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Series 7 Practice Exam 1 questions well answered graded A+
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Series 7 Practice Exam 1 questions well answered graded A+
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Series 7 Practice Exam 1A 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
recommendations would most likely be:
a tactical strategy
a passive strategy
an aggressive strategy
a hedged strategy - correct answer ✔✔a passive strategy
When comparing a broker dealer and an investment advisor, which of these statements is most
accurate?
advisors are compensated based upon performance, brokers are not.
advisors are compensated based upon transactions, brokers are compensated based upon assets under
management.
advisors are compensated based upon fees for advise, brokers are compensated based upon
transactions.
both are compensated based upon transactions. - correct answer ✔✔advisors are compensated based
upon fees for advise, brokers are compensated based upon transactions.
An agent of a broker dealer may borrow money from all of the following except:
a corporate affiliate of the agent's member firm.
a client which is a bank
,a broker dealer
a mortgage broker - correct answer ✔✔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, Feb. 4th. If he fails to make payment by Monday, Feb 9th, the most
likely consequence will be:
an extension of time will be requested on his behalf and if granted, no liquidation will occur.
no extension of time is necessary under these circumstances: he has two additional business days in
which to make payment
the purchase will be canceled for non-payment: his account will be frozen for 90 calendar days
the firm will do a sell-out, at Mr. Watney's expense, and freeze his account for 90 calendar days. - correct
answer ✔✔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:
disclose the conflict of interest to the customer
let the compliance and/or legal department handle the situation
avoid the conflict - don't propose transactions which involve conflicts of interest
the member firm should obtain FINRA approval of the prosed transactions. - correct answer ✔✔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.
short 5 index calls
long 5 index puts
long 7 index puts
long 700 index puts - correct answer ✔✔long 7 index puts
S&P 500 beta is 1.0
Ko's beta is 1.4 = 40% greater than the S&P 500
to cover Ko's options contracts it would take 1,000,000/(2000x100)= 5
But her portfolio is 40% risker so 5x1.4=7
A wrap account is most appropriate:
for a client who actively trades
for a client who is predominantly a buy and hold investor
for a client wishing to follow a dollar cost averaging approach
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