Series 7 Exam Questions fully solved & updated

A registered principal or registered representative must retake the qualifying exam if his or her registration has been revoked or terminated for a period of ____________ or more. A.) 1 year B.) 5 years C.) 3 years D.) 2 years - ANSWER-D.) 2 Years A member may maintain a representative registration for which of the following persons?I. A person who performs legal, compliance, or internal audit functions for the memberII. A person who performs back-office functions for the memberIII. A person who is no longer functioning as a representativeIV. A person who performs administrative functions for registered personnel A.) I, II, III, IV B.) I, II, III C.) I, II & IV D.) I & II only - ANSWER-C.) I, II & IV Which of the following is true regarding persons who are to function as research analysts? A.) None of these answer choices. B.) They must be registered as a general securities representative and pass a qualifying examination for research analysts. C.) They must be registered as a general securities representative only. D.) They must pass a qualifying examination for research analysts only. - ANSWER-B.) They must be registered as a general securities representative and pass a qualifying examination for research analysts. Within how many days must a member report to FINRA if the member or an associated person of the member is the subject of a written customer complaint involving allegations of theft or misappropriation of funds? A.) 10 business days B.) 15 calendar days C.) 20 business days D.) 30 calendar days - ANSWER-D.) 30 calendar days Which of the following are considered institutional investors? A.) A governmental entity B.) An employee benefit plan that meets the requirement of Section 403(b) or Section 457 of the Internal Revenue Code and has at least 100 participants C.) A qualified plan as defined in Section 3(a)(12)(C) of the Exchange Act and that has at least 100 participants D.) All of these answer choices - ANSWER-D.) All of these answer choices An options contract that gives the holder the right to purchase the number of shares of the underlying security is a _________________. A.) Covered B.) Uncovered C.) Put D.) Call - ANSWER-D.) Call Which of the following registered principals may approve the purchase of a variable annuity?I. General Securities Sales Supervisor (Series 9/10)II. General Securities Principal (Series 24)III. Investment Company Products/Variable Contracts Principal (Series 26) A.) I, II, & III B.) III only C.) I only D.) I & III - ANSWER-A.) I, II, & III Correspondence means any written communication that is distributed to _____ or fewer retail investors within any ______-day period. A.) 10 or fewer investors within any 10-day period B.) 15 or fewer investors within any 20-day period C.) 25 or fewer investors within any 30-day period D.) 30 or fewer investors within any 25-day period - ANSWER-C.) 25 or fewer investors within any 30-day period Which of the following persons would not be included in a research analyst's household? A.) A mother, financially dependent on the research analyst, living at the same address. B.) A nonrelated, financially independent individual who resides at the same address as the research analyst. C.) Parents who have a different principal residence than the research analyst. D.) A spouse and children who share the same principal residence as the research analyst. - ANSWER-B.) A nonrelated, financially independent individual who resides at the same address as the research analyst. What is the Time of Day Restriction when placing cold calls (telemarketing)? A.) Before 8:00 a.m. and after 8:00 p.m. (local time of the called party's location) B.) Before 8:00 a.m. and after 9:00 p.m. (local time of the called party's location) C.) Before 8:00 a.m. and after 8:00 p.m. (local time of the caller's location) D.) Before 8:00 a.m. and after 9:00 p.m. (local time of the caller's location) - ANSWER-B.) Before 8:00 a.m. and after 9:00 p.m. (local time of the called party's location) What are the three General Telemarketing Requirements? A.) Time of Day Restriction, Firm-Specific Do-Not-Call List, and State Do-Not Call List B.) State Do-Not-Call List, National Do-Not-Call List, and Firm-Specific Do-Not-Call List C.) Time of Day Restriction, National Do-Not-Call List, and Firm-Specific Do Not Call List D.) Time of Day Restriction, State Do-Not-Call List, and National