Series 7 Jobs and More

Sunday, November 18, 2007

Series 7 Test 7 with Answer and Help

11. In what order do the following dates occur, based on a cash dividend to its stockholders?

I. Dividend Payable Date
II. Stock Record Date
III. Ex-Dividend Date
IV. Dividend Declaration Date

A) I, III, II, IV
B) III, I, II, IV
C) IV, I, III, II
D) II, I, III, IV

Correct answer is A: The first step in the cash dividend process is to announce the dividend payable date, secondly the corporation will announce the Ex- Dividend date (which is four days prior to the Record Date), Thirdly the Record Date, and finally the payable date or dividend declaration date.

2. If a dealer wants to find out more information about offering quotes for corporate bonds. Where could this trader find this information?


I Bloomberg
II Yellow sheets
III Pink sheets
IV Blue list

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


Correct answer is A: Corporate bond quotes for dealers can be found on Bloomberg and also in the yellow sheets. Information on pink sheets includes thinly traded penny stocks and the Blue list comprises of municipal bonds.

3. All of the following are voted on by shareholders EXCEPT:

A) New issue of common stock
B) Merger or acquisitions
C) Board of director’s elections
D) Reverse stock split


Correct answer is A: There is no voting that is required for existing shareholders to vote on new issues of common stock. This is done by the board of directors. The other choices are all voted on by the shareholders.

4. Which of the following are not considered fiduciary accounts?

I. Partnership account
II. Trust account
III. Joint account
IV. Custodian account

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

Correct answer is B: Partnership and joint accounts are managed by the owner of the account, they are not fiduciary accounts. Trust and Custodian accounts are fiduciary accounts and are managed by a third party for the best interests of the owner.

5. John Johnson, who is a broker for Needball Inc. communicates bids and offers on the exchange floor and must comply with all of the following NYSE rules Except:

A) bids and offers are set by floor officials during unusual circumstances
B) highest bid and lowest offer have preference
C) bids and offers must be publicly announced
D) a bid or offer for less than the normal trading unit has no standing in the trading crowd

Correct answer is A: Under NYSE rules, the highest bid and lowest offer has priority and all bids and offers must be announced publicly. Bids and offers are not set by floor officials even for unusual circumstances; they are always set by market participants.

6. Dave LeBranche owns 5% of DYT non-cumulative preferred stock. In 2003, DYT pays a 3% dividend to the preferred stockholders. In 2004, what would DYT owe to the preferred shareholders?


A) 2 %
B) 4 %
C) 5 %
D) 8 %

Correct answer is C: The key to the question is “non-cumulative”. Non-cumulative preferred stock does not carry over missed dividends to the next year. Most preferred stock is cumulative and any missed dividends would carry over to the next year.

7. All of the following are true regarding the Specialist on the NYSE Except?

I The specialist can purchase a security for his own inventory
II The specialist can “stop stock” for a floor broker any time
III The specialist can accept discretionary orders
IV Specialists are responsible for maintaining an orderly market


A) I and II
B) I, III and IV
C) III and IV
D) I, II, and III


Correct answer is C: The specialist works on the floor of the exchange. They accept orders and execute orders for floor brokers. They can purchase for their own inventory and sell out of their own inventory. The specialist can “stop stock” for a floor broker. This guarantees a price while the floor broker decides what he wants to do. They cannot accept discretionary orders. Floor brokers work for the firm and are separate from the specialist.

8. Who decides which over the counter and listed stocks are marginable?

A) NYSE
B) MSRB
C) NASD
D) FRB

Correct answer is D: The Federal Reserve Board decides which over the counter and listed stocks are marginable. The FRB has final say on which securities are approved for margin.

9. Which of the following statements are true regarding warrants?

I. The price of the warrant is decided upon the time of expiration
II. Usually warrants have a life of five years or less
III. When an warrant is issued the price of the warrant is set above the current market price of the underlying stock
IV. The price of the warrant varies with the movements of the underlying stock

A) I and II
B) II and III
C) I, II, and III
D) I, II, III, and IV

Correct answer is D: All of the following statements are true regarding warrants. According to the NASD, warrants have a life of five years or less. A warrant’s price is set higher than the price of the underlying stock, so it is issued out of the money. Also, as the price of the underlying stock rises the warrant moves accordingly. The longer the time value, the higher value of the warrant.

10. According to SEC rules, when must a brokerage send out statements to a customer?

A) Monthly
B) Quarterly
C) Semi-annual
D) Annually

Correct answer is B: A customer must receive a statement at least quarterly, but if it is an active account where trading occurs regularly, the customer must receive a statement monthly.

11. Which of the following are not true regarding trade reports from the NASDAQ tape?

I. Tape shows sell side reporting
II. Tape show buy side reporting
III. NASDAQ trades must be reported within 60 seconds from the time of execution
IV. NASDAQ trades must be reported within 90 seconds from the time of execution

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

Correct answer is D: Reporting on the NASDAQ tape occurs on the sell side of the transaction only. Also, trades must be reported within 90 seconds of execution or they are marked late on the tape.

12. Dave is a broker with Leopold Inc. and has a client Edward that opens a margin account. Of the following margin situations, which one is not true?

A) It is under the discretion of the broker-dealer to determine which securities are marginable
B) New issue securities are not marginable for the first 30 days
C) Some exchange margin rules can be more restrictive than Reg. T
D) Reg. T covers margin and also cash accounts

Correct answer is A: The broker-dealer does not determine which securities are marginable, that is up to the Federal Reserve Board. The other three choices are true. New issue securities are not marginable for the first 30 days, exchange margin rules can be more restrictive than Reg. T, and Reg. T covers both margin and cash accounts.

