convertible into four shares of common stock. The preferred is trading at 104.50. The preferred is callable at 101. If the common stock price is presently 27.89, which of the following actions would be a successful arbitrage:

Options:

A.

purchase 400 shares of common stock and sell 100 shares of preferred stock as “short exempt” (that is, the sale is exempt from the uptick rule)

B.

purchase the preferred stock and sell an appropriate amount of the common stock “short exempt”

C.

purchase both the common and the preferred stocks as a hedge against further market risk

D.

purchase the preferred stock and let it be called, which is inevitable at these market prices

Question 34

The principal underwriter of an open-end investment company is frequently called:

Options:

A.

participating investment advisor

B.

sponsor

C.

selling group member

D.

investment counselor

Question 35

Who is responsible for verifying that limited partners meet net worth and income requirements?

Options:

A.

the limited partners

B.

the general partner

C.

the sponsor

D.

the registered representative

Question 36

Common stocks for which of the following industries are most likely to decline in value when interest rates rise?

Options:

A.

automobile manufacturers

B.

airlines

C.

stock brokers

D.

public utility companies

Question 37

A four-letter symbol assigned to an issue is characteristic of an equity security that is:

Options:

A.

authorized for inclusion in the NASDAQ system

B.

listed on the NYSE

C.

admitted to unlisted trading privileges on a regional stock exchange

D.

trading in less than 100-share units on the American Stock Exchange

Question 38

Bubba want to buy a CMO. In general, how often should he expect to receive interest payments?

Options:

A.

every week

B.

every month

C.

every year

D.

at maturity

Question 39

Bubba and his wife, Bubbette, maintain a joint account with a brokerage firm as “joint tenants in common”. Bubbette calls a registered representative at the brokerage and places an order to sell 100 shares of XYZ, which is long in the account.

Which of the following statements is correct about this order?

Options:

A.

it may be entered

B.

it may be entered only after confirming with Bubba

C.

it must be approved by an officer of the brokerage prior to entry

D.

the order may not be accepted

Question 40

A market-maker has purchased a particular stock over a period of time for prices as high as $9 per share and as low as $3 per share. The average cost is approximately $6 per share. The current NASDAQ quote for the stock is 5 to 5.25. According to the FINRA Conduct Rules, the dealer’s offering price to the public should be based upon:

Options:

A.

the current market for the stock

B.

$3

C.

$9

D.

$6

Question 41

Which of the following may occasionally be purchased at a discount from net assets value?

Options:

A.

no-load funds

B.

closed-end funds

C.

open-end funds

D.

contractual plans

Question 42

Customers who engage in increased activity of wiring money from their account could indicate which of the following activities?

Options:

A.

Interpositioning

B.

Churning

C.

Crossing

D.

Money laundering

Question 43

Partnership democracy is:

Options:

A.

a prohibition against control by a single partner

B.

the sharing of management by all partners

C.

permission granted to the general partner to act outside the partnership agreement

D.

a synonym for silent partner

Question 44

In comparing the premium cost of a LEAPS option with a premium of a traditional option on the same security and same strike price, which of the following is generally true?

Options:

A.

the premiums will be approximately the same

B.

the LEAPS premium will be higher than the traditional option premium

C.

the premium for the traditional option will be higher than the LEAPS option premium

D.

LEAPS premiums do not consider time value

Question 45

Which of the following does not appear in a municipal syndicate letter to underwriters?

Options:

A.

the specific bid and offering terms of the issue

B.

the amount of each member’s participation

C.

the extent of the manager’s authority in directing the offering

D.

the duration of the syndicate account

Question 46

Under which of the following conditions are homeowners most likely to refinance existing mortgages?

Options:

A.

when interest rates rise

B.

when interest rates fall

C.

when interest rates are stable

D.

when the yield curve is inverted

Question 47

Which of the following is true about a customer with a frozen account?

Options:

A.

may not trade corporate securities under any circumstances

B.

may make purchases but not sales of corporate securities

C.

must deposit the full purchase cost before an order is executed

D.

must deposit sufficient cash for each transaction no later than the settlement date

Question 48

The maximum contribution an employer may make to a SEP-IRA is:

Options:

A.

$4,000

B.

$5,000

C.

25% of employee compensation

D.

100% of employee compensation

Question 49

Regulation T is set at 50%. Bubba’s account contains long positions in the following securities with the prices listed:

100 ABC $30

200 XYZ $70

200 QBB $40

200 KKK $25

Total market value = $30,000

Debit balance in the account = $12,000

Net equity balance of the account = $18,000

What is the buying power in Bubba’s account?