Do-Not-Call List - ANSWER-C.) Time of Day Restriction, National Do-Not-Call List, and Firm-Specific Do Not Call List What is the dollar value that any gift from or to a member or person associated with a member may not exceed in one year? A.) $50.00 B.) $150.00 C.) $0.00 (gifts are not allowed) D.) $100.00 - ANSWER-D.) $100.00 When must a customer opening a margin account receive the Margin Disclosure Statement? A.) With the first account statement B.) At or prior to account opening C.) When the first deposit into the account is made D.) After the account is opened - ANSWER-B.) At or prior to account opening Which of the following is not a disclosure in the Margin Disclosure Statement? A.) You can lose more funds than you deposit in the margin account. B.) You can make bigger profits by utilizing margin in your account. C.) You are not entitled to choose which securities or other assets in your account(s) are liquidated or sold to meet a margin call. D.) The firm can sell your securities or other assets without contacting you. - ANSWER-B.) You can make bigger profits by utilizing margin in your account. How often must the Margin Disclosure Statement be sent to existing margin account holders? A.) Annually B.) Quarterly C.) Monthly D.) Semiannually - ANSWER-A.) Annually A client of yours with a conservative level of tolerance for systematic risk and a fairly long time horizon has indicated that she would prefer to avoid substantial portfolio turnover. Your suitable recommendation would most likely be: A.) a tactical strategy. B.) a passive strategy. C.) an aggressive strategy. D.) a hedged strategy. - ANSWER-B.) a passive strategy. When comparing a broker-dealer and an investment advisor, which of these statements is most accurate? A.) Advisors are compensated based upon performance, brokers are not. B.) Advisors are compensated based upon transactions, brokers are compensated based upon assets under management. C.) Advisors are compensated based upon fees for advice, brokers are compensated based upon transactions. D.) Both are compensated based upon transactions. - ANSWER-C.) Advisors are compensated based upon fees for advice, brokers are compensated based upon transactions. An agent of a broker-dealer may borrow money from all of the below except: A.) a corporate affiliate of the agent's member firm. B.) a client which is a bank. C.) a broker-dealer. D.) a mortgage broker. - ANSWER-D.) a mortgage broker. Mr. Watney has placed a buy order for 1000 shares of ABC at the market. The execution price was $42 in his cash account on Wednesday, February 4th. If he fails to make payment by Monday, February 9th, the most likely consequence will be: A.) an extension of time will be requested on his behalf and if granted, no liquidation will occur. B.) no extension of time is necessary under these circumstances: he has two additional business days in which to make payment. C.) the purchase will be canceled for non-payment: his account will be frozen for 90 calendar days. D.) the firm will do a sell-out, at Mr. Watney's expense, and freeze his account for 90 calendar days. - ANSWER-B.) no extension of time is necessary under these circumstances: he has two additional business days in which to make payment. The recommended way to handle a conflict of interest between a member firm and one of its customers in a proposed transaction or set of transactions is to: A.) disclose the conflict of interest to the customer. B.) let the compliance and/or legal department handle the situation. C.) avoid the conflict - don't propose transactions which involve conflicts of interest. D.) the member firm should obtain FINRA approval of the proposed transactions. - ANSWER-A.) disclose the conflict of interest to the customer. Mrs. Ko's portfolio has an aggressive bias towards growth stocks. As such, its beta is 1.4 and she is concerned about downside exposure due to overall market risk over the near term. The S&P 500 Index is currently at 2000.00 and her portfolio has a current market value of $1,000,000. Which of the following recommendations would provide the best hedge? A.) short 5 S&P 500 Index calls B.) long 5 S&P 500 Index puts C.) long 7 S&P 500 Index puts D.) long 700 S&P 500 Index puts - ANSWER-C.) long 7 S&P 500 Index puts A wrap account is most appropriate: A.) for a client who actively trades. B.) for a client who is predominantly a buy and hold investor. C.) for a client