Latest Sep 24, 2023 Series-7 Brain Dump: A Study Guide with Tips & Tricks for passing Exam
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FINRA Series-7 (General Securities Representative Qualification Examination (GS)) Certification Exam is an essential exam for individuals who want to work in the securities industry. It is a challenging exam that tests the knowledge and skills of individuals in a variety of areas related to the securities industry. Passing the exam is a requirement for individuals who want to sell securities products to the public, and it is often a prerequisite for other securities licenses.
NEW QUESTION # 34
In the distribution of a new issue underwriters or selling group member are prohibited from:
- A. selling to the public at the so-called public offering price
- B. selling to another broker or dealer who needs to fill an accommodation order
- C. withholding blocks of a new issue in the member's account
- D. all of the above
Answer: C
Explanation:
Explanation/Reference:
Explanation: withholding blocks of a new issue in the member's account. Underwriters and selling group members are prohibited from keeping blocks of a new issue for their own accounts.
NEW QUESTION # 35
In what broad category of municipal bonds are "limited tax" bonds placed?
- A. revenue
- B. general obligation
- C. special tax
- D. new housing authority
Answer: B
Explanation:
Explanation/Reference:
Explanation: general obligation. A limited tax bond is generally classified as general obligation.
NEW QUESTION # 36
In mid-September, Bubba sells one XYZ February 50 call at $6. It subsequently expires without being exercised.
How is the premium taxed?
- A. the $600 premium is a capital gain
- B. the $600 premium is rolled over into another XYZ call with the next longest expiration date
- C. Bubba's cost of the underlying stock is reduced
- D. the $600 premium constitutes ordinary income
Answer: A
Explanation:
Explanation/Reference:
Explanation: the $600 premium is capital gain. That's simply how the tax law works.
NEW QUESTION # 37
Which of the following sources provides news of prospective municipal securities sales to underwriters?
- A. the Blue List
- B. the SEC News Digest
- C. the daily Bond Buyer
- D. The Wall Street Journal
Answer: C
Explanation:
the daily Bond Buyer. News is covered in the daily Bond Buyer as well as Munifacts, which is operated by the daily Bond Buyer. The Blue List shows only current offerings, not prospective ones.
NEW QUESTION # 38
If recaptured deductions are added to income, recaptured investment tax credits are added to:
- A. gains
- B. basis
- C. income
- D. taxes
Answer: D
Explanation:
taxes. Tax credits are not deductible expenses and have no effect on basis.
NEW QUESTION # 39
Which of the following is not a characteristic of treasury bills?
- A. their payments are exempt from state income tax
- B. the bid price is higher than the offer price
- C. they are quoted on yield-to-maturity percentages
- D. they mature one to three years from the date of issuance
Answer: D
Explanation:
they mature one to three years from the date of issuance. Remember the question asks what is "not" a characteristic of treasury bills. The other choices are aspects of treasury bills, which most commonly have maturities of 90 days but never longer than one year.
NEW QUESTION # 40
Which of the following does not issue debt securities that trade in the open market?
- A. Fannie Mae
- B. Federal Reserve Banks
- C. Freddie Mac
- D. Federal Land Banks
Answer: B
Explanation:
Explanation/Reference:
Explanation: Federal Reserve Banks. Debt securities are not issued by Federal Reserve Banks. All of the other entities do issue debt securities.
NEW QUESTION # 41
Which of the following pairs of terms are synonyms in connection with most mutual funds?
- A. net asset value and redemption price
- B. net asset value and offering price
- C. selling price and bid price
- D. bid price and management fee
Answer: A
Explanation:
net asset value and redemption price. Investors redeeming shares of mutual funds receive the net asset value.
NEW QUESTION # 42
A financial institution requesting a quote on a block of 100 bonds from a dealer in government securities receives a quote of 98.02 bid, 98.06 asked.
What is the dollar amount the institution will receive if the financial institution sells these bonds to the dealer?''
- A. $98,750.00
- B. $98,062.50
- C. $98,187.50
- D. $98,250.00
Answer: B
Explanation:
$98,062.50. The financial institution receives the bid price, which is 98 and 2 / 32. Two thirty-seconds is $0.625. The 98 is the percentage of a $1,000 bond. Multiplying 98% by $1,000 results in $980. Add $0.625 to $980 to arrive at $980.625 per bond. But ...there are 100 bonds. So, multiplying $980.625 by 100 equals $98,062.50.
NEW QUESTION # 43
The amount for which the securities of a close-end investment company are selling above net asset value is know as:
- A. commission
- B. discount
- C. premium
- D. sales charge
Answer: C
Explanation:
premium. The price of closed-end investment companies is determined by trading of their shares in the open market. The price may be a discount to net asset value or a "premium" above net asset value.
NEW QUESTION # 44
In terms of depletion, percentage depletion is better than cost depletion because it:
- A. is not subject to recapture
- B. is more widely available
- C. is limited to production
- D. permits recovery of more than the original cost
Answer: D
Explanation:
permits recovery of more than the original cost. Percentage depletion is only available for small producing wells.
NEW QUESTION # 45
Bubba has a short margin account with equity of $15,000 and a credit balance of $28,000.
What is th e current NYSE minimum equity maintenance requirement on Bubba's account?
- A. $3,750
- B. $4,500
- C. $3,900
- D. $3,250
Answer: C
Explanation:
Explanation/Reference:
Explanation: $3,900. The requirement for short accounts is 30% of the current market value. The market value is $13,000 ($28,000 - $15,000). Multiplying by 30% equals $3,900.
NEW QUESTION # 46
Which of the following is true of treasury stock?
