[Oct-2022] The FINRA Series7 Exam Test For Brief Preparation
Revolutionary Guide To Exam FINRA Dumps
NEW QUESTION 125
In which of the following situations may exemption from compliance with Regulation T be granted?
- A. a broker/dealer conducts business only in registered securities
- B. a broker/dealer transacting less than 10% of its business through a member of a securities exchange
- C. none of the above
- D. a broker/dealer who does not offer margin accounts
Answer: C
Explanation:
none of the above. No broker/dealer is exempt. Reg T covers cash accounts as well as
margin accounts.
NEW QUESTION 126
Bubba buys a ten-year municipal and at 102 and sells it five years later at 101. What is tax treatment?
- A. the $10 loss is applied as a reduction against ordinary income
- B. the $10 loss is applied against future profits in municipal securities
- C. a $10 long-term capital loss is realized
- D. no capital loss or income deduction is realized
Answer: D
Explanation:
no capital loss or income deduction is realized. The $20 premium is amortized over the
ten-year life of the bond. After five years, half of the premium has been written down. The remaining
premium is the same as the premium received upon selling the bond. The sale at 101 results in no loss or
gain.
NEW QUESTION 127
CMOs are sold and priced based upon which of the following:
- A. expected average life
- B. current yield
- C. par value
- D. stated maturity
Answer: A
Explanation:
expected average life. The average life of a CMO is the length of time that each dollar of
invested principal is expected to remain outstanding. Pricing of CMOs is based upon this factor.
NEW QUESTION 128
Under which of the following conditions may a registered representative of a firm that is an underwriter of
a new offering of common stock send to a client a copy of the firm's research report on that stock?
- A. if his firm is not the managing underwriter
- B. if it is accompanied by a red herring
- C. if he has permission of his employer
- D. under no circumstances
Answer: D
Explanation:
under no circumstances. The representative may send the red herring but not a research
report of his firm.
NEW QUESTION 129
In a firm commitment offering, any shares that are not sold are:
- A. returned to the issuing corporation
- B. transferred to treasury stock
- C. owned by the members of the syndicate
- D. listed in the over-the-counter market
Answer: C
Explanation:
owned by the members of the syndicate. In a firm commitment the underwriter buys the
securities from the issuing company. If they don't sell to the public, they are owned by the underwriters.
NEW QUESTION 130
Under Regulation T, when must money be deposited to cover requirements for Bubba's new purchases
on margin?
- A. on the next business day following the trades
- B. no later than the seventh business day after the trades
- C. no later than the fifth business day after the trades
- D. on the day of the trades
Answer: C
Explanation:
no later than the fifth business day after the trades. Bubba should pay up no later than the
fifth business day.
NEW QUESTION 131
Smart Company, Inc., has cash it intends to use in six months for purchase of equipment. The most
prudent investment during the six-month period is:
- A. treasury bills
- B. common stock
- C. treasury bonds
- D. preferred stock
Answer: A
Explanation:
treasury bills. The most prudent investment provides the cash in the six-month short-term
period. Common and preferred stock are subject to significant price uncertainty. US treasury issues
provide the most safety of principal. Treasury bonds have longer maturities than the six-month terms
available for treasury bills.
NEW QUESTION 132
Customers who engage in increased activity of wiring money from their account could indicate which of
the following activities?
- A. Crossing
- B. Interpositioning
- C. Money laundering
- D. Churning
Answer: C
Explanation:
money laundering. Potential money laundering activities include excessive wiring of money
between accounts.
NEW QUESTION 133
Which of the following may occasionally be purchased at a discount from net assets value?
- A. open-end funds
- B. no-load funds
- C. contractual plans
- D. closed-end funds
Answer: D
Explanation:
closed-end funds. Mutual funds are purchased at NAV (when no-load) or NAV plus a sales
charge. The pricing of closed-end funds is determined by market activity and has no direct link to NAV.
NEW QUESTION 134
Which of the following is a benefit of Section 8 low-income housing partnerships?
- A. potential for capital appreciation
- B. large deductions
- C. high, reliable income
- D. low risk
Answer: D
Explanation:
low risk. The low risk is a consequence of the government guarantee or subsidy.
NEW QUESTION 135
Which of the following would not normally be a function of an investment banker?
- A. underwriting new issues of securities
- B. providing short-term capital needs to client companies
- C. assisting in large secondary offerings of securities
- D. providing long-term capital needs to client companies
Answer: B
Explanation:
providing short-term capital needs to client companies. The short-term capital needs of
companies are normally the function of commercial bankers, not investment bankers.
NEW QUESTION 136
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. short straddle
- D. long combination
Answer: C
Explanation:
short straddle. A straddle is a put and call on the same stock with the same strike price and
expiration date.
NEW QUESTION 137
Bubba has a short margin account with a short market value of $22,000, a credit balance of $42,000, and
SMA of $500. What is the NYSE minimum equity maintenance for this account?
- A. $6,000
- B. $6,600
- C. $5,500
- D. $12,600
Answer: B
Explanation:
$6,600. The NYSE maintenance requirement on short margin accounts is 30%. Multiplying
the short market value of $22,000 by 30% equals $6,600.
NEW QUESTION 138
In June, Bubba bought 100 shares of XYZ at $35. In November, he bought a listed put in XYZ with a $35
strike price and a July expiration for a premium of $600. In April, Bubba exercises the put option and uses
his stock for delivery. What is his resulting tax consequence?
- A. neither profit nor loss
- B. this is a wash sale and cannot be included in the investor's tax calculations
- C. cannot be determined without knowing the market price of XYZ upon exercise
- D. a $600 capital loss
Answer: D
Explanation:
a $600 loss. The strike price and Bubba's purchase price are the same. He has a $600 loss
on the option for the premium he paid.
NEW QUESTION 139
The most common type of bond issued by a well-established company is:
- A. a debenture
- B. a convertible
- C. an open-end mortgage
- D. a senior secured note
Answer: A
Explanation:
a debenture. Because of the company's well-established financial condition, it issues a
debenture that has no specific collateral and is only backed by the creditworthiness of the issuer.
NEW QUESTION 140
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