wishing to follow a dollar cost averaging approach. D.) for a client nearing retirement who will primarily be withdrawing rather than making new investments. - ANSWER-A.) for a client who actively trades. All member broker-dealers are required to comply with the USA Patriot Act and related protective regulations. At the time of account opening, individuals filling out a new account form must supply certain information which will enable which of the following agencies to verify they are not on the list of known money launderers, terrorists or others deemed ineligible to open an account at a financial institution? A.) FINRA B.) SEC C.) OFAC D.) Justice Department - ANSWER-C.) OFAC The Office of Financial Asset Control Your customer Mr. Furyk has expressed an interest in adding technology stocks to his portfolio. He informs you that he likes ABC Technology, Inc. and has instructed you to buy it when you think the time and price are right and to buy as much of it as you believe is reasonable when considering his portfolio mix and investment objectives. A.) because his instructions are giving you limited discretion as to price and time, you do not require written discretionary power B.) you would be required to obtain branch managerial approval before entering this order C.) you may place the order as you see fit, however Mr. Furyk retains the right to break the trade if he disagrees with the execution D.) you must have written discretionary power in order to do what this client wants - ANSWER-D.) you must have written discretionary power in order to do what this client wants Which of the below statements is/are not untrue regarding a Roth IRA? I. the maximum contribution below age 50 is $5,500 II. withdrawals must begin by April 1 of the year after attainment of age 70½ III. anyone with earned income may open a Roth IRA IV. withdrawals after age 59½ are taxable as ordinary income only to the extent they exceed the original principal/cost basis A.) I only B.) I and III C.) III only D.) I, II, III and IV - ANSWER-A.) I only The Van Buren Growth Fund has its first breakpoint at $10,000, and its second breakpoint at $25,000. You have a customer for whom this fund is suitable and has told you he would like to invest $8,000 at this time. Without further discussion, you process the client's purchase order. A.) When the client invests additional money into the fund, he will be granted the reduced sales charge on that portion of his investment which exceeds the breakpoint. B.) When the client invests additional money into the fund, he will be given a retroactive sales charge reduction once his total investment equals or exceeds the breakpoint. C.) You have engaged in a breakpoint sale. D.) None of the above. - ANSWER-C.) You have engaged in a breakpoint sale. For the customer who is seeking to hedge a short stock position, which of these strategies can provide some degree of protection? I. buy limit order II. long call III. short put IV. buy stop order A.) I, II, III and IV B.) II, III and IV C.) II only D.) I and IV - ANSWER-B.) II, III and IV Trades appear on Tape A as follows: XYZ 49........XYZ 48.95........XYZ 48.90.......XYZ 49.05 Your customer's 100 share order to sell XYZ at 49 stop, GTC placed prior to the above trade reports would be executed at: A.) 49.05 B.) 49.00 C.) 48.95 D.) 48.90 - ANSWER-C.) 48.95 Your firm has hired a new candidate to be a municipal securities registered representative. If her date of hire was March 1st, and she passed the appropriate qualification examination required by the MSRB on March 31st, when is the earliest date on which she may begin to engage in the sale of municipal securities with public customers? A.) March 31st B.) April 1st C.) June 1st D.) July 1st - ANSWER-C.) June 1st One of the best ways to hedge against loss when long a listed stock is to acquire a long put position. As such, your client who had purchased 100 shares of Alpha Beta common six months ago at 12.40 takes your advice and buys 1 Alpha Beta May 20 put at 3 with the stock trading at 22.40 to protect against erosion of the 10 point unrealized capital gain. Which of the below statements is correct? A.) your client will break-even with the stock at 25.40 B.) your client will break-even with the stock at 19.40 C.) your client's holding period on the stock is erased D.) your client's potential profit has been capped by purchasing the option - ANSWER-C.) your