Series 7 Practice Tests - Sample Exams, Series 7 Help

Bull Spread Questions for Series 7

2011-12-02T08:58:00.000-08:00

A bull spread is buying calls and selling calls or buying puts and selling puts where the profit lies with the market rising. If the market falls, the investor will lose money. These concepts must be understood for the Series 7 exam

Bull Call Spread Example

Buy 1 WDF Sep 40 Call@5
Short 1 WDF Sep 45 Call@4

The above example will show a bullish strategy. The investor is buying a call option with a September expiration, a stike price of 40 (the right to buy the stock at) and he is paying a $500 premium. This buy call is a bullish option by itself. The Short position is a call option with a strike price of 45 (the obligation to sell at price), and the investor is receiving a $400 premium.

This investor thinks the market will go up. He has lost $100 on the spread (the difference in the premiums paid and recieved), and he hopes the options will trade or get exercised. If the market goes down (bearish) and the options expire worthless, then the investor loses the $100 premium and this option strategy has been a loss.

The options investor wants the market to rise and for both contracts to get exercised. The person will make the 5 point strike price difference, minus the $100 premium lost. This $400 potential is the maximum gain.

The maximum loss in this trading spread strategy is the $100 premium. This is a call bull spread.

A Bullish put spreads is when an investor buys and sells puts hoping the market will rise.

Bull Put Spread Example

Puts can be bought and sold to create a spread. These spreads can be bullish or bearish. A bull Put position would be as follows:

Buy 1 DFT Oct 80 Put@6
Short 1 DFT Oct 90 Put@9

In this case, the investor is long the bearish option (a buy put is a bear option position), has the right to sell the stock at 80 and is paying a $600 premium. The option he is shorting has a 90 strike price (short put holders must buy the stock at the strike price) and is getting a $900 premium.

This is resulting in a net credit of $300. Since the investor has a gain of $300 and is controlling puts, the only way he will make money is if the options expire worthless. This is a credit spread. The premium gained is the maximum gain on the options.

Since the maximum gain is already established, having the options exercised or traded would not be profitable. If the market was bear in direction, the options investor would have a negative on the strike price difference (selling at 80 and buying at 90). Remember, Puts are the opposite of calls. A "Buy Put" means you have the right to sell the stock. The higher strike price is best when you are long puts. The loss potential on this bull spread is the strike price difference minus the premium gained.

You would be bullish here. If the market rises, both puts should expire and the premium gain is safe.

This is a bull put spread.

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How To Pass The Series 7 Exam

2011-11-30T13:11:00.000-08:00

Many people wonder what is the best way to pass the Series 7 Stockbroker Exam the first time or How to pass the series 7.

As you study for the Series 7, Series 6 or almost any securities licensing test - it is crucial to work with MORE than enough exams. Memorizing repetitive test questions may give you good final exam practice scores, but it will not give you the readiness to pass the Series 7. It will only provide a false sense of security.

Software Test Exams

Working Series 7 questions from your computer will prepare you well as long as the amount of questions is there and the degree of difficulty is strong. The actual exam is given on computer so drilling yourself with computer based training questions is a great way to prepare.

American Investment Training has a regularly updated 7000 question hard drill CD for the Series 7.

Series 7 Answer Explanations

Accurate and detailed answer explanations to your practice questions is a VERY important aspect of studying and passing the series 7. When you get a question wrong (or even if you guessed it right), you want to see the correct answer explanation clearly written out.

Study Tip To Passing

A great study tip and technique is to write out the answer explanations on exam questions you got wrong. This reinforces the concept and will limit you from getting that question wrong again or even a similar question.

More Free Info: Pass the Series 7

Series 7 Sponsorship

2011-11-27T08:22:00.000-08:00

Getting sponsorship for the series 7 is something people need to get the Series 7 license.

American Investment Training AIT can set you up as an independent broker dealer, Insurance Broker or financial advisor. We can also present a program to get any FINRA Licenses you need to work as an independent. AIT's affiliate broker dealers are also looking for experienced brokers, groups and professionals. Earn high payout with great product and support. Leading companies.

We deal with the top Independent BD firms in the country. We can introduce the right fit for YOUR independent broker business.
Learn more:
Series 7 Sponsorship help

Option Spreads

2011-11-22T09:59:00.000-08:00

The buying and selling of the same type of option contract creates a spread trading strategy. A call spread is buying and selling calls and a put strategy is going long and short on two contracts.
Debit Call

Spreads that are created when the premiums bought and sold results in a loss for the options trader is a debit spread. This would mean the investor needs the contracts to perform well to make the debit up. Debit spreads can be bullish or bearish.