13. What is the maximum coverage provided by the SIPC for securities and cash in a customer’s account?

I. $400,000 in securities per account
II. $100,000 in cash per account
III. $500,000 in securities per account
IV. $200,000 in cash per account

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

Correct answer is C: The SIPC (Securities Investors Protection Corporation) provides for coverage on customers securities up to $500,000 in total, but it only covers up to $100,000 in cash.

14. Dennis Stewart wants to purchase $10,000 of DEF stock and also $10,000 of POP calls on the same day in his margin account. What is the amount and number of shares of fully paid securities Dennis must deposit to meet the Reg. T requirement? He would like to use his TFT securities, which are currently valued at $15 per share.

A) $10,000/500 shares
B) $12,000/1000 shares
C) $13,000/500 shares
D) $15,000/1000 shares

Correct answer is D: Dennis must deposit 50% of the value of DEF stock $5,000 and 100% of the value of the calls $10,000 which totals $15,000. He must then deposit 1000 shares valued at $15 per share.

15. Jon Davidson would like to open an options account for one of his clients, prior to opening the account, all of the following steps must be taken except:

A) Approval of the first transaction
B) Signing the new account form
C) Sending out the options disclosure documents
D) Receiving back the signed options agreement

Correct answer is D: All of the following steps must be done before the account is opened. The signed options agreement must be sent back within 15 days after the account is opened.

16. Of the following orders listed below, which guarantee a specific price or better?

I. Sell Limit
II. Buy Limit
III. Sell Stop
IV. Buy Stop

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

Correct answer is A: When a limit order is entered, the customer will receive that specific limit price or better. On the hand, when a stop order is entered it becomes a market order to be filled at the first opportunity.

17. Steve, who is transferring an account from one broker-dealer to another may have a delay in the transfer for all of the following reasons except:

A) The account holdings are positioned in one the broker-dealers proprietary accounts
B) The holdings in the customers account do not match
C) The holdings in the account are in the street name
D) Customers signature is not authentic

Correct answer is C: If the customers holdings are held in the street name, the firm will usually send the securities to the client, this has no impact in a delay to a new broker-dealer. If the signature on the account does not match, the holdings are not the same as indicated, or holdings are held in the old firm’s proprietary account, this may delay the transfer of assets.

18. John and Jane Mansfield open an account together and have reportable dividends throughout the year, which will receive a 1099 at the end of the year?

A) Jane only
B) John only
C) Jane and John Jointly
D) Which ever social security number is on file

Correct answer is D: 1099’s are sent to the account owner on file, if the account is joint, both owners must decide which owner will receive the 1099 for that year.


19. A couple who currently reside in Florida wish to open a joint cash account with CBC brokerage Inc. Which of the following documents do they need to open the account?

I. Options agreement
II. Joint account form
III. Discretionary authority form
IV. New account form

A) I and II
B) II and III
C) II and IV
D) I, II, III, and IV

Correct answer is C: This couple would only need to fill out and sign the new account and the joint account forms to open their cash account. Since this account will be noted as a cash account, the options agreement will not be necessary unless they wish to purchase options. The discretionary authority form will only be needed if one of the owners want to give that power to someone else.

20. John Stern wishes to buy 2 XYZ Mar 60 PUT for $600. What is John’s maximum potential gain?

A) $1,200
B) $10,800
C) $12,000
D) Unlimited


Correct answer is B: The maximum gain for the John for the purchase of a put option is the difference between the strike price (60) and $0 minus the premium paid $1,200. If the price goes to $0, the holder can make $12,000 minus the $1,200 premium which equals $10,800.

Series 7 Home Study Course

Series 7 Test 6 with Answers

1. If Mr. Jones purchases a bond at $98 and it has a nominal yield of 7.5% and it is held to maturity, the investor would have a yield of:

A) Equal to 7.5%
B) Less than 7.5%
C) Greater than 7.5%
D) Between 7.0% and 7.5%


Correct answer is C: A bond purchased at a discount and held to maturity, would have a yield greater than the coupon rate. The nominal yield is paid based on the par amount and matures at $100.

2. Which of the following show dealer to dealer OTC stock quotes on the NASDAQ?
A) Blue sheets
B) Pink sheets
C) Yellow sheets
D) Red sheets

Correct answer is B: The pink sheets show dealer to dealer over the counter stock quotes on the NASDAQ. The Blue sheets show the trade offering sheets of bond dealers, listing dealers' offerings of municipal bonds for sale all over the country. The yellow sheets show corporate bond quotes. The red sheets do not exist.

3. Why would an investor sell stock short?

A) To hedge against another short sale
B) To make large gains with limited risk
C) Make a profit by the decrease in the price per share of a stock
D) Make a profit by the increase in the price per share of a stock


Correct answer is C: Selling stock short is profitable when the market declines, allowing an investor to purchase the stock at a lower price. It is not done with existing long positions and it carries a high degree of risk with limited profitability.

4. A specialist can handle all of the following orders except:

A) Limit order
B) Stop order
C) Stop limit order
D) Market order – not held

Correct answer is D: A specialist cannot use discretion over the price and time of an order execution and cannot take market – not held orders. Limit, stop, and stop limit orders are placed on the specialist’s books and executed at the appropriate time.

