Series Seven Practice Exam 2

1. A stock transaction takes place between a bank and an insurance company without
the use of a broker. This trade took place in the:

A. first market
B. second market
C. third market
D. fourth market

2. Which of the following orders are placed below the market of a particular security?

I buy stop orders
II sell limit orders
III sell stop orders
IV buy limit orders

A. I and II
B. III and IV
C. I and III
D. II and IV

3. Treasury notes pay interest:

A. Monthly
B. Quarterly
C. Semi-annually
D. At maturity

4. Which tranche of a CMO is the most unpredictable?

A. PAC tranche
B. support tranche
C. TAC tranche
D. Z tranche

5. Which of the following are true in relation to a CMO issue?

I When interest rates fall, Payments speed up
II When interest rates fall, Payments slow down
III When interest rates fall, average life goes up
IV When interest rates fall, average life goes down

A. Iand IV
B. I and III
C. II and III
D. II and IV


6. All of the following are used when factoring an accrued interest amount for the seller of a bond except:

A. the nominal yield
B. the settlement date
C. pay dates
D. the yield to maturity


7. Which of the following corporate bonds would be the most likely to be refunded?

A. 8% maturing 2014, callable in 2006 @ 100
B. 8% maturing 2008, callable in 2006 @ 101
C. 6% maturing 2014, callable in 2006 @ 100
D. 6% maturing 2008, callable in 2006 @ 101

8. All of the following are “covenants” that an issuer must keep in a revenue issue except:

A. rate covenants
B. maintenance covenants
C. insurance covenants
D. assessment covenants

Use the following for questions 9-11
A customer sells 100 shares of FGH short @ $78 and Buys 1 FGH Apr 80 call @ 3

9. What is the customer’s maximum gain?

A. unlimited
B. $8100
C. $7500
D. $500

10.What is the customer’s maximum loss?

A. unlimited
B. $8100
C. $7500
D. $500

11.At what price will the customer make a profit?

A. 75
B. 81
C. 82
D. 74


12. A customer is short 1 RST Dec 60 put that was sold for $600. If RST is currently selling in the market
at 64, what is the intrinsic value of this option?

A. 0
B. 2
C. 4
D. 6


13. Which of the following could occur between 2 broker dealers in the secondary market?

A. Reclamation
B. Recapture
C. Refunding
D. Reserve requirements

14. If the market value in a long margin account increases, you would see the:

A. Debit balance decrease
B. SMA decrease
C. SMA increase
D. SMA remain the same


15. The syndicate manager in a new offering receives 10 cents, the syndicate members are allocated 60 cents.
the selling group receives 15 cents. Based on this information the total underwriting spread
would be:

A. 45 cents
B. 55 cents
C. 70 cents
D. 85 cents


16. Which of the following is used by a municipality to solicit bids for a new issue of bonds?

A. official statement
B. syndicate letter
C. tombstone
D. notice of sale


17.The assumed interest rate is used with which type of security?

A. fixed annuities
B. variable annuities
C. closed end funds
D. real estate investment trusts


18. The term that is used to describe when the IRS takes back tax credits from a limited partnership is:

A. reclamation
B. recapture
C. rejection
D. refunding


19. What is the maximum length of time that an issuer can hold onto a shelf offering?

A. 6 months
B. 1 year
C. 2 years
D. 5 years








A customer buys 1 ASD Nov 70 put @4 and sells 1 ASD Nov 80 put @ 6.

20. This investor has created a:

A. credit spread that is bearish
B. credit spread that is bullish
C. debit spread that is bearish
D. debit spread that is bullish


21. A treasury bond has a bid price of 101-16 and an ask price of 101-24. A customer redeeming $10,000 par
would receive:

A. $10,116
B. $10,124
C. $10,150
D. $10,175


22. Active customer account statements must be sent:

A. weekly
B. monthly
C. quarterly
D. semi annually


23. If a corporation wishes to open a cash account they must send their:

A. corporate resolution
B. corporate charter
C. corporate resolution and the corporate charter
D. most recent financial statement

Series 7 Online Course