Options:

A.

$3,000

B.

$6,000

C.

$11,000

D.

$0

Question 50

In regard to discretionary accounts, which of the following statements is correct?

Options:

A.

the customer must approve each transaction in writing before the order is entered

B.

the customer must grant written authorization to the member firm to exercise discretion in the account

C.

the account must be accepted in writing by an officer of the member firm

D.

both B and C

Question 51

Bubba buys a bond issued at par with a 5% coupon that is convertible into common stock at $40. The bond increases in value by 20 points.

What is the conversion parity of the stock?

Options:

A.

$25

B.

$40

C.

$48

D.

$50

Question 52

When a member firm buys or sells securities directly as principal with a public customer, it is acting as:

Options:

A.

a dealer

B.

a broker

C.

an agent

D.

none of the above

Question 53

Most publicly owned securities are:

Options:

A.

listed

B.

over-the-counter

C.

unregistered

D.

exempt from SEC registration requirements

Question 54

In considering the fairness of a firm’s markup, the FINRA considers:

Options:

A.

dealer cost for the security

B.

financial condition of the client

C.

profitability of the member firm

D.

amount of the transaction

Question 55

Which of the following are considered to be discretionary orders under the FINRA Rules of Fair Practice?

Options:

A.

a customer instructs her registered representative to purchase stock in XYZ whenever the representative deems the price to be right

B.

a customer instructs her registered representative to sell 300 shares of ABC that is long in her account whenever the representative thinks the time and price are appropriate

C.

a customer gives a member firm a check for $25,000 and instructs the firm to purchase bank stocks and insurance company stocks when the prices appear to be favorable

D.

both A and C

Question 56

A public offering by an investment banker in which any securities not sold are returned to the issuer is known as:

Options:

A.

a firm commitment

B.

a best efforts offering

C.

an all or none offering

D.

a contingency offering

Question 57

The agreement between the members of a syndicate and the manager is known as the:

Options:

A.

agreement among underwriters

B.

underwriting agreement

C.

standby agreement

D.

selling agreement

Question 58

Which securities do not receive dividends?

Options:

A.

ADRs

B.

warrants

C.

common stock

D.

preferred stock

Question 59

A new stock offering by Bubba Corporation provides details that state between 1,000,000 and 1,500,000 shares will be sold depending upon market conditions. This offering is a:

Options:

A.

best efforts

B.

standby

C.

mini-max

D.

market potential

Question 60

What is the term applied to a classification of CMO securities having a stated maturity, average life, and estimated yield?

Options:

A.

tranche

B.

tier

C.

bracket

D.

bucket

Question 61

Smart Company, Inc., has cash it intends to use in six months for purchase of equipment. The most prudent investment during the six-month period is:

Options:

A.

common stock

B.

preferred stock

C.

treasury bills

D.

treasury bonds

Question 62

A group net order is one that benefits municipal syndicate members:

Options:

A.

equally

B.

according to their percentage participation in the account

C.

according to the number of designated orders they’ve received

D.

according to the number of presale orders they’ve received

Question 63

Which of the following is true about option prices?

Options:

A.

premiums on options for listed stocks are usually greater than on unlisted stocks

B.

premiums on options of higher-priced stocks are usually greater than on lower-priced stocks

C.

premiums on options of well-known companies are usually larger than on lesser-known companies

D.

premiums on options of volatile stocks are usually larger than on less volatile stocks

Question 64

Bubba holds 200 shares of common stock in a utility company and receives rights to subscribe to an additional 100 shares at $20. The utility company is raising $40 million of new capital.

How many shares of common stock for the utility company were outstanding prior to the rights offering?

Options:

A.

2,000,000

B.

4,000,000

C.

1,000,000

D.

40,000,000

Question 65

Which of the following stock exchanges is not registered with the SEC?

Options:

A.

Pacific Stock Exchange

B.

Boston Stock Exchange

C.

Chicago Stock Exchange

D.

all are registered

Question 66

Which of the following best describes depreciation?

Options:

A.

a tax credit available to investors in heavy equipment

B.

deductions from gross income to offset lower value of equipment

C.

return of principal from real estate investments

D.

capitalized and amortized maintenance costs

Question 67

Municipal bond brokers generally conduct the following:

Options:

A.

trade for dealer banks

B.

trade for non-bank dealers

C.

trade for their own account

D.

both A and B

Question 68

All sales literature and advertising relating to investment company shares prepared by members of FINRA must be filed for review with which of the following?