Strategy Example

Buy 1 SWE Nov 40 Call for $300
Short 1 SWE Nov 50 Call for $100

These call options that were bought and sold resulted in a debit for this trader. The debit is $200. The options investor is looking for these contracts to become more valuable so they can be traded or exercised. The "spread" profit potential is in between the strike prices. When creating call debit strategies, the investor is bullish on the market. The market rising on this stock is what is needed for this trading position to be profitable going forward. The maximum loss is the $200 debit - should the contracts expire.

Penny Stock Trading Course

Options Intrinsic Value Series 7

2011-11-22T09:37:00.000-08:00

The amount that an option is "In The Money" is the Intrinsic Value of the contract. The calculation is based on the strike price and the market price of the stock. If a call option is in the money by 3 points, the contract has 3 points of intrinsic value. This formula method is used for Puts and Calls.

Stock Option investments are profitable based on the market price of a stock and the strike price. These profit direction calculations are different if a Put or a Call contract is held and the intrinsic value is looked at differently. An option being in the money does not mean the investor is profitable. If an investor bought call options for $500 with a strike price of 60, while the market on the stock is 63 - the contract would have 3 points of intrinsic value (strike price of 60 and the market at 63). The formula does not factor in the premium paid or the real break even for the trader, which is really 65 (strike price plus premium).

Thus, options that are in the money are not always at break even or better for the investor. Contracts that are in the money do trade higher than out of the money contracts - put or call.

Put Option

A put contract with a 40 strike price and a premium of $300 was purchased. The current market is 41. In this situation, the break even method and formula is strike price minus premium - which is 37. An investor always wants the stock to go down on a Long Put. The option also has 0 intrinsic value because the option is out of the money. It is out of the money by one point since all put options are only in the money when the stock price is below the market price. You calculate the intrinsic value based on whether an option is in or out of the money only. The formula does not factor in cost or whether a trader is long or short.

All Calls are “In the money” when the market price is above the strike price

All Puts are “In the money” when the market price is below the strike price

All options are “At the money” when the market price is equal to the strike price

Options cannot have negative intrinsic value in the formula. If the option is out of the money, then the option has no intrinsic value.

Ex: 1 HLP DEC 25 PUT

HLP Current Market Value is 26

Stock is 1 point above the Put

Intrinsic value Calculation = 0

Firm Element CE Credits

2011-09-14T08:57:00.000-07:00

All FINRA NASD firms must provide FINRA continuing education for their representatives and managers. This CE training can be taken online in the subjects that are needed. Our firm element courses offer dozens of subject choices for managers and brokers.
Series 7 and Series 6

All representatives that are licensed Series 7 and Series 6 must take there continuing education training beginning in the 2nd year of licensing. Subjects within our firm element education include:

Ethics and Suitability
Anti Money Laundering
Securities Products, including mutual funds, annuities, bonds and options
FINRA Rules and Regulation
Economics and more

Firm Element CE

Muncipal Bonds

2011-08-10T18:56:00.000-07:00

Many people who are studying for the Series 7 have trouble with Municipal Bonds. Here is some helpful notes on the basics.

Muni Bonds

People who are looking for tax free yield investing will look to make investments in municipal bonds. The interest earned is federally tax free and the after tax yeild in normally higher than US Government securities.

The higher the tax bracket of the bond investor, the higher the tax free yield. Investing in these bonds is normally done based on the state the person lives in. People who buy municipal securities will normally be free from federal, state and local taxation.

Municipal brokers can help customers with investing in them. They are normally offered broker to broker, so many firms will have a list of other firms and their inventory. Investing in these normally comes down to these important factors:

State issue of the bonds
Tax bracket of the investor
Maturity
Call dates, if any
Rating
Coupon and yield

Callable Muni Bonds

Most Muni bonds are callable. This is because states, cities and other authorities want the fiscal flexibility to call back bonds early. The primary reason for a bond being called is that interest rates have gone down enough where the current coupon rate or Nominal Yield is considered too high.

When investing in Municipal bonds, buyers should ladder their portfolio where the call dates are spread out or staggered. This allows for greater management of interest rate risk within their Municipal portfolio.

Callable issued will normally have a higher coupon rate than non call bonds.

Online Series 7 Course

Series 7 Options Help

2011-07-15T11:27:00.000-07:00

An equity or stock option is a contract between a buyer and sell, where the buyer owns the contract and has a right to buy or sell the stock at a set price. This type of trading and investing product carries risk to the amount of money invested in the contract.
There is significant trading volume in the options market. These securities have a limited time frame for investors to either trade them back or exercise them.