client's holding period on the stock is erased On December 30th, with no other gains or losses for the year, Mr. Mickelson liquidated 300 shares of Ford common at $10 in which he had a cost basis of $20. Because of his long-term bullish belief in Ford, he acquired 300 shares of Ford at $11 on January 10th. His year-end loss of $3,000 is: A.) partially tax deductible in the year of sale B.) fully tax deductible in the year of sale C.) not deductible in the year of sale D.) not enough information to determine - ANSWER-C.) not deductible in the year of sale Gamma Medical, a domestic NASDAQ listed company, has each of the below investments in its corporate investment portfolio. Identify the one with the best after-tax yield, assuming a 35% corporate tax bracket. A.) 4% State of Ohio GO B.) 5% US Treasury Bond C.) 6% IBM debenture D.) 5.4% Ford preferred stock - ANSWER-D.) 5.4% Ford preferred stock With the Fed engaging in a policy of tightening the money supply, interest rates are on the rise. The market price of which of the following issues would likely decline the greatest dollar amount? A.) T-bill B.) T-note C.) T-bond D.) all of the above would tend to decline at about the same rate - ANSWER-C.) T-bond During normal trading hours, trades in listed stocks must be reported to the appropriate 'tape' A.) within 2 seconds B.) within 10 seconds C.) within 30 seconds D.) within 15 minutes - ANSWER-C.) within 30 seconds Prior to the execution of a short sale of stock, it is the responsibility of the member firm handling the order to obtain an appropriate level of certainty that the shares are available for borrowing and within a time frame which will allow regular way delivery. the regulation which requires this is: A.) Regulation T B.) Regulation U C.) Regulation X D.) Regulation SHO - ANSWER-D.) Regulation SHO An option trader who simultaneously goes long an XYZ Oct 40 put and short an XYZ Nov 40 put will profit if: A.) both options expire unexercised B.) the difference in premiums widens C.) the market price of XYZ falls below 40 and remains there D.) none of these - this is an uneconomic trade - ANSWER-A.) both options expire unexercised Mr. Poulter is a high risk tolerant high net worth client who enjoys trading options and shorting the market. As such, he places an order to short 1000 shares of Citigroup common at $2.25 per share. His deposit requirement with Reg. T at 50% would be: A.) $1,125 B.) $2,000 C.) $2,250 D.) $2,500 - ANSWER-D.) $2,500 The S&P 500 Index is currently at 1862.42. The S&P 500 Index March 1850 put just traded at 14.40. Pick from the below the answer which correctly states the intrinsic value and the time value of this option. A.) insufficient data to compute B.) 0.00; 14.40 C.) 14.40; 0.00 D.) 12.42; 1.98 - ANSWER-B.) 0.00; 14.40 Registered reps often recommend US T-bonds to their clients looking for stability of income and the safety of government paper. However, T-bonds are not immune from investment risk. To which of the following risks is a T-bond most exposed in the early years of ownership? A.) interest rate risk B.) liquidity risk C.) credit risk D.) inflation risk - ANSWER-A.) interest rate risk The bid price of a stock is the A.) price a market maker can expect to receive from a customer B.) price a customer can expect to pay for the stock C.) price a market maker will pay a customer for the stock D.) equivalent to the net asset value of the stock - ANSWER-C.) price a market maker will pay a customer for the stock Place the following in their proper order in the handling of an order. I. P & S dept. II. Cashier III. Margin dept. IV. Wire room A.) IV, I, III, II B.) I, IV, III, II C.) I, III, II, IV D.) IV, III, I, II - ANSWER-A.) IV, I, III, II A new stock issue may begin trading on NASDAQ A.) as early as the completion of the IPO B.) following the opening trade on the morning of the effective date C.) 30 days after the effective date D.) after a 5 business day quiet period - ANSWER-B.) following the opening trade on the morning of the effective date Contributions are permitted to be made to an H.R.10 plan, better known as the Keogh Plan, based upon A.) full time corporate salary B.) part time wages as an employee of a partnership C.) compensation earned as a freelance writer D.) alimony received as part of a court settlement - ANSWER-C.) compensation earned as a freelance writer A restricted margin account is one in which A.) the