FINRA Series-7 Deluxe Study Guide with Online Test Engine
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NEW QUESTION # 233
Who owns a corporation?
- A. the government
- B. the holders of common stock
- C. the holders of common stock and the holders of preferred stock
- D. the owners of debentures
Answer: C
Explanation:
Explanation/Reference:
Explanation: 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.
NEW QUESTION # 234
Bubba has not existing positions in his account and writes 1 XYZ July 60 put and 1 XYZ July 60 call.
What is this position called?
- A. short combination
- B. long straddle
- C. long combination
- D. short straddle
Answer: D
Explanation:
Explanation/Reference:
Explanation: short straddle. A straddle is a put and call on the same stock with the same strike price and expiration date.
NEW QUESTION # 235
The practice of positioning stock in response to a customer's order and immediately after marking it up for resale to the customer is:
- A. a riskless transaction
- B. a factor to consider in the FINRA guideline
- C. a simultaneous transaction
- D. all of the above
Answer: D
Explanation:
all of the above. A transaction that is simultaneous and thus riskless calls for a smaller than usual markup under FINRA guidelines.
NEW QUESTION # 236
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?
- A. 10 rights per share
- B. 10 million rights per share
- C. 6 rights per share
- D. 6 million rights per share
Answer: C
Explanation:
Explanation/Reference:
Explanation: 6 rights per share. Each share receives a right and there are six million shares receiving rights to one million new shares. So six rights are required for one share.
NEW QUESTION # 237
A large manufacturing company has current assets of approximately $9,400,000 and current liabilities of about $4,900,000.
Which of the following statements is true about the current ratio?
- A. it is somewhat below the standard minimum
- B. it is about the standard minimum
- C. it is substantially below the standard minimum
- D. it is somewhat above the standard minimum
Answer: A
Explanation:
it is somewhat below the standard minimum. The standard minimum current ratio for a manufacturing company is 2 to 1. The current ratio for this company is 1.92 (9,400,000 divided by 4,900,000).
NEW QUESTION # 238
A mutual fund custodian is paid according to which of the following specifications when receiving deposits from a shareholder's reinvestment plan?
- A. a commission for each share purchased
- B. a processing fee
- C. a percentage of the fund's net asset value
- D. a percentage of the sales charge
Answer: B
Explanation:
Explanation/Reference:
Explanation: a processing fee. Many custodian banks charge the custodian fee to the mutual fund rather than the individual shareholder.
NEW QUESTION # 239
The FINRA markup policy applies to:
- A. principal transactions in municipal bonds
- B. agency sales OTC
- C. mutual fund sales
- D. new issues of corporate securities
Answer: B
Explanation:
agency sales OTC. Markup policy applies to basically all securities other than government and municipal offerings expect where the security is offered under a current prospectus. Choices C and D are offered under a prospectus. Choice B involves municipal securities. Therefore, choice A is the only correct answer.
NEW QUESTION # 240
To qualify as an intrastate offering under SEC Rule 147, which of the following is true of the issue?
- A. it must consist of common stock only
- B. it cannot exceed $1,500,000 in value
- C. it must be approved by the SEC
- D. it must be sold only to bona fide residents of one state
Answer: D
Explanation:
Explanation/Reference:
Explanation: it must be sold only to bona fide residents of one state. Under Rule 147 intrastate offerings are sold only to residents of one state and cannot be sold outside that state for nine months. All the other choices are incorrect about the rule.
NEW QUESTION # 241
After an extended period of backing and filling, a stock moves up sharply through a resistance level on heavy volume. A technical analyst would likely call this a:
- A. buy-in
- B. technical rally
- C. buying climax
- D. breakout
Answer: D
Explanation:
Explanation/Reference:
Explanation: breakout. An upward move through a resistance level that is confirmed by heavy volume is called a breakout.
NEW QUESTION # 242
Which of the following is not classified as a money market instrument?
- A. treasury bills
- B. banker's acceptances
- C. commercial paper
- D. American Depository Receipts
Answer: D
Explanation:
Explanation/Reference:
Explanation: American Depository Receipts. American Depository Receipts are used to facilitate transfer of ownership in foreign securities. They are not money market instruments.
NEW QUESTION # 243
Which of the following statements is not true about exchange traded options?
- A. they are adjusted for stock splits
- B. they are adjusted for cash dividends
- C. they are adjusted for stock dividends
- D. they are adjusted for reverse splits
Answer: B
Explanation:
they are adjusted for cash dividends. This is the statement that is "not" true.
NEW QUESTION # 244
In regard to discretionary accounts, which of the following statements is correct?
- A. both B and C
- B. the customer must grant written authorization to the member firm to exercise discretion in the account
- C. the customer must approve each transaction in writing before the order is entered
- D. the account must be accepted in writing by an officer of the member firm
Answer: A
Explanation:
Explanation/Reference:
Explanation: both B and C.