Options:

A.

Anti-Trust Division of the Justice Department

B.

SEC

C.

Federal Reserve Board

D.

FINRA

Question 69

Which of the following will not result in termination of a limited partnership?

Options:

A.

transfer of ownership of a limited partnership interest

B.

sale or transfer of partnership assets

C.

majority vote of the limited partners to end the partnership

D.

arrival of the termination date established in the partnership agreement

Question 70

When an index option is exercised, settlement is made by:

Options:

A.

delivery of the underlying securities

B.

delivery of a futures contract

C.

cash

D.

any of the above

Question 71

The net investment income of an open-end investment company represents:

Options:

A.

net income from dividends and interest paid on securities in the fund’s portfolio

B.

net gains on sales of portfolio securities

C.

dividends, interest, and net gains on sales of securities

D.

net profits from the investment company operation

Question 72

In order to determine the amount of estate tax due, if any, the assets of a decedent’s estate are valued as of the date of death. A second evaluation is then made:

Options:

A.

three months after the date of death

B.

six months after the date of death

C.

one year after the date of death

D.

at any time up to six months after the date of death

Question 73

In terms of depletion, percentage depletion is better than cost depletion because it:

Options:

A.

permits recovery of more than the original cost

B.

is limited to production

C.

is more widely available

D.

is not subject to recapture

Question 74

Which of the following municipal bonds may be grouped under the classification of “revenue bonds”?

Options:

A.

special tax

B.

new housing authority

C.

general obligation

D.

limited tax

Question 75

Which of the following is not a practice of a mutual fund custodian?

Options:

A.

changing shareholder registrations on the fund’s records

B.

disbursing dividends and capital gains to the fund’s shareholders

C.

lending the fund’s securities to banks or broker/dealers

D.

maintaining sales records for the fund’s underwriter

Question 76

A corporation makes a rights offering to raise $10 million of new capital by issuing one million shares of common stock. If it already has six million shares outstanding at the time of the offering.

What subscription ratio is the corporation establishing for each new share?

Options:

A.

6 rights per share

B.

10 rights per share

C.

6 million rights per share

D.

10 million rights per share

Question 77

Big Easy Investment Banking, Inc., is participating in an Eastern account underwriting of $10 million of municipal bonds by agreeing to underwrite 10% of the issue. One week later, $4 million remains unsold but Big Easy has distributed $1.5 million of bonds.

What is the liability of Big Easy remaining in the account?

Options:

A.

$0

B.

$400,000

C.

$600,000

D.

$1,000,000

Question 78

A front-end loan mutual fund plan is most suitable for:

Options:

A.

a voluntary accumulation plan

B.

a contractual plan

C.

an automatic withdrawal plan

D.

an optional withdrawal plan

Question 79

Which of the following does not decrease basis?

Options:

A.

cash or property paid out

B.

depletion of real property

C.

losses

D.

income from extraordinary sources

Question 80

An advertisement for a CMO security by a member of FINRA should disclose which of the following?

Options:

A.

the exact yield investor will earn

B.

the yield based upon the prevailing discount rate

C.

that the stated yield is an estimate that may vary passed upon prepayments and market factors

D.

that the yield may be greater than the stated percentage but never less

Question 81

Regulation T is set at 50%. Bubba’s account contains long positions in the following securities with the prices listed:

100 ABC $30

200 XYZ $70

200 QBB $40

200 KKK $25

Total market value = $30,000

Debit balance in the account = $12,000

Net equity balance of the account = $18,000

Bubba wants to buy 100 shares of DUM at $30 per share and 100 shares of OUT at $120. How much additional money must be deposited?

Options:

A.

$6,000

B.

$7,000

C.

$4,500

D.

$1,500

Question 82

Which of the following statements incorrectly describes US securities markets?