5. Which of the following securities does Regulation T apply to?

I. Corporate stock
II. ADR’s
III. U.S. Treasury notes
IV. Convertible corporate bonds

A) I and II
B) I , II, and III
C) I, II, and IV
D) II, III, and IV

Correct answer is C: Regulation T only applies to non-exempt securities. All U.S. Government securities including Treasuries are exempt. ADR’s, Corporate stock, and Convertible corporate bonds are non-exempt.

6. Which of the following is considered a good delivery for a 700-share purchase?

A) Seventy 7-share certificates
B) Ten 70-share certificates
C) Seven 100-share certificates
D) One 700-share certificates

Correct answer is C: To be considered good delivery, stock certificates must be delivered in 100 certificate multiples or in certificates of less than 100 that add up to 100. Only choice C fits this criteria, seven certificates of 100-share certificates.

7. A bond that is sold below par, matures at par and pays no semi-annual interest payments is:

I. Treasury bill
II. Zero Coupon bond
III. Treasury Note
IV. Municipal bond
A) I only
B) I and II
C) II and III only
D) III and IV

Correct answer is B: Treasury bill’s and Zero Coupon bonds are sold at a deep discount and mature at par. They do not pay semi-annual interest and the bond is redeemed by the issuer at par. Treasury notes and Municipal bonds pay semi-annual interest payments to the bondholder and are redeemed at par at maturity.

8. Which of the following amounts would be covered under SIPC insurance?

A) $300,000 securities + $150,000 cash
B) $400,000 securities + $100,000 cash
C) $550,000 securities + $125,000 cash
D) $450,000 securities + $130,000 cash


Correct answer is B: SIPC covers up to a $500,000 maximum. But, this amount does not cover more than $100,000 in total cash.

9. A bond is trading at $1,100, and has a conversion price of $40. At which price would the stock need to trade to be equal to the current bond price?

A) 25
B) 48
C) 40
D) 44


Correct answer is B: The first step is to convert the bond, you must always use par value. Divide the par value (1000) by the conversion price ($40). This equals the amount of shares that will be created (25). To come up with the “parity price” that the stock must trade at, do one of 2 things: Divide $1100 by 25, which equals 44 or multiply 25 by each answer choice until the bond price is equaled. Answer is 44.

10. If a security became mutilated, which of the following could authenticate the certificate?

I. Clearing Corporation
II. Transfer Agent
III. Issuer
IV. Receiving Broker

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

Correct answer is B: The certificate can only be authenticated by the transfer agent and the issuer. They are the only ones who can validate the owner and the legitimacy of the security. The receiving broker and the clearing corporation do not have this capacity.

Series 7 NASD Stockbroker Training

Series 7 Exam Test 5 with Answers

1. A technical analyst sees that a stock has “broken through” it’s resistance level. The analyst would consider this action to be:


A) Bearish
B) Oversold
C) Bullish
D) Overbought

Correct answer is C: The resistance level is the level where all the sellers have been cleared out and there are still buyers for the stock. A Breakthrough of the resistance level is a sign of strength and is considered bullish.

2. Treasury bills are auctioned:

A) Weekly
B) Monthly
C) Semi-annually
D) Annually


Correct answer is A: Treasury Bills are auctioned on a weekly basis, using a competitive bidding process.

3. What is the dollar amount of a U.S. Treasury bond quoted at 99.21?

A) $9,921
B) $9,965.62
C) $9,950.50
D) $9,925.50


Correct answer is B: Treasury bonds are quoted in 1/32. 21 is divided by 32 = .6562 and then added on to 99 (par) which equals 99.652. From this point move the decimal point over two spaces and the dollar amount = $9,965.62.

4. Securities trading “over the counter” is also synonymous with:

A) First market
B) Second market
C) Third market
D) Fourth market

Correct answer is B: Over the counter trading of OTC securities is also considered the Second market.

5. Which of the following is true regarding SMA?

I. SMA represents excess equity above 50%
II. SMA increases by $.50 for every dollar that the account increases in value
III. SMA can be used to purchase other marginable securities
IV. SMA will be available if the account value increases above 40%

A) I only
B) I and II
C) I, II, and III
D) II, III, IV


Correct answer is C: SMA in margin account represents excess equity derived by the increase in market value. A customer can use SMA to either borrow cash or purchase additional securities.

6. John Financial Corp. wants to set their long margin account minimum equity maintenance levels at 30% per account. Which of the following is true?

A) This is not permitted, because the NYSE minimum equity requirement is 25%
B) The firm must receives permission from the NYSE
C) This is permitted. A firm can increase their minimum maintenance levels.
D) NYSE and NASD must approve this before it can become effective.


Correct answer is C: A firm can set their minimum equity levels higher than the NYSE minimum. Most firms do set their levels higher than 25%. A firm could not go below 25%.

7. When must a customer return the signed options agreement?

A) 15 days after opening the account
B) Prior to opening the account
C) 15 days prior to opening the account
D) Does not need to be sent back until the first trade is executed

Correct answer is A: The options agreement does not have to be signed prior to opening the account. It is required within 15 days of the account being approved.


8. Mr. White buys 4 TEV OCT 65 Calls for $400 each. What is the customer’s maximum total loss?

A) $400
B) $1600
C) $6500
D) Unlimited


Correct answer is B: The maximum loss Mr. White can incur is the total amount of the Premium, which could happen if the options expire. Mr. White purchased 4 options for a total of $1600. The $1600 is the maximum loss.