equity has fallen below the minimum maintenance requirement B.) the equity has fallen below the $2,000 minimum equity requirement C.) the customer is temporarily prohibited from accessing SMA D.) the equity is less than Reg. T - ANSWER-D.) the equity is less than Reg. T Which of the below instruments trades plus accrued? A.) T-bills B.) Zero coupon bonds C.) STRIPS D.) Industrial Development Revenue bonds - ANSWER-D.) Industrial Development Revenue bonds The Uniform Practice Code of FINRA sets forth requirements regarding deliveries, eligibility for issuer distributions, and a wide variety of rules pertaining to dealer to dealer day to day activities. When it comes to the determination of ex-dividend dates: A.) the ex dividend date for open-end investment company shares is set by the Board or the principal underwriter of the fund. B.) the ex dividend date in respect of listed common shares is normally 2 business days prior to the designated record date set by the Board. C.) the ex-date for stock dividends 25% or greater is normally 1 business day past the payable date. D.) all of the above - ANSWER-D.) all of the above Mr. Daly has contacted you regarding some confusion related to the sudden dramatic drop in the price of his shares of Wells Fargo common. As of his latest monthly statement received a few days ago, he held a 400 share long position and the market price was $30. While checking the market this morning, he noticed the stock was trading at $20, down 33%, thus the reason for his call. You inform him this is the result of the 3 for 2 split, previously announced by the Board, which just went ex. How many additional shares will be showing on his next statement? A.) 600 B.) 400 C.) 200 D.) 133.33 - ANSWER-C.) 200 As the result of a client complaint involving accusations of churning, and allegations of unauthorized trades, a duly qualified panel of arbitrators has heard the case and rendered its ruling against the registered rep on all counts, as well as the branch manager and the member firm for failure to supervise. FINRA rules set forth the normal procedure for the filing of an appeal to the adverse ruling with which of the following? A.) National Adjudicatory Council B.) Board of Governors of FINRA C.) District Business Conduct Committee D.) none of the above - ANSWER-D.) none of the above The most volatile of the money market rates shown below is the: A.) prime rate B.) fed funds rate C.) discount rate D.) call loan rate - ANSWER-B.) fed funds rate SEC Rule 144 restricts sales of control stock by corporate insiders to which of the following limits? A.) control stock may be sold without limit so long as the insider has filed Form 144 with the SEC at the time of the sale and the sale is not based upon material non-public information. B.) control stock may be sold over a 90 day period in an amount not to exceed the greater of 1% of the issuer's outstanding shares or the average weekly volume over the 4 week period preceding the sale. C.) control stock may be sold over a 90 day period in an amount equal to the lesser of 1% of the issuer's outstanding shares or the average weekly volume over the 4 week period preceding the sale. D.) the sale of stock by control persons requires that all sale transactions be effected through a broker/dealer which is a member of the principal exchange on which the stock is traded and the firm may act only in an agency capacity. - ANSWER-B.) control stock may be sold over a 90 day period in an amount not to exceed the greater of 1% of the issuer's outstanding shares or the average weekly volume over the 4 week period preceding the sale. One of your customers who is an active trader and is a student of technical analysis has called you to discuss his findings regarding the price action on MMM common. He believes that it is fast approaching its resistance level of 60. If he does not think the stock will break out, which of the below would be most appropriate? A.) sell most if not all of his current long position B.) place a GTC buy limit order at 61 C.) place a GTC sell stop order at 60 D.) sell MMM 60 put options with a 3 month expiration - ANSWER-A.) sell most if not all of his current long position The stock of which of the following listed corporations is generally considered the most sensitive to interest rate changes? A.) consumer goods B.) health care C.) public utility D.) broker-dealer - ANSWER-C.) public utility