Options:

A.

a capital market comprised of long-term debt and equity issues

B.

a money market comprised of short-term debt and equity issues

C.

a municipal market comprised of tax-exempt issues of state and local governments

D.

a government and agency market comprised of both short-term and long-term debt issues

Question 83

A case of leverage is:

Options:

A.

selling common stock short and buying warrants for the equivalent number of shares followed by subscribing to the shares and covering the short

B.

borrowing at 6% and investing the funds at 10%

C.

buying stock on the NYSE and later selling it the same day on the CBOE

D.

redeeming a convertible bond before maturity

Question 84

Convertible preferred stock has all of the following characteristics except:

Options:

A.

a lower dividend rate than non-convertible preferred

B.

a dilution of earnings if converted into common stock

C.

a requirement for shareholders to always accept the call price when called

D.

required dividend payments to shareholders before any dividends are paid to holders of common stock

Question 85

An excerpt from a recent tombstone ad reveals bonds offered publicly at 101.

Why were they priced at a premium?

Options:

A.

to enable investors to establish a tax loss when the bonds are redeemed at maturity

B.

to reflect prevailing credit ratings and market conditions for the issuer

C.

to provide the issuer with a larger deduction from pre-tax earnings for higher than usual interest payments

D.

to comply with SEC rules mandating such pricing for debt issues maturing in the year 2000 and thereafter

Question 86

As a general rule, when a partnership is terminated, in what order are assets distributed?

Options:

A.

general creditors, secured lenders, limited partners, general partners

B.

secured lenders, limited partners, general creditors, general partners

C.

secured lenders, general creditors, limited partners, general partners

D.

general creditors, general partners, limited partners, secured lenders

Question 87

Which of the following activities by a limited partner may subject the partner to unlimited liability?

Options:

A.

participating in management of the partnership

B.

committing the partnership in any manner

C.

making loans beyond those specified in the partnership agreement

D.

all of the above

Question 88

Reinvestment of dividends and distributions from investment company shares:

Options:

A.

results in compounding of shares, which can be an important factor for investment growth

B.

permits deferment of all federal income taxes on dividends and distributions until the investment is liquidated

C.

makes possible the purchase of fund shares at a price below net asset value

D.

all of the above

Question 89

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

Options:

A.

advances and declines

B.

new highs and lows

C.

the short interest

D.

predictions of recession in the economy

Question 90

Which of the following statements is pertinent to closed-end investment companies?

Options:

A.

they are continuously issuing new shares

B.

they are prohibited from issuing any securities other than common stock

C.

their shares are traded at prices determined in the open market

D.

their shares are redeemable at net asset value

Question 91

Municipal syndicate allocation procedures are described in which of the following?

Options:

A.

underwriting agreement

B.

syndicate account letter

C.

agreement among the underwriters

D.

official statement

Question 92

How much currency is one mil worth?

Options:

A.

one-tenth of one cent

B.

one-tenth of $1

C.

one-tenth of $100

D.

one-tenth of $1,000

Question 93

Which of the following statements regarding mutual funds is true?

Options:

A.

the custodian can also be the transfer agent

B.

the sponsor receives a management fee based on the fund’s total assets

C.

the terms “management company” and “investment advisor” are interchangeable

D.

the management company receives a portion of the sales load for managing the fund assets

Question 94

Crossover is best defined as:

Options:

A.

the point at which the program becomes profitable

B.

the point at which income exceeds deductions

C.

the fact that there are more general partners than limited partners

D.

the profit of limited partners exceeding profit of general partners

Question 95

An employer profit sharing plan may be described as:

Options:

A.

an income tax deduction

B.

a retirement plan

C.

a tax deferral plan

D.

all of the above

Question 96

What is the possible reward for investing in raw land?

Options:

A.

deferred income

B.

large deductions

C.

potential capital appreciation

D.

lack of investment risk

Question 97

In the distribution of a new issue underwriters or selling group member are prohibited from:

Options:

A.

selling to the public at the so-called public offering price

B.

selling to another broker or dealer who needs to fill an accommodation order

C.

withholding blocks of a new issue in the member’s account

D.

all of the above

Question 98

Bubba Corporation has a registered public offering of 500,000 shares at $36. Of these, 300,000 shares were authorized by unissued and 200,000 shares were sold on behalf of an affiliated person.

What is evident from this information?

Options:

A.

the entire proceeds of the offering are a primary offering accruing to the corporation

B.

300,000 shares are identified as a primary distribution

C.

60% of the proceeds are paid to the corporation and the balance accrues to the affiliated person

D.

both B and C

Question 99

The term “secondary market” refers to:

Options:

A.

trading in issues of low quality

B.

trading in outstanding issues

C.

issues that banks are not permitted to underwrite

D.

private placements

Question 100

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?

Options:

A.

refuses the order

B.