9. Which of the following pay’s a dividend?

I. Common stock
II. Preferred stock
III. Cumulative preferred stock
IV. Warrants

A) I and II
B) I, II, and III
C) II and III
D) II, III, and IV

Correct answer is B: All of the above choices pay a dividend except warrants. Warrants are long term options to buy a security at a specific price. Until the warrant is exercised (purchasing the underlying stock), the holder does not receive the benefits that a stockholder would have. No dividends would be payable.

10. Which of the following debt instruments pay semi-annual interest and pay the principal at maturity?

I. Municipal bonds
II. Treasury Bonds
III. Corporate bonds
IV. GNMA bonds

A) I only
B) I and II
C) I, II, and III
D) I, II, III, and IV

Correct answer is C: All of the above debt instruments pay semi-annual interest and pay principal at maturity., except for Government National Mortgage Association (GNMA) bonds make monthly principal and interest payments back to the bondholders.

Series 7 Prep Course

Series 7 Test 4 with Answers - Practice Exam

More practice exam questions for the FINRA Stockbroker Exam

1. Mr. Hanson buys 3 XYZ May 50 CALLS paying $300 each for them. The breakeven for both contracts is:
A) 56
B) 53
C) 50
D) 47

Correct answer is B: The breakeven for all call options in the strike price (50) plus the premium ($300). The customer needs the stock to rise 3 points on each contract owned. The breakeven is 53 for each contract. The number of contracts Mr. Hanson has does not matter.

2. A listed security on the NYSE has been traded over the counter by a NYSE member firm. In which “market” did the trade take place?
A) First market
B) Second market
C) Third market
D) Fourth market

Correct answer is C: This would be a third market transaction. The third market is listed securities on an exchange that have been traded elsewhere. After hours or better pricing through another broker dealer could be reasons for these trades.

3. Prepayment risk or extension risk would most likely be part of which securities?
A) Municipal Bonds
B) Treasury notes
C) Treasury stock
D) CMO’s

Correct answer is D: CMO’s are paid based on the paying schedule of mortgage holders. Should the mortgage payment slow down, the payments to the bondholders would slow down and the bond may “extend” beyond its original time frame. Mortgage payments speeding up could lead to “Prepayment risk”, which would make the bond pay off faster than anticipated. Only mortgage backed securities (CMO’s, Pass Throughs) have these features.

4. What is the minimum maintenance requirement for a client who maintains 200 shares of XYZ Corp. presently valued at $65 per share?
A) $3,250
B) $4,000
C) $4,750
D) $5,000

Correct answer is A: When calculating the minimum maintenance requirement for a long margin account, multiply the total value of the securities ($13,000) by 25%. The total will come out to $3,250

5. Which of the following is true regarding American Depository Receipts (ADR’s)?

I Foreign companies that list their shares for trading on U.S. stock exchange
II Dividends are paid to shareholders in dollars
III Shareholders do not have voting or preemptive rights
IV Dividends are paid to shareholders in overseas currency


A) I and II
B) I, II and III
C) III and IV
D) I, II, III, and IV

Correct answer is D: An ADR is foreign stock traded in the US. The overseas company will declare it’s dividend in it’s natural currency, but it will be paid in U.S. dollars. An affiliated institution in the US will convert the dividend to US dollars and distribute it to the shareholders in the US. Shareholders do not have voting or preemptive rights, the bank votes the shares that it owns and it sell off preemptive rights and remit the money to the receipt holder.

6. The maximum allowable gift to customers and associated persons under NASD
Rules is:

A) $75
B) $100
C) $125
D) $150

Correct answer is B: NASD rules state that the maximum gift allowance is $100 in cash or equivalents.

7. How many people can be registered as a custodian on a minor’s account?

A) One
B) Two
C) Three
D) Four

Correct answer is A: Only one adult (custodian) can be listed per minor account. Discretionary authority cannot be given to other individuals or custodians.

8. Which of the following will a common shareholder will vote on:

A) Board of director elections
B) Rights offering
C) Stock dividend
D) Cash dividend


Correct answer is A: Common shareholders vote for the Board of Directors and on matters that affect the shareholder’s “ownership interest.” Existing shareholders are given an opportunity to buy any new issue of common stock through a rights offering. There is no voter approval needed. Dividend elections are made by the discretion of the Board of Directors.

9. Billybob has a long margin account with a current market value of $31,000. The current equity is $15,000. The customer then sells $2000 in securities. After meeting the minimum requirement, what would the current debit balance be?

A) $14,000
B) $15,000
C) $15,500
D) $16,000


Correct answer is A: To answer this correctly, you needed to recognize that this is a “restricted account.” A restricted account occurs when the debit balance exceeds the equity. The long market value before the sale was $31,000 and the equity was $15,000. This means the debit balance was $16,000 ($31,000 - $15,000). Selling securities is a restricted account requires half of the sale proceeds to be applied to the debit balance. Since $2000 of securities was sold, $1000 of those proceeds would be applied. The new debit balance would be $15,000.

10. A market maker associated with NASDAQ has not honored or filled firm quotes on a consistent basis. This firm would be guilty of:

A) Backing away
B) Interpositioning
C) Crossing
D) Churning

Correct answer is A: This would be “backing away”. FINRA prohibits backing away. A firm must honor its firm quotes.

Series 7 Study Courses

View Top Forex Trading Learning System - software solution to avoid trading during uncertain market periods. Instead, pick the best trending pair at the current time.