Choice A is the opposite of a discretionary account. Both B and C are standard procedures for a discretionary account.
NEW QUESTION # 245
Bubba maintains an individual cash account as well as a joint account with his wife, Bubbette. While Bubba is out of town on a fishing trip, Bubbette calls the brokerage firm with an order to buy 100 shares of Great Company, Inc., at the market value for Bubba individual account. It is a stock Bubba has previously informed the brokerage he wanted to buy at the "right price".
What does the brokerage do?
- A. enter the order only after receipt of written instructions to do so from Bubba
- B. buy the stock in the joint account and, after verification from Bubba, journal the security to his individual account
- C. refuse to accept the order unless Bubba has provided a signed trading authorization in favor of Bubbette
- D. execute the order as requested
Answer: C
Explanation:
refuse to accept the order unless Bubba has provided a signed trading authorization in favor of Bubbette. Unless Bubbette has been given written trading authorization over Bubba's account, trading orders cannot be accepted from her or any other person.
NEW QUESTION # 246
Which of the following is a right for shareholders of common stock?
- A. the right to vote about important matters of the company
- B. both B and C
- C. the right to dividends
- D. the right to have the stock price increase
Answer: A
Explanation:
Explanation/Reference:
Explanation: the right to vote about important matters of the company. Shareholders have no expectation of stock price increase or dividends. They are entitled to receive dividends only if the board of directors declares them.
NEW QUESTION # 247
Bubba opens a margin account and sells short 100 shares of XYZ at $50. Assuming a Reg T requirement of 50%, what is the opening balance in Bubba's account?
- A. $7,500
- B. $2,500
- C. $10,000
- D. $5,000
Answer: A
Explanation:
$7,500. The short sale transaction is $5,000. The Reg T required deposit is $2,500 ($5,000 x 50%). Adding both results in $7,500.
NEW QUESTION # 248
Service charges by a FINRA dealer for transfer and safekeeping of customer securities held in street name:
- A. may not be levied under FINRA Conduct Rules
- B. may not be levied unless there is no trading in the account for more than six months
- C. may be levied only if the charge if fair, reasonable, and non-discriminatory
- D. may be levied only if the security has a value of less than $5,000
Answer: C
Explanation:
may be levied only if the charge if fair, reasonable, and non-discriminatory. This is the standard in the FINRA rules.
NEW QUESTION # 249
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 rights does Bubba receive?
- A. 0
- B. 1
- C. 2
- D. 3
Answer: D
Explanation:
200. In an issue of rights, there is always one right per share. Bubba owns 200 shares and thus receives the same number of rights.
NEW QUESTION # 250
Which of the following statements is not true about a letter of intent?
- A. the letter of intent has a maximum duration of 13 months
- B. a certain portion of shares purchased are held in escrow until the terms of the letter are met
- C. a shareholder may not redeem any shares for 13 months
- D. a letter of intent may be backdated by 90 days
Answer: C
Explanation:
a shareholder may not redeem any shares for 13 months. Redemptions are permissible at any time. However, since escrowed shares are set aside to cover the difference in sales loads based on terms of the letter, redemptions prior to 13 months may liquidate the escrow account and thus return to the investor 100% of net asset value.
NEW QUESTION # 251
In a triple net lease, which of the following is the tenant not responsible for paying?
- A. financing charges
- B. insurance premiums
- C. maintenance
- D. taxes
Answer: A
Explanation:
Explanation/Reference:
Explanation: financing charges. In a triple net lease, the tenant is responsible for taxes, insurance, and maintenance.
NEW QUESTION # 252
Customers who engage in increased activity of wiring money from their account could indicate which of the following activities?
- A. Churning
- B. Money laundering
- C. Interpositioning
- D. Crossing
Answer: B
Explanation:
money laundering. Potential money laundering activities include excessive wiring of money between accounts.
NEW QUESTION # 253
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?
- A. the entire proceeds of the offering are a primary offering accruing to the corporation
- B. both B and C
- C. 60% of the proceeds are paid to the corporation and the balance accrues to the affiliated person
- D. 300,000 shares are identified as a primary distribution
Answer: B
Explanation:
Explanation/Reference:
Explanation: both B and C.
The 200,000 shares are sold on behalf of the affiliated person so the proceeds go to that individual. Only the other 300,000 shares are a primary offering.
NEW QUESTION # 254
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FINRA Series-7 (General Securities Representative Qualification Examination (GS)) Exam is a highly respected and widely recognized certification in the financial industry. It is a vital step for individuals who seek to become registered representatives of broker-dealer firms in the United States. Series-7 exam is designed to ensure that candidates possess the knowledge and skills required to effectively advise clients on the purchase and sale of securities, including stocks, bonds, mutual funds, and other financial instruments.
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