Stock options expire monthly and carry 100% risk to the premium (cost). When an investor buys an option, they can lose their enitre investment if the contract does not perform well enough to be profitable.

Types

The two types of options are Calls and Puts. Call option contracts give the holder the right to buy the stock at the strike price. For a person who is trading calls, they have an unlimited gain - since the market can rise to an unknown level.

Put contracts are for bearish investors who feel the market will decline. They give the holder the right to sell the stock at the strike price.

Trading

Most option investors do not exercise the contracts. They usually see easier trading opportunities to buy or sell the contracts itself back to the market for a premium gain. Some traders will exercise the option if they want to own the stock beyond the expiration date of the contract.

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Short Options

Many investors will look to sell or short option contracts. The goal here is to gain the premium for selling and hope the options expire. Options can also be used as hedging or income strategies with stock they already own. Covered Call Writing is one strategy that is used on held stock.

Most broker dealers will set up an options trading account for their customers. However, certain risks must be disclosed prior to trading.

Premium

The cost (current price) of an option contract to buy or sell is called the premium.

The premium is affected by 2 main factors:

1. Time remaining on the contact (expiration)

- The longer the expiration, the more valuable the option

Ex: 1 DEF NOV 60 CALL vs. 1 DEF DEC 60 CALL

The December contract has a longer “life” in the market, thus will have a higher premium.

2. Strike price vs. the current market price (“In the money” potential)

- More “in the money” equals higher premium
- The lower strike price call carries higher premiums
- The higher strike price put carries higher premiums

Ex: 1 JKL JAN 70 PUT vs. 1 JKL JAN 60 PUT

* The “70 Put” has 70 points of intrinsic value potential. Thus will have a higher premium.

The 3 “ACTIONS” of options

1. Holder or Writer can trade the option back to the market for premium gain or loss

2. Holder (only) can choose to exercise the contract for it’s full benefit and value or trade the option to the market

- Call holder has the right to buy the stock at a fixed price
- Put holder has the right to sell the stock at a fixed price

3. Holder (only) can choose to let the contract expire worthless. This is the holders worst case scenario.

“Holder’s gain = Sellers loss”

“Holders loss = Sellers Gain”

Options are a unique security, with unique risks. Options expire monthly with a maximum standard life of 9 months. Unlike most other securities, your initial investment can be lost in a short period of time. The holder can lose 100% of the premium paid. The writer is in effect selling short, which in some circumstances can produce an unlimited loss potential. These losses cannot be recovered on the contract once the contract expires.

Since Options are one of the riskiest types of investments, suitability and education must be the initial priority of any registered representative looking to present them to customers.

Series 7 Options

Sample Tests - Series 7 CD

2011-06-18T06:52:00.000-07:00

Study and pass the Series 7 exam by taking a fully interactive on line course. This is a virtual class that can used by students around the world. Since most areas do not offer live Series 7 training, using a state of the art on line courses make it simple.

The effectiveness of this type of school training lies with the pacing for the student. There is a lot of information on the series 7 test and trying to keep up with a teacher can be challenging - at least on the more difficult parts. Using an online class allows you to pause and stop anytime you want. Take a break whenever you want.

The school learning breaks the Series 7 down to sections and the training course will go as fast or as slow as you need.

Series 7 Online

Series 7 Test Sample Question

2011-05-03T08:09:00.000-07:00

American Investment Training is the leading provider of Series 7 study material and online courses. AIT also offers sample series 7 questions.

The following are sample practice questions and answers for the Series 7 exam. The test focuses on several big areas including Bonds, Options, FINRA Rules and regulations. The Series 7 license test requires consistant study. These questions are just some examples.

Sample Test examples:

1. Betsy has just opened an options account and enters an order to buy 1 XYZ Oct 70 Call for $300. What is Betsy’s maximum potential gain?

A) $300
B) $6700
C) $7000
D) Unlimited

Correct answer is D: The maximum gain for the Betsy for the purchase of a call option is unlimited. The appreciation of the underlying stock can go up forever. The maximum loss that Betsy can incur is only the premium paid of $300.

2. A customer 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 equity in the account?

A) $500
B) $20,000
C) $20,500
D) $37,000

Correct answer is B: The equity in a short margin account is equal to the credit balance minus the short market value. SMA is not used when computing equity.