It uses no indicators, but the trend is determined by pure price action. It quickly scans 34 Forex pairs on all time frames from minute to monthly. That's 34 x 9 = 306 charts. Forex System analyzes all the charts for you every second! This way, you get the best trending pair and time frame at any time you want. Charts, audio and video on the page to view. View Forex Charts and Trading

Bonds Exam For Series 7

1. An investor purchases a bond with a 6% nominal yield at a price of 101 1/2. If he holds the bond to maturity he will receive a yield to maturity of:

A. less than 6%
B. 6%
C. greater than 6%
D. cannot be determined

2. All of the following pay semiannual interest EXCEPT:

A. GNMA bonds
B. municipal G.O bonds
C. municipal revenue bonds
D. treasury notes

3. Which of the following is true regarding convertible bonds?

A. it carries a higher yield than non convertible bonds
B. it has a fixed conversion price until the bond matures
C. the conversion price will change as interest rates change
D. the conversion price will change as the stock price changes


4. If a bond was purchased at a premium and is callable at par, which of the following is not true?

A. the yield will be lower if called
B. the investor will be paid par value if it is called
C. the yield will be higher if called
D. if the bond is not called it will mature at par

5. If an investor owned a callable bond and interest rates moved up 100 basis points after he purchased the bond. His bond would be:

A. more likely to get called
B. less likely to get called
C. definitely called
D. cannot determine

6. A customer owns $10,000 of a 6% IBM bond that matures 11-15-99. The customer sells his bond on Thursday Sep. 9th for regular way settlement. How many days are owed?


7. In relation to a CMO issue, If interest rates decline sharply you should see:

A. the average life increase
B. the average life decrease
C. the yields increase on new issues
D. prepayments decrease


8. Annual interest divided by the market price is the:

A. nominal yield
B. yield to maturity
C. tax equivalent yield
D. current yield

9. A corporation will initiate a “pre-refunding” strategy when:

A. interest rates are low
B. interest rates are high
C. prices are low
D. both b and c

10. A customer pays $1030 for a 5 year convertible bond with a conversion price of $50. The bond is callable at $1070 and the current market price of the stock is $52. Which alternative would be the most attractive?

A. sell the bond
B. convert the bond
C. allow the bond to be called
D. none of the above

11. A bond has a 7% nominal yield and a 6.60% yield to maturity. If interest rates moved 40 basis points lower, where would the bond be offered at to a new buyer?

A. 6.60 nominal yield
B. 6.20 yield to maturity
C. 7.00 yield to maturity
D. 6.56 yield to maturity

12. All of the following are “Secured Bonds” except:

A. Mortgage Bond
B. Collateral Trust Bond
C. Income Bond
D. Equipment Trust Bond

13. The risk that interest rates will rise after purchasing a bond is known as:

A. Market Risk
B. Call Risk
C. Reinvestment Risk
D. Purchasing Power Risk

Series 7 Online Training

Saturday, November 17, 2007

FINRA NASD Exam Test Series 7

1. If XLM Corporation has issued 5 million dollars in new bonds, which of the following would be true?

A. Current liabilities would increase
B. Stock holders equity would decrease
C. Current assets would increase
D. Total liabilities would decrease

2. A customer owns 100 shares of DEL stock that was purchased at $90. If the customer wanted to hedge the position while generating current income, your recommendation should be to:

A. buy a call
B. buy a put
C. sell a call
D. sell a put

3. If a stock hits a resistance level, a technical analyst would consider that to be:

A. bullish
B. bearish
C. over sold
D. neutral

4. A corporation would require shareholder approval for which of the following?

A. a 5% stock dividend
B . the repurchase of 200,000 shares of it’s own stock
C. a cash dividend
D. a 3 for 1 stock split

5. Which of the following are exempt from registering a new issue with the SEC?

A. open end funds
B. closed end funds
C. variable annuities
D. fixed annuities

6. A customer buys 100 shares of ABC at $18 in a new margin account. The customer is
required to deposit:

A. $1800
B. $2000
C. $900
D. $2500


7. A customer sells short 100 shares of XYZ at $19 in a new margin account. The customer is required to deposit:

A. $1900
B. $950
C. $2000
D. $1000


8. All of the following are money market securities except:

A. treasury bonds
B. treasury bills
C. commercial paper
D. municipal notes


9. Which of the following are paid a sales concession in connection to a
new municipal bond underwriting?

A. the issuer
B. the selling group
C. the syndicate members
D. the syndicate manager


10. If a customer who has an individual account dies, which of the following
actions should be taken first?

A. liquidate the account and freeze the assets.
B. cancel all outstanding orders
C. transfer the assets to the surviving spouse
D. wait for instructions from the estate lawyers



11. ISD corporation has earnings per share of $4.02 and has paid $2.40 in dividends.
the market price of the ISD is $40. What is the price earnings ratio?

A. 24.69
B. 16.67
C. 6.23
D. 9.95



12. An investor buys 100 shares of GHI at $83 and also sells 1 GHI Apr 90 call @2.
What is the investor’s maximum gain?

A. unlimited
B. $900
C. $200
D. $8100


A 5% municipal bond maturing in 15 years is trading in the market at $850 and has
a yield to maturity of 6.49%


13. What is the current yield on this bond?

A. 5.00%
B. 5.88%
C. 6.04%
D. 6.49%


14. What is the nominal yield on this bond?

A. 5.00%
B. 5.88%
C. 6.49%
D. 7.64%


15. The securities act of 1933 provides for:

A. the extension of credit in the securities industry
B. the establishment of the securities and exchange commission
C. the registration of new issues
D. all of the above


Use for questions 16 and 17
An investor buys 1 ABC Oct 80 call for $500 and also sells 1 ABC Oct 75 call
for $700.

