This is the first of two free Series 7 Practice Exams. This practice test features 50 challenging questions that cover a wide variety of the topics that you will need to know for your exam. Each question includes a detailed explanation of the correct answer. Start your test prep right now with our Series 7 practice questions.
a tactical strategy.
a passive strategy.
an aggressive strategy.
a hedged strategy.
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 advice, brokers are compensated based upon transactions.
Both are compensated based upon transactions.
a corporate affiliate of the agent’s member firm.
a client which is a bank.
a mortgage broker.
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.
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 proposed transactions.
short 5 S&P 500 Index calls
long 5 S&P 500 Index puts
long 7 S&P 500 Index puts
long 700 S&P 500 Index puts
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.
for a client nearing retirement who will primarily be withdrawing rather than making new investments.
because his instructions are giving you limited discretion as to price and time, you do not require written discretionary power
you would be required to obtain branch managerial approval before entering this order
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
you must have written discretionary power in order to do what this client wants
I and III
I, II, III and IV
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.
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.
You have engaged in a breakpoint sale.
None of the above.
I, II, III and IV
II, III and IV
I and IV
your client will break-even with the stock at 25.40
your client will break-even with the stock at 19.40
your client’s holding period on the stock is erased
your client’s potential profit has been capped by purchasing the option
partially tax deductible in the year of sale
fully tax deductible in the year of sale
not deductible in the year of sale
not enough information to determine
4% State of Ohio GO
5% US Treasury Bond
6% IBM debenture
5.4% Ford preferred stock
The 4% Ohio bond is tax free because it is a municipal bond, giving it a 4% after tax yield. The 5% Treasury is taxable at 35%, giving it a 3.25% after tax yield [65% times 5%]. The 6% IBM bond is taxable at 35%, giving it a 3.9% after tax yield [65% times 6%]. Only 30% of the preferred dividend is subject to taxation [30% times 5.4% = 1.62%]. This means that only 1.62% of the dividend will be TAXED... therefore the tax will be 35% times 1.62% = 0.57%. A 5.4% preferred paying tax of 0.57% leaves an after tax return of 4.83%, which is far greater than the other three investments.
all of the above would tend to decline at about the same rate
within 2 seconds
within 10 seconds
within 30 seconds
within 15 minutes
both options expire unexercised
the difference in premiums widens
the market price of XYZ falls below 40 and remains there
none of these – this is an uneconomic trade
insufficient data to compute
0.00 intrinsic value; 14.40 time value.
interest rate risk
price a market maker can expect to receive from a customer
price a customer can expect to pay for the stock
price a market maker will pay a customer for the stock
equivalent to the net asset value of the stock
IV, I, III, II
I, IV, III, II
I, III, II, IV
IV, III, I, II
as early as the completion of the IPO
following the opening trade on the morning of the effective date
30 days after the effective date
after a 5 business day quiet period
full time corporate salary
part time wages as an employee of a partnership
compensation earned as a freelance writer
alimony received as part of a court settlement
the equity has fallen below the minimum maintenance requirement
the equity has fallen below the $2,000 minimum equity requirement
the customer is temporarily prohibited from accessing SMA
the equity is less than Reg. T
Zero coupon bonds
Industrial Development Revenue bonds
the ex dividend date for open-end investment company shares is set by the Board or the principal underwriter of the fund.
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.
the ex-date for stock dividends 25% or greater is normally 1 business day past the payable date.
all of the above
National Adjudicatory Council
Board of Governors of FINRA
District Business Conduct Committee
none of the above
fed funds rate
call loan rate
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.
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.
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.
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.
sell most if not all of his current long position
place a GTC buy limit order at 61
place a GTC sell stop order at 60
sell MMM 60 put options with a 3 month expiration
US exports to be more competitive
foreign exports to increase
the US trade deficit to grow
none of the above
growth and income fund
government bond fund
all of the above
I and III
I and II
a violation of the Securities & Exchange Act of 1934
the secondary market
the third market
the fourth market
100 shares of the underlying common stock
cash equal to the aggregate exercise price of the option
a depository receipt for 100 shares of the underlying common stock
none of these are exceptions
the Bond Buyer Index
the new issue calendar
the placement ratio
the visible supply
acquisition of shares with a resulting cost basis of strike price less premium
liquidation of shares with a resulting sales proceeds of strike price less premium
the potential for unlimited loss
the potential for a maximum loss of strike price plus premium
= 22 cents dividend per share.
$7 cost basis and the date of acquisition is the date of the gift
$14 cost basis and the date of acquisition is the date of the gift
$7 cost basis and the date of acquisition is the donor’s date of purchase
$14 cost basis and the date of acquisition is the date of purchase by the donor
interest payments may be made in either US dollars or the currency of the nation in which the bond was issued.
its interest payments will be made in US dollars only.
these bonds are issued by either US or foreign corporations but are not issued in the United States.
principal is repaid at maturity in US dollars.
Municipal yield divided by (100% minus investor’s tax bracket)
= 4.5% divided by (100% minus 36%)
= 4.5% divided by 64%
put / call ratio
price / earnings ratio of the S&P 500
daily volume compared to the average daily volume
advance / decline ratio
The client’s new equity is $5,000, found by taking CMV minus debit balance = $9,000 minus $4,000.
However, Reg. T only requires equity of 50% of CMV, which on a $9,000 position is a Reg. T required equity of $4,500.
Your client’s equity of $5,000 exceeds Reg. T by $500.
The new equity of $5,000 minus the Reg. T equity of $4,500 = $500.
This $500 is commonly referred to as SMA, and is also called excess equity, also called Reg. T excess, and is also referred to as the client’s ‘line of credit.’