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

C.

requires a 25% down payment before executing the order

D.

executes the order at its own risk

Question 101

Bubba is eligible for a Roth IRA. He may convert his SEP-IRA to a Roth IRA:

Options:

A.

without restriction

B.

only after the two-year holding period

C.

after a 90-day holding period

D.

not ever

Question 102

Bubba decides to buy equity securities. Which of the following statements is always true about what Bubba is buying?

Options:

A.

they are readily marketable

B.

they have a fixed rate of return

C.

they have a fixed maturity date

D.

they are not secured by collateral

Question 103

Which of the following does not affect the public offering price of a new issue?

Options:

A.

anticipated earnings of the issuer in the next year

B.

dividend projections for the next year

C.

the book value of the issuer

D.

the selling group’s determination of value in the prevailing market conditions

Question 104

Which of the following is not an intangible drilling cost?

Options:

A.

salaries

B.

supplies and fuel

C.

machinery and pipe

D.

repairs

Question 105

A limit order is best describes as an order:

Options:

A.

to buy at a specific price or lower

B.

to sell at a specific price or higher

C.

to be executed at a specific price or better

D.

that is in effect for only one day

Question 106

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

Options:

A.

the amount of the issue

B.

the type of industry in which the issuer is engaged

C.

the past record of the issuing corporation

D.

all of the above

Question 107

A buy-in of a customer’s sale transaction is mandated if the securities have not been received by the broker/dealer within how many business days following the settlement date:

Options:

A.

5

B.

10

C.

20

D.

30

Question 108

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:

Options:

A.

the FINRA

B.

the issuing corporation

C.

the syndicate manager

D.

the SEC

Question 109

Which of the following is true of treasury stock?

Options:

A.

it has voting rights

B.

it is entitled to receive dividends

C.

it is stock that has not been issued

D.

it is stock that has been reacquired by the issuer

Question 110

Which of the following would not be subject to the holding period restrictions under Rule 144?

Options:

A.

restricted stock acquired via investment letter

B.

restricted stock acquired via stock options plan

C.

restricted stock acquired via private placement

D.

restricted stock acquired via open market purchase

Question 111

The market theory stating that the small investor is usually wrong is called the:

Options:

A.

advance-decline theory

B.

odd-lot theory

C.

Dow theory

D.

short interest theory

Question 112

In a corporation’s financial statements, earned surplus is also recognized as:

Options:

A.

gross profit

B.

operating income after payment of interest expense

C.

earnings retained after payment of dividends to shareholders

D.

net income

Question 113

Which of the following must be true in order for an offering to qualify as an intrastate offering under Rule 147?

Options:

A.

80% of the proceeds of the offering must be used in that state

B.

80% of the corporation’s assets must be located in that state

C.

80% of the corporation’s revenue must be earned in that state

D.

all of the above are required

Question 114

A mutual fund letter of intent may permissibly be predated for a period of time up to:

Options:

A.

5 business days

B.

10 business days

C.

90 calendar days

D.

13 months

Question 115

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

Options:

A.

grant an extension for a bona fide reason

B.

place the securities temporarily in a general account

C.

purchase the securities for the firm’s error account

D.

liquidate the securities or otherwise cancel the transaction

Question 116

Mutual fund salespersons may not represent that a product is like of safer than:

Options:

A.

an insurance policy

B.

a fixed annuity

C.

a corporate debt instrument

D.

all of the above

Question 117

Upon opening a new account for a customer, a registered representative should:

Options:

A.

inquire about age

B.

investigate the customer’s credit rating

C.

determine what is suitable for the customer based upon his financial background

D.

all of the above

Question 118

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?

Options:

A.

as a $600 capital loss

B.

as 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

Question 119

Bubba held one XYZ July 30 listed call option when XYZ split 2 for 1.

What is the resulting position, Bubba has on the Option Clearing Corporation’s record?

Options:

A.

long one XYZ July 30 call

B.

long one XYZ July 30 call and short one XYZ July 30 call

C.

long two XYZ July 30 calls

D.

long two XYZ July 15 calls

Question 120

In mid-September, Bubba sells one XYZ February 50 call at $6. It subsequently expires without being exercised.

How is the premium taxed?

Options:

A.

Bubba’s cost of the underlying stock is reduced

B.

the $600 premium is a capital gain

C.

the $600 premium constitutes ordinary income

D.

the $600 premium is rolled over into another XYZ call with the next longest expiration date

Demo: 120 questions
Total 400 questions