16. This spread strategy is a:

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


An investor buys 1 ABC Oct 80 call for $500 and also sells 1 ABC Oct 75 call for $700.
17. this spread would be defined as a:

A. vertical spread
B. horizontal spread
C. long combination
D. diagonal spread





18. An investor would most likely want call protection on a bond when interest rates are:

A. rising
B. falling
C. stable
D. fluctuating

19. An investor buys a bond with a 6% nominal yield at a price of 102 1/4. If he holds the bond to maturity he will receive a yield of:

A. less than 6%
B. 6%
C. greater than 6%
D. cannot be determined

20. Which of the following actions would the FRB consider doing during times of inflationary pressure?

A. buy securities
B. sell securities
C. lower the discount rate
D. decrease reserve requirements

21. If a municipality wanted to install new street lights in a small area of a town, they would most likely issue:

A. a revenue bond
B. a special assessment bond
C. a double barreled bond
D. a collateral trust certificate

22. Under the Investment Company Act of 1940, all of the following are defined as types of investment companies except:

A. Unit investment trusts
B. open end companies
C. limited partnerships
D. Face amount certificates

Series 7 Class

Option Rules For 7 Exam

The following can be used as rules and concepts for Options within the Series 7 Exam.

OPTIONS

BUY CALL

BUYING THE OPTION HOPING THE MARKET RISES THUS MAKING THE CALL MORE VALUABLE.

EXERCISED: THE HOLDER HAS THE RIGHT TO BUY THE STOCK AT THE STRIKE PRICE.
(UNLIMITED GAIN POTENTIAL)

TRADED: CAN SELL THE CONTRACT BACK TO THE MARKET FOR A GAIN OR A LOSS.

EXPIRED: THE HOLDER CAN ONLY LOSE THE PREMIUM SPENT. (MAXIMUM LOSS)


SELL (SHORT) CALL

SELLING THE CALL FOR PREMIUM HOPING THE OPTION EXPIRES WORTHLESS.

EXERCISED: THE SELLER IS OBLIGATED TO DELIVER THE STOCK TO THE CALL HOLDER
IF THE BUYER CHOOSES TO EXERCISE THE OPTION.
(UNLIMITED LOSS IF SELLER DOES NOT OWN THE STOCK ALREADY)

TRADED: SELLER CAN PURCHASE THE CONTRACT BACK IN THE MARKET TO CLOSE OUT
THE POSITION.

EXPIRED: SELLERS BEST CASE SCENARIO. COLLECTS PREMIUM WITHOUT ANY OBLIGATIONS.

=================================================================================
BUY PUT

BUYING THE PUT HOPING THE MARKET FALLS MAKING THE PUT MORE VALUABLE.

EXERCISED: THE HOLDER HAS THE RIGHT TO SELL THE STOCK AT THE STRIKE PRICE.
IF STOCK WENT TO “0”, HOLDER CAN MAKE THE DIFFERENCE BETWEEN
STRIKE PRICE AND “0” (MAXIMUM GAIN).

TRADED: CAN SELL BACK THE CONTRACT BACK TO MARKET FOR A GAIN OR A LOSS.

EXPIRED: THE HOLDER CAN ONLY LOSE THE PREMIUM SPENT. (MAXIMUM LOSS)

SELL (SHORT) PUT
SELLING THE PUT FOR PREMIUM HOPING THE OPTION EXPIRES WORTHLESS.

EXERCISED: THE SELLER IS OBLIGATED TO PURCHASE THE STOCK AT THE STRIKE PRICE
TO SATISFY THE PUT HOLDER. MAY HAVE TO BUY A WORTHLESS STOCK.
TRADED: SELLER CAN PURCHASE THE CONTRACT IN THE MARKET TO CLOSE OUT POSITION

EXPIRED: SELLERS BEST CASE SCENARIO. COLLECTS PREMIUM WITHOUT ANY OBLIGATIONS.

Series 7 Options Exam

Use the following for questions 1-3

An investor buys 200 shares of IBM at $83 and buys 2 IBM May 80 put@2
1. What is the investor’s maximum loss?

A. Unlimited
B. $800
C. $1000
D. $16,200


2. At what price will the investor realize a profit on this position?

A. 80
B. 81
C. 85
D. 86


3. If the stock rose to $98 and the investor allows the put to expire, what would the gain be at that point?

A. $400
B. $1300
C. $1400
D. $2600


4. A customer buys 1 PDQ Dec 90 put@4 and sells 1 PDQ Dec 100 put@6. This
position is a:

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


5. An investor buys 1 XYZ Jul 85 call and buys 1 XYZ Sep 85 put. This position is a:

A. vertical spread
B. long combination
C. horizontal spread
D. short combination


6. The Options Clearing Corporation sets all of the following components of an option
contract EXCEPT the:

A. strike price
B. expiration month
C. premium
D. expiration date



7. A customer buys 1 QRS Oct 60 call@4 and sells 1 QRS Oct 70 call@1. This position is a:

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

Use the following to answer questions 8-10
An investor Buys 100 shares of RST at $67 and sells 1 RST Sep 70 call@4