3. A customer 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 on this account?

A) $5500
B) $6000
C) $6600
D) $12,600

Correct answer is C: Minimum equity maintenance on short margin accounts is 30%. NYSE rules state that you must maintain at least 30% equity based on the current short market value. The short market value of $22,000 must be multiplied by 30%. This equals $6600.

4. An investor owns 100 shares of LKI at $58. He needs to limit his loss to 5 points or less and will accept a longer time for the order to be executed, to make sure the loss does not exceed 5 points. Which of the following orders would be the best recommendation?

A) Sell limit order
B) Sell stop-limit order
C) Sell stop order
B) Buy stop order

Correct answer is B: A sell stop-limit order would be the best choice. A sell stop-limit order specifies a price, but will not turn into a market order. This order will only get executed at the price or better. Stop orders, although quicker in execution, will turn into market orders and the customer will not be guaranteed a specific price. Stop-limit orders are risky, in that the order may or may not get executed, but in this situation, it is the best choice.

Visit American Investment Training for Series 7 Training

Series 65 Books

2011-03-07T07:19:00.001-08:00

Series 65 books, cd and other study material available through American Investment Training. All Series 65 prep material is updated for current test content. 2 book set with over 1500 practice test exam questions.

The course is built for self study and carries a 90% first time self study pass rate. The books and CD course is the best option for fast completion. As always, AIT is here to assist our students until they pass their exam successfully.
Series 65 Investment Advisor Courses
Series 65 Books

Become an Independent Broker

2011-01-14T07:19:00.001-08:00

American Investment Training and Atlantin Partners is looking for independent Series 7 brokers, Series 6 agents, life insurance brokers and financial advisors to get set up an independent reps. Series 7 Sponsorship is possible for brokers displaying other production.

These independent opportunities are best for producing agents who sell Annuities, Life Policies and other insurance based product. Producing Stockbrokers, Financial Advisors and planners are also welcomed. These include Series 7 Licensed and Series 66 (65 and 63). Series 7 Sponsorship may be offered to established insurance brokers and agents looking to open their own office and get set up as an independent.

All inquires are kept confidential. We are the training company for many of the largest insurance services companies in the country. We will speak with you directly first to see what your needs are. No fees.

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Independent Broker Set Up

Securities License Exams

2010-12-20T16:54:00.000-08:00

If you are looking to break into the securities industry or work for a broker-dealer, there are certain securities licenses that you should keep in mind.

People who are currently outside the business or graduating from college are well served in this job market to get some license training and completion.

FINRA

Broker Dealers who are members of FINRA (formerly NASD) must have their employees licensed based on the job functions of those employees. FINRA is the regulatory authority of the broker dealer industry. There are several licenses that the NASD recognizes to work in the securities industry. Some can be obtained before you enter the business. Other licenses need to be "sponsored" by your employing firm. That means, while you can begin studying for sponsored exams, you can not sit for the actual exams until you are hired. All FINRA exams (once you are registered)can be taken any day of the week (Mon-Fri) at hundreds of testing centers throughout the country.

Licenses to consider that do not require sponsorship

Series 65 - The Series 65 licenses you as a Registered Investment Advisor. This is an excellent designation to get before you enter the job market. The license itself is for financial advising. Giving investment advice on assets you are overseeing for a fee. It looks very strong on a resume and it is only a 130 question multiple choice exam. Even if you are unsure of the area of finance to work in, this license is a plus. Employers will consider any licensing a bonus over other candidates who have not obtained this certification. As I said, it does NOT require company sponsorship. Get this first.
Series 63 - The Series 63 covers the Uniform State Law content of the business. The exam is a short test of state laws, registration procedures and terminology. The license is for registered brokers and advisors. Most states require the 63, before representatives can call out of state investors. This license can be obtained on your own and does not require company sponsorship. Brokerage firms will look for this on your resume.
Series 3 - The Series 3 exam is specific to the futures and commodities market. It is administered through the NASD testing network, but it is a NFA (National Futures Association) license. Most firms that do not work in this market will not consider this license very important or needed, but if you ever land with a futures firm, you will need it. As with any license, it doesn't hurt to get it at all.

There are a few other futures tests (Series 30 and 31), but neither needs to be taken unless you are looking to work specifically with futures - commodity related securities.

Securities license designations such as the Series 7 and Series 6 require company sponsorship before sitting for these exams. Get the licenses you can get on your own. Once you are hired, your company will sponsor you for other exams, if required by your company.

Get the edge in your finance career and begin some securities license training. Do what you can to get your resume placed on top of the pile!

