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Series 7 practice exam multiple choice Questions and Answers | 100% Pass
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TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD OWNER: EMILLYCHARLOTTE COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED FIRST PUBLISHED: SEPTEMBER 2024 5/79 Stabilizing a new issue can only be done once the effective date of the new issue has arrived. It isn't done during the...

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  • September 25, 2024
  • 79
  • 2024/2025
  • Exam (elaborations)
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TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD
OWNER: EMILLYCHARLOTTE
COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED
FIRST PUBLISHED: SEPTEMBER 2024

Series 7 practice exam multiple choice
Questions and Answers | 100% Pass

When discussing a corporation's capitalization, each of the below would be included

except:

A: non-voting class B preferred stock

B: subordinated debentures rated BB+ by Standard & Poor's

C: earned surplus

D: plant & equipment - Answer✔️✔️-Plant and equipment



Capitalization includes Stockholders' Equity and Long-term Debt. Plant & Equipment are

Fixed Assets, which are assets purchased with the Capital raised by the business but

are not themselves considered Capital

Miami-Dade County currently has the following four GOs outstanding. All issues

possess a call feature and have coupons and maturities as shown below. Assume all

issues have similar principal amounts outstanding. In the event interest rates decline,

and the County plans to do a refunding of only one of the four outstanding GOs, which

issue would most likely be called?



A :6.25s31 callable at 100

B 5.50s33 callable at 100½

1/79

,TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD
OWNER: EMILLYCHARLOTTE
COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED
FIRST PUBLISHED: SEPTEMBER 2024
C 4.65s34 callable at 101

DZr29 callable at 100 - Answer✔️✔️-A :6.25s31 callable at 100



f you were in charge of finances for the county and you were considering paying off only

one of your debts, wouldn't it be the debt that's costing the county the most (the highest

interest rate)? In this scenario, the county will retire/call the 6.25% callable bonds

because those are costing the county the most every year. Also notice that those bonds

have an added advantage - they are callable at 100, which means at Par, meaning

there is no call 'premium' required to retire them.

When viewing the latest quotes on T-bills, you note that the current quote on the new 3

month Bills, 0.50 − 0.55, is somewhat higher than the quote on new 3 month Bills at the

previous auction.



A T-bill prices have risen

B The yield curve is inverting

C The Fed is easing the money supply

D T-bill discounts have increased - Answer✔️✔️-D T-bill discounts have increased



T-bills are not quoted as a percentage of par, whereas notes and bonds are. Bill quotes

represent the percentage of Discount from Par Value at which banks and dealers

purchase T-bills at the Fed Auction. If you're told that this week's quotes, which are


2/79

,TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD
OWNER: EMILLYCHARLOTTE
COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED
FIRST PUBLISHED: SEPTEMBER 2024
discounts from par, are HIGHER than the discounts from last week, that means T-Bill

purchase prices have gotten LOWER -----we all know that when department stores

increase the DISCOUNT, the price in dollars gets cheaper. It's the same with T-bills. For

any of you who put answer A, it is wrong because it says prices have gone up. When a

discount gets higher/bigger, the sale price goes down.

CPU Industries, Inc. (ticker symbol CPU) has $50,000,000 par value convertible

debentures outstanding with a 40 to 1 conversion ratio. If the bonds are currently trading

at 110 and are above parity, CPU common must be trading:

A at 27.50

B at 27.49 or below

C at 27.51 or above

D at 44.00 - Answer✔️✔️-B at 27.49 or below



Step 1 is to determine the parity price of the stock. The bond is trading at 110, which is

$1,100. The bond is convertible into 40 shares: that's the 40 to 1 conversion ratio given

in the question.



that at its current price of $1,100, the bond is WORTH MORE THAN the stock.

Therefore, the stock can't be AT $27.50, it must be at least 1 penny below $27.50. So

40 shares at $27.49 (or below) is less than $1,100.

All of the below represent bond sweeteners with the exception of:


3/79

, TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD
OWNER: EMILLYCHARLOTTE
COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED
FIRST PUBLISHED: SEPTEMBER 2024
A a put option

B cum-warrants

C a call feature

D convertibility - Answer✔️✔️-C a call feature



A sweetener is a feature that is good for investors. Owning a callable bond exposes one

to call risk, which is not considered desirable by bond investors. Call risk is the risk of

having one's portfolio altered when the issuer chooses to call the bonds. Having a put

feature, a conversion feature, or warrants attached to a bond can be desirable and even

highly profitable

Stabilizing a new stock issue

I. may occur once the S-1 has been filed with the SEC

II. may only occur if disclosed in the final prospectus

IIII. may not occur at or above the POP

IV. if necessary, is normally a function performed by a syndicate manager

A I and III

B II and IV

C III and IV

D I, II, III and IV - Answer✔️✔️-B II and IV




4/79

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