8. What is the investors maximum gain?

A. unlimited
B. $400
C. $700
D. $6300


9. What is the investors maximum loss?

A. unlimited
B. $400
C. $700
D. $6300


10. At what price will the investor break-even?

A. 63
B. 71
C. 74
D. 66


11. What type of strategy would best suit an investor if he anticipated no movement in a particular stock?

A. sell a call
B. sell a put
C. buy a straddle
D. sell a straddle

12. If all of the expiration months were the same, Which 2 statements are true?

I the lower the strike price on a call, the higher the premium
II the higher the strike price on a call, the higher the premium
III the lower the strike price on a put , the higher the premium
IV the higher the strike price on a put, the higher the premium

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


13. Which type of option gives the investor the “the right to sell”?

A. buy call
B. buy put
C. sell call
D. sell put


14. If an investor sold stock short, what type of option would provide the best protection for the stock?

A. buy call
B. buy put
C. sell call
D. sell put


15. Which type of option if uncovered, could an investor realize a potential unlimited loss?

A. buy call
B. buy put
C. sell call
D. sell put

Use the following for questions 16-18
An investor buys 1 ABC Mar 25 call@ 8 and sells 1 ABC Mar 35 call@ 5

16. This position is A:

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


17. The investor wants these options to:

A. widen
B. narrow
C. expire
D. none of the above


18. This spread is defined as:

A. vertical
B. horizontal
C. diagonal
D. combination




19. Which of the following is done first when a Registered Representative wishes to conduct options business with a new customer for the first time?

A. Open a new options account
B. Send the Risk Disclosure Document to the customer
C. Send the OCC Options Agreement to the customer
D. Have a Registered Options Principal approve the account


20. An investor sells 100 shares of RET at $64 short and buys 1 RET Dec 70 call@1. The stock then rises to $80 and the investor exercises the call, What was the gain or loss?

A. $1700 loss
B. $900 gain
C. $700 loss
D. $1500 gain

Series 7 Online Training

Series 7 Test 3

Use the following information for questions 1-3

Mr. Brown buys 100 shares of GHI at $68 and also sells 1 GHI Dec 70 call
for a premium of $800.

1. At what price would GHI need to be for Mr Brown
to break even?

a) 60
b) 62
c) 76
d) 78

2. What would be his maximum gain?

a) unlimited
b) 6000
c) 1000
d) 800

3. What would be his maximum loss?

a) unlimited
b) 7600
c) 6000
d) 1000

4. A customer purchases 10 bonds that have a nominal yield of 8% at a
price of 94 1/4. The customer will receive semi annual payments of:

a) $377
b) $400
c) $754
d) $800

5. Which type of order must be executed immediately and entirely?

a) immediate or cancel
b) all or none
c) fill or kill
d) firm commitment

6. GNMA pass-throughs pay back principal and interest:

a) monthly
b) quarterly
c) semi annually
d) annually

7. All of the following are abbreviations for a municipal note except:

a) RAN
b) LAN
c) TAN
d) BAN

8. Which of the following groups of trades contain a zero-plus tick?

a) 29 28 7/8 28 7/8 28 1/2 29
b) 28 28 1/8 28 1/8 28 1/4 28 1/2
c) 28 28 1/8 28 1/4 28 1/2 28 1/4
d) 29 29 1/8 29 1/4 29 1/2 29 3/8

9. A round lot trade of stock is:

a) 10 shares
b) 100 shares
c) 500 shares
d) 1000 shares

10. Which of the following industries would be considered to be a defensive stock?

a) automobile
b) clothing
c) steel
d) airline

11. Which of the following must be sent to customers by the settlement date after a purchase of a municipal bond?

a) preliminary prospectus
b) official statement
c) tombstone
d) notice of sale

12. State issued municipal bonds will not be backed by:

a) income taxes
b) sales taxes
c) gasoline taxes
d) property taxes

13. If the market value in a margin account decreases, the SMA will:

a) increase
b) decrease
c) stay the same
d) fluctuate


14. Which of the following is true regarding limited partnerships?

a) the limited partner has unlimited liability
b) the general partner has unlimited liability
c) neither the general partner nor the limited partner have unlimited liability
d) both a and b





15. A registration statement has been filed with the SEC. All of the following will take
place during the 20 day cooling off period except:

a) hold a due diligence meeting
b) issue a preliminary prospectus
c) fill unsolicited orders
d) blue sky the issue


16. Which of the following insures municipal bonds?

a) FDIC
b) AMBAC
c) ADBAN
d) FRB

Use the following for questions 17 and 18

A customer buys 100 shares of JKL at $43 and buys 1 JKL Apr 40 put
paying a $200 premium.