Nick Hunter is the President of American Investment Training (AIT) http://www.aitraining.com - a securities license training company. He also writes for http://www.brokerjobs.com - A career website for incoming brokers and advisors.

Series 7 Sponsorship - How to become a licensed stockbroker

2010-11-10T05:11:00.000-08:00

Learn how to become a licensed Series 7 Stockbroker and financial advisor.

Building a career as a Financial Advisor, Insurance Broker or Stockbroker requires pre-knowledge information in not only the requirements, but understanding truly what it takes to succeed as a broker or financial planner. This book cuts through the haze of the snippets of information you find on the Internet. It not only speaks to how to become a stockbroker, but discusses the types of firms to choose from, the salary to expect, the commission structures and more.

Introduction to a career as a stockbroker and financial advisor
How companies hire
Firms to avoid
SERIES 7 SPONSORSHIP
Discussion of all licenses and ones you should consider
Working as an Independent Broker
How Large firms and small work
Insurance and Investment Product Carriers
and More career information.... EBOOK!
See More: Become a Series 7 Broker

Finance Job Posting - Post Jobs for 1 YEAR - Classified Ad

2010-09-29T09:23:00.000-07:00

www.brokerjobs.com is a leading recruiting website for financial advisors, brokers and other finance jobs. It is linked from American Investment Training as well. 1 year job posts.

Placing Ad with our job website Benefits

There are many benefits using broker jobs. One is, you are not one of thousands or getting lost in other industries. We generally only have 20-30 ads running at the same time. You also have the listing for one whole year - which is great for ongoing recruiting. We also get many emails and calls relating to job searches, changing firms, career questions and so on. We point them all to THIS Website.

Our visitors range from:

College graduates
Career changers
CPA's, accountants and lawyers
Insurance brokers
Licensed stockbrokers and financial advisors
Million dollar broker producers

Post Finance Jobs

Series 7 Registration Questions - Sponsorship

2010-08-11T12:19:00.000-07:00

Series 7 Questions and sponsorship requirements.

Q: Who is required to take the Series 7?

A: FINRA investment brokers and other employees of a firm.

Q: Is it a difficult exam?

A: It is a large exam, so the time and amount of material in it can be intimidating at first. However, it really comes down to just good study habits and passing the practice exams. Using a CD test simulator is very helpful.

Q: How long does it take to prepare for the exam?

A: Normally 2 months, but the good thing about the Series 7 is that it can be taken any day of the week (once you are registered through FINRA).

Q: What does the test focus on mostly?

A: It covers the entire securities market, but the most amount of questions are in Regulations, Debt (bonds), Customer Accounts and Options.

A: How many times can I sit for the exam?

Q: If you fail the test, you must wait 30 days before sitting for the Series 7 again. If you fail it 3 times, you must wait 6 months. After each fail thereafter - a 6 month wait is mandatory between attempts. This would be very unusual for a person to fail this many times though. As long as you passing the practice tests, you should pass on the first try.

Q: What other licenses are attractive to employers?

A: The most popular license over the last 3 years has been the Series 65 License. The 65 exam is to become a registered investment advisor. People who hold the Series 65 can charge fees for investment advice, instead of commissions. The Series 7 does not cover that. The Series 63 is also required of most employees. This covers state licensing. The Series 65 and the Series 63 do not require company sponsorship either. They are very attractive looking on a resume.

Series 7 Course Material

Series 7 Test Prep - Free shipping special

Insurance Agent Series 7 Sponsor - Sell Life Products and Get Series 7

2010-03-09T12:20:00.000-08:00

American Investment Training can set you up as an independent Insurance agent or broker through one of our many brokerage firm clearing contacts. If you are an experienced Life and Health insurance agent and wish to get set up as an independent office - appointing with one of our broker dealers including Series 7 sponsorship may be available.

These independent opportunities are best for producing agents who sell Annuities, Life Policies and other insurance based product. Producing Stockbrokers, Financial Advisors and planners are also welcomed. These include Series 7 Licensed and Series 66 (65 and 63). Series 7 Sponsorship may be offered to established insurance brokers and agents looking to open their own office and get set up as an independent.

All inquires are kept confidential. We are the training company for many of the largest insurance services companies in the country. We will speak with you directly first to see what your needs are. No fees.

Top Product from major insurance carriers

American Investment Training

Go to the contact form here: Independent Insurance Broker Office

How to Pass The Series 7

2010-01-20T11:26:00.000-08:00

Studying and preparing for the exam will vary depending on the time you can dedicate to it. Home study courses given by American Investment Training recommend a plan of 6-8 weeksconsisting of 2 hours daily. The course will cover each subject in depth and give you plenty of chapter questions and answers. The Series 7 course is designed to get you to pass the exam on the first try.