- A. it is entitled to receive dividends
- B. it is stock that has not been issued
- C. it has voting rights
- D. it is stock that has been reacquired by the issuer
Answer: D
Explanation:
Explanation/Reference:
Explanation: it is stock that has been reacquired by the issuer. Treasury stock has no voting rights and is not entitled to receive dividends. The shares have been issued but are no longer outstanding in the market.
NEW QUESTION # 47
Which of the following rights does an ADR holder not have?
- A. the right to see financial statements
- B. preemptive rights
- C. the right to transfer ownership
- D. the right to vote for your mother-in-law as a board member
Answer: B
Explanation:
Explanation/Reference:
Explanation: preemptive rights. Holders of ADRs do not have preemptive rights, although they have most other rights of shareholders, including the right to vote for board members-even a mother-in-law
NEW QUESTION # 48
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 it is accompanied by a red herring
- B. under no circumstances
- C. if his firm is not the managing underwriter
- D. if he has permission of his employer
Answer: B
Explanation:
under no circumstances. The representative may send the red herring but not a research report of his firm.
NEW QUESTION # 49
In a corporation's financial statements, earned surplus is also recognized as:
- A. net income
- B. gross profit
- C. earnings retained after payment of dividends to shareholders
- D. operating income after payment of interest expense
Answer: C
Explanation:
Explanation/Reference:
Explanation: earnings retained after payment of dividends to shareholders. The other choices are clearly incorrect. Earned surplus is also referred to as retained earnings.
NEW QUESTION # 50
Bubba has been classified as a restricted person according to Rule 2790. He may purchase equity securities of an IPO except:
- A. when the new issue of securities is purchased pursuant to a stand-by agreement
- B. when the transaction is exempt by an order of the FINRA
- C. to purchase securities to avoid dilution
- D. when the new issue of securities is purchased pursuant to a best effort basis
Answer: D
Explanation:
Explanation/Reference:
Explanation: when the new issue of securities is purchased pursuant to a best effort basis. All the other choices are allowable under the rule "except" this one.
NEW QUESTION # 51
Which of the following best describes phantom income?
- A. the non-taxable portion of a distribution
- B. income received but not reported
- C. income reported but not received
- D. income from deductions and tax credits
Answer: C
Explanation:
Explanation/Reference:
Explanation: income reported but not received. Reportable income that is not distributable includes loan forgiveness.
NEW QUESTION # 52
When opening a brokerage account for a customer, a registered representative must determine the customer's:
- A. all of the above
- B. investment objectives
- C. financial resources
- D. financial requirements
Answer: A
Explanation:
Explanation/Reference:
Explanation: all of the above. All of the choices are required information for the registered representative to obtain.
NEW QUESTION # 53
Bubba has a short margin account with equity of $15,000 and a credit balance of $28,000.
What is th e current NYSE minimum equity maintenance requirement on Bubba's account?
- A. $3,750
- B. $4,500
- C. $3,900
- D. $3,250
Answer: C
Explanation:
$3,900. The requirement for short accounts is 30% of the current market value. The market value is $13,000 ($28,000 - $15,000). Multiplying by 30% equals $3,900.
NEW QUESTION # 54
The FINRA Conduct Rules permit a transaction made "seller's option" to be delivered earlier than the expiration of the contract if:
- A. the client requests it
- B. the seller is located in New York City
- C. the buyer is given one-day notice in writing
- D. the buyer is a non-clearing member
Answer: C
Explanation:
Explanation/Reference:
Explanation: the buyer is given one-day notice in writing. A contract made on a "seller's option" may be terminated by the seller at an earlier date, provided that he gives the buyer one-day notice.
NEW QUESTION # 55
Distribution from an IRA can begin at age 59½ and must begin by age:
- A. whenever the individual is retired
- B. 70½
- C. 0
- D. 1
Answer: B
Explanation:
Explanation/Reference:
Explanation: 70½. This the age at which IRA withdrawals are required.
NEW QUESTION # 56
To qualify as an intrastate offering under SEC Rule 147, which of the following is true of the issue?
- A. it must be sold only to bona fide residents of one state
- B. it must consist of common stock only
- C. it cannot exceed $1,500,000 in value
- D. it must be approved by the SEC
Answer: A
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 # 57
An excerpt from a recent tombstone ad reveals bonds offered publicly at 101.
Why were they priced at a premium?
- A. to provide the issuer with a larger deduction from pre-tax earnings for higher than usual interest payments
- B. to reflect prevailing credit ratings and market conditions for the issuer
- C. to enable investors to establish a tax loss when the bonds are redeemed at maturity
- D. to comply with SEC rules mandating such pricing for debt issues maturing in the year 2000 and thereafter
Answer: B
Explanation:
to reflect prevailing credit ratings and market conditions for the issuer. Premiums or discounts are used in bond offerings to bring the yield in line with current market conditions.
NEW QUESTION # 58
A mutual fund letter of intent may permissibly be predated for a period of time up to:
- A. 10 business days
- B. 90 calendar days
- C. 5 business days
- D. 13 months
Answer: B
Explanation:
Explanation/Reference:
Explanation: 90 calendar days. An investor has 90 days from the date of original purchase to sign a letter of intent. The maximum duration for the letter is 13 months from the initial purchase.
NEW QUESTION # 59
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Passing the Series-7 exam is a requirement for individuals who wish to become a general securities representative. This includes individuals who wish to work for a brokerage firm, investment bank, or other financial institution that deals with securities. In addition, the exam is also required for individuals who wish to register with FINRA as a general securities representative.
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