17. What is the customer’s maximum loss?

a) $200
b) $500
c) $4100
d) unlimited

18. At what price will the customer break-even?

a) 38
b) 41
c) 42
d) 45

19. Which type of order specifies a price that will activate the order but will
then get executed at the next price whether the price is higher or lower?

a) market order
b) stop order
c) limit order
d) all or none order

20. A bond has a conversion price of $40. The bond is selling in the market at
$800. At what price would the common stock need to trade to be equal to
the bond?

a) 20
b) 32
c) 40
d) 48




21. Which of the following is a type of corporate bond?

a) revenue bond
b) collateral trust certificate
c) FHLB bond
d) Bond anticipation note

22. Which of the following insures bank deposits?

a) SIPC
b) FRB
c) FDIC
d) SEC

23. A mutual fund has a current N.A.V. of 11.25 and a P.O.P of 12.10. The sales charge
on this fund is:

a) 7.02%
b) 7.56%
c) 7.86%
d) 8.50%

24. Early withdrawals from an IRA are subject to a penalty of:

a) 10%
b) 15%
c) 20%
d) 50%

25. ABC corporation earned $2.00 per share this year and is currently selling
in the market at $20. If it earns $3.00 per share next year and it’s Price-earnings
ratio stays the same, the stock should sell at:

a) $20
b) $25
c) $30
d) $60


26. If an S&P 500 index call option was exercised, the seller of this option must:

a) deliver the underlying security
b) deliver the cash equivalent of the premium
c) deliver the cash equivalent of the intrinsic value
d) purchase the value of the index

27. An investor is long 100 shares of XYZ stock. Which of the following orders should be used to protect against
a loss in this position?

a) sell stop order
b) sell limit order
c) buy stop order
d) buy limit order



28. GHI Corporation has just issued 20 million dollars in 20 year debentures. Which of the following is true?

a) current assets decreased
b) current liabilities increased
c) stock holders equity increased
d) total assets increased

29. Which of the following securities are non interest bearing?

a) T-bills
b) T-notes
c) T-bonds
d) CMO’s

30. Which of the following are not exempt to the registration requirements of the securities act of 1933?

a) commercial paper
b) treasury bonds
c) municipal notes
d) mutual funds

Series 7 Exam Training

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

Series 7 Practice Test

1. ABC stock is currently trading at $65 a share. If an investor wishes to buy the stock at a lower price sometime
during the day, which of the following orders would be the most appropriate?

A. Buy Limit
B. Sell Limit
C. Buy Stop
D. Sell Stop


2. Mr. Smith purchases a 10% corporate bond at par that matures in 20 years and is callable in 10 years at 103.
If the bond is called, Mr. Smith’s yield will be:

A. Less that 10%
B. More than 10%
C. Equal to 10%
D. Cannot determine


3. Which creditors are paid last when a company goes out of business?

A Preferred Stockholders
B. Common Stockholders
C. Subordinated Debentures
D. Debentures


4. XYZ Corporation has gross income of $6,000,000. It has $1,000,000 in interest expense and is in the 34% tax
bracket. XYZ has 500,000 shares of common stock and 10,000 shares of 10% preferred stock ($100 par)
outstanding. What are the earnings per share for XYZ?

A. $6.40
B. $7.72
C. $10.91
D. $11.80


5. Which of the following are usually backed by property taxes?

A. School district bond
B. State general obligation bond
C. Industrial development bond
D. Government agency bond


6. Which of the following have authority to enforce MSRB rules?

I. SEC
II. NASD
III. Controller of the currency
IV. FRB

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


7. An investor purchases a $10,000 municipal bond at par on January 5th 2005. On September 12th 2005, this
investor sells the bond for $10,500. The profit is taxed as:

A. ordinary income
B. tax-free capital gain
C. passive income
D. capital gain

8. An investor sells 2 DFK APR 20 PUT@6. What is the Customers maximum loss?

A. $1200
B. $1400
C. $2800
D. unlimited

9. A municipality bond rating service would consider all of the following when evaluating a revenue bond
EXCEPT:

A. The public’s attitude toward the debt
B. The debt service coverage ratio
C. feasibility studies
D. operating revenues

10. Minimum maintenance requirements on margin accounts are set by:

A. FRB
B. SEC
C. NYSE
D. NASD

11. A municipal bond has been issued with successive maturity dates set from 2000 through 2012. What type of
bond is this?

A. Serial
B. Series
C. Term
D. Balloon

12. Bondholders may NOT take action against the corporation if it fails to make interest payments for which of the
following securities?

I Debentures
II Subordinated debentures
III Convertible bonds
IV Income bonds

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




13. Which of the following would NOT be of interest to a technical analyst?

A. Short interest ratio
B. Earnings per share
C. Support levels
D. Advance/decline ratio

14. An investor sells short at $50 and sells a 50 put at 5. If the put is exercised when the stock is trading at $45,
the investor will realize:

A. Neither gain or loss
B. a gain of $500
C. a gain of $1000
D. a gain of $1500

15. An investor buys 1 ADF MAY 80 Call and sells 1 ADF MAY 70 Call. Which of the following is true?

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


16. Which 2 terms are synonymous?

A. Current yield and yield to maturity
B. Nominal yield and basis
C. Yield to maturity and coupon rate
D. Nominal yield and coupon rate


17. Which of the following is true regarding selling stock short?

A. The stock must be repurchased within 7 business days
B. It can be done in a cash or margin account
C. It must be done in a margin account
D. It can only be done with exchange listed securities

18. Under Regulation D, the maximum number of accredited investors allowed in a private placement is:

A. 25
B. 35
C. 45
D. unlimited


19. Which of the following are NOT EXEMPT to the registration requirements under the Securities Act of 1933?

A. Commercial Paper
B. Corporate Bonds
C. Fixed Annuities
D. Municipal Notes



20. An investor sells 100 shares of RST short at $60 and also Sells 1 RST APR 55 put@1. What is the break-even
point?

A. 54
B. 56
C. 59
D. 61


21. Which of the following “rights” does a preferred stockholder normally have?

A. Right to vote
B. Preemptive rights
C. Right to convert to common stock
D. Right to convert to a bond

Series 7 Study Course - Books, software, online practice exams.