There will also be several final exams that simulate the actual test content and you might wantto use a computer testing program as well. A computer testing program can give you good visual studying because the real exam will be very similar to the computer testing program.

The SERIES 7 spreads out the different subjects throughout the test. You will be given a calculator to use at the center. Applicants are not permitted to bring their own. Scrap paper will be given to you as well for you to use during the test. Once the test officially starts you can write down anything you want (Formulas, Rules etc.). The computer also offers the student the ability to change their answers at the end of the first or second part of the test.

Meaning, if you wish to change an answer to a question in the first half, you will have to wait until the end of the first half to do it. Once the second half starts, you will be unable to view your first half. Basically, you are taking 2 different 125question exams. Even if you are unsure what the correct answer to a question is, you must enter something before the next question is shown.

Your grade is given immediately on your screen at the conclusion of the test and a print out will be given to you. Your sponsoring Firm will receive a copy as well. The national first time passing rate for the SERIES 7 is around 60% but if you use a top training company, the rate is more like 80%. Now, we don’t like to think about anything negative but if you do fail the test, you will have to wait 30 days to re-take it. Should you fail the test 3 times, and then there is a mandatory 6 month wait for re-applying. As long as you study consistently and pass your practice exams, you should pass your exam on the first try.

Visit Global Career Schools for more Series 7 info and Home Study Course Options at the link to follow. SERIES 7 STUDY

Virtual Series 7 Course

2009-12-03T13:45:00.000-08:00

Study for the Series 7 exam by taking a virtual online training class.

The Series 7 is a license to work as a Regitered Representative of a FINRA NASD brokerage firm. American Investment Training offers live virtual test classes to pass the Series 7 Exam.

Test Format

The Series 7 Exam is comprised of 250 multiple choice test questions. The time limit is 6 hours. 70% is the grade needed to pass the test. This license is for selling securities in the primary or secondary market of a FINRA firm. The Series 7 covers securities such as Stocks, Bonds, Options, Mutual Funds, and Retirement Plans. The Exam is offered daily at hundreds of national test centers.

Now you can have of the best of both worlds - classroom and self-study! Attend our live, internet-based virtual classes from your home or office. Our livevirtual classes are the perfect addition to studying with our state of the art exam prep software and printed textbooks.

Live instructor classes for the Series 7

VIEW OR BEGIN LIVE VIRTUAL TRAINING HERE

Series 3 Study Material - Series 3 Study Course

2009-08-29T15:37:00.000-07:00

The Series 3 course offered by American Investment Training includes study material comprised of updated Series 3 Book and CD Test Programs. The AIT self study course normally takes 6 weeks to complete. Chapter and Final Exams are included to prepare the student for the actual test.

The Series 3 exam is the national commodity futures test. If you ever wanted to participate in the futures market trading contracts, options or engage in hedging strategies, this may be the certification and career for you. Adding licenses such as the Series 3 can add to your credentials in any investment career. If you do not have an impressive finance degree or other designations, this license will at least add to your credentials and give you some benefit when job hunting or going on interviews.

Preparing for the series 3 exam usually takes 6-8 weeks of 1-2 hours per day home study. The exam is a multiple choice test.

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CFA Study Prep - CFA Material

2009-07-23T17:10:00.000-07:00

Begin training to become a Chartered Financial Analyst by using our study notes, guides and materials. Level 1 is offered in June and December. Level 2 and 3 are offered in June only. Exams are given at select worldwide locations.

Enhance your finance job credentials with a Chartered Financial Analyst Certification.

Eligibility and registration requirements are part of the exam process. Education or work experience requirement: U.S. bachelor’s degree or comparable non-U.S. Degree. 4 years of professional work experience may be substituted for candidates without degrees.

The Chartered Financial Analyst designation has become a very popular and important educational certification. More finance related companies are requiring this designation than ever before. Gain an advantage over other job candidates, by getting your CFA charter.

Level 1 is offered in June and December. Level 2 and 3 are offered in June only. Exams are given at select worldwide locations.

Eligibility and registration requirements are part of the exam process. 4 years of professional work experience may be substituted for candidates without degrees.

Study text books, online tests and full class DVD's.

Study and Pass the CFA using American Investment Training - the leader in financial exam training.

AIT:
CFA Level 1 Training Prep

Series 66 Test Books - Study Material

2009-06-26T09:55:00.000-07:00

American Investment Training has updated and accurate Series 66 Exam test training books and computer based study material. American Investment Training provides financial courses to investment professionals and students looking to enter the investment business and pass the Series 66 the first time.

All books and CD's come difficult but accurate practice exam questions and detailed answers.

Sample Series 66 Question

A 401(k) plan is established by a(n):

a. self-employed individual with contributions based upon the individual’s self employed income
b. for-profit corporation with contributions made by employees as a salary reduction
c. not-for-profit organization with contributions made by employees as a salary reduction
d. government agency with contributions made by the employer on behalf of the employees

Study Material

The Series 66 study material offered by AIT includes: Two Series 66 Books and a CD Test Program. Chapter and final exam course test questions are provided to give exposure to accurate exam questions, that will give the student the best opportunity to pass on the first attempt.

Study Books with over 500 pages, Chapter Exams after each section with detailed Answers.

Over 1000 Practice questions with updated final answers.

Includes 8 simulated Final Exams with complete answers.

Computer CD Test Simulator features 30 quizzes (5 for each of the 6 major topics
covered on the Series 66 exam), 5 Final Exams, 5 State Law Midterms and many

Glossary terms.

Req: CD Rom, Windows 95 and higher, including vista, XP

Series 66 Books

Series 7 Books

2009-06-18T13:27:00.000-07:00

American Investment Training provides up to date and accurate study course books for the Series 7 exam. This is a 5 book set that is updated for current year test content.

Over 3000 questions are in the AIT books with accurate and detailed answer explanations.

All Series 7 exam course material is updated for current test content 2009 - New Questions Added!

The Series 7 License course can be studied using the books and CD test program or using only books. The books contain a large amount of test questions (over 3000). Our Series 7 CD certification program is a powerful program that has over 7000 practice questions with detailed answers. This program will show each correct answer after each answer is chosen. Most of our prep students feel the combination course of the Series 7 books and CD offers the fastest method to passing. The CD program tests are "exam tough", if not a little harder than the actual test.

(5 books total) 2 Study Books with Chapter Exams following each section with detailed Answers.

Final Exam Book with 10 updated Exams

Chapter Exam Book - Expanded chapter tests on the major areas of the test.

Over 1000 pages and 3000 questions and answers.

Series 7 Books

Series 65 Study Courses - Exam Course

2009-06-09T10:18:00.000-07:00

Pass the Series 65 test using the American Investment Training home study course. This exam material can be purchased through AIT's website or online here through PayPal.

The Series 65 license is for individuals looking to become licensed investment advisors. It is a 130 question multiple choice test.

Sample Series 65 Exam Questions

1. Which business form has a limited life?

a. S corporation
b. General partnership
c. Limited liability company
d. Sole proprietorship

2. A portfolio increases in value from $1,000,000 to $1,210,000 over 24 months. The annualized rate of return is:

a. 10.00%
b. 10.50%
c. 11.00%
d. 21.00%

2 Study Books with over 600 pages, Chapter Exams after each section with detailed Answers.
Over 1300 Practice questions with updated final answers.
Includes 8 simulated Final exams with detailed explanations.
Computer CD Test Simulator - 9 Final Exams from the major topics with detailed answers.
(Windows 95 and higher, includes Vista, XP)

Study MaterialThe Series 65 study material offered by AIT includes: Two Series 65 Books and a CD Test Program. Chapter and final exam course test questions are provided to give exposure to accurate exam questions, that will give the student the best opportunity to pass on the first attempt.

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Series 65 Books and CD - Updated ($220 - same as AIT site)

Questions from American Investment Training Students

2009-05-17T16:36:00.000-07:00

The following are some of the more frequently asked questions from American Investment Training's Series 7 students. AIT sells the highest volume of broker license training courses in the world.

Q: What is the Series 7 exam?

A: The Series 7 exam is a 6 hour, 250 question exam that if passed, registers you as a Registered Representative with the NASD.

Q: How often is the Series 7 exam given? and the other NASD (now FINRA) - NASAA exams?

A: All exams are given daily (Except Sundays and holidays) at Prometric Learning Centers. There are hundreds of testing centers, with locations in every state. You can view the list on our "links" page HERE

Q: Will I need any type of live class?

A: AIT courses are designed for home study and over 90% of our students pass without the need of a class. We also offer online courses in several areas, including insurance pre license, insurance and securities CE, real estate, appraisal, futures and select NASD licenses. The home study course is always needed first. Please visit our study course section.

Q: Do you offer sponsorship and a service setting up brokers and advisors to work independently?

A: Yes and No. We are not a firm, so we cannot sponsor. However, AIT has a partner NASD firm within our company that specializes in setting individuals or groups as independent brokers. This is a national firm with multiple branch offices. This would include sponsorship, for qualified people. If you are interested in becoming an independent broker or add investments to your existing professional practice, you should contact us or learn more HERE (email form only - no calls). If you are looking to break into the business, you should study and pass the Series65 and Series 63 - to name two. Many banks, financial planning companies and others will look for these licenses. In this competitive job market - getting licenses to add to your resume is VERY important in giving you an advantage over other candidates.

Q: Can I take the Series 7 Exam without affiliating with a firm directly?

A: No. What many of our students do is begin studying for the exam and adding that they are "Preparing for the Series 7" on their resume. Firms are looking for people who take initiatives like this. AIT also makes our students resumes available to our firms. Any person who purchases a study course from us is entitled to this free resume assistance service.

Broker License Courses - American Investment Training's full home study course list

Online Series 7 Training

CD Test Program - Over 7000 Series 7 Practice Questions

2009-03-25T06:14:00.000-07:00

Buy the American Investment Training Series 7 CD Test program here through PAYPAL. The AIT CD Program has over 7000 questions designed to prepare you for the Series 7. The exam questions on this CD generally run 5-10 points harder than the actual test.

5 exams of 50 questions each on Options, Debt and the other major parts of the exam.

10 updated final exams

Interactive glossary that are integrated within the test questions.

The Series 7 CD certification program is a powerful program that has over 7000 practice questions with detailed answers. This program will show each correct answer after each answer is chosen.

Only $150 for 7000+ exam questions. This program can be installed on a desktop, notebook or any other computer device with a CD rom drive.

Pass your exam with the American Investment Training CD

Sample Customer Accounts Series 7 Test Examples

2009-03-16T18:54:00.000-07:00

1. A customer should purchase long term bonds when a customer thinks:

A) Long term interest rates are going to decrease
B) Short term interest rates are going to decrease
C) Long term interest rates are going to increase
D) Short term interest rates are going to increase

Correct answer is A: A customer should buy long term bonds when they feel interest rates are going to decline after they purchase the bond. When interest rates decline, bond prices go up. The customer’s bond price would rise in value if this occurs. Short term rates do not necessarily affect long term bond prices.

2. A corporation wishing to open a new margin account would need to provide the firm their:

I Corporate resolution
II Corporate charter
III Income statement
IV List of issued securities

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

Correct answer is B: Corporate margin accounts require the corporate resolution and charter. An income statement is not required, nor is the list of outstanding securities issued by the company.

3. A registered representative is out of the office. The representative’s assistant receives a call from a customer. The assistant is not a Series 7 registered representative or Series 11 licensed. The customer tells the assistant to buy 100 shares of GHI at the market and to have the registered representative call him back when he returns. Which of the following is true?

A)The assistant can tell the trader to buy the stock, but cannot write the actual ticket
B)The assistant can write the order ticket with approval from a principal
C)The assistant can write the order ticket but must wait for the broker before it is placed with the trader
D)The assistant cannot accept this order

Correct answer is D: Since the assistant is not licensed either Series 11 or Series 7, this person cannot accept phone orders such as this.

4. Growth stocks would normally have:

I Low dividend payouts
II High dividend payouts
III Low beta ratings
IV High beta ratings

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

Correct answer is A: A growth stock would be a stock that is a potentially emerging company. These companies are normally not in an income position to offer much in dividends, as they are still investing their profit into the company. Since these companies have lower prices, and are still not established, their beta levels (measures volatility) tend to be higher.

5. Which NASDAQ level is known as the “Inside market”?

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

Correct answer is A: NASDAQ Level I is known as the inside market. It will show the highest bid and lowest offer of an OTC security listed on NASDAQ.

6. A customer buying 10 corporate bonds with a 6% coupon rate will receive semi annual payments of:

A) $30
B) $60
C) $300
D) $600

Correct answer is C: Each bond is $1000 par. The customer owns 10 bonds, which is $10,000. The bond pays 6% to the total par value per year ($600) in semi annual payments of $300 every six months.

7. An investor places an order of 10,000 shares. He tells a representative that he wants as much as possible very quickly and to cancel the rest. The representative should designate this order as:

A) Fill or kill
B) All or none
C) Firm commitment
D) Immediate or cancel

Correct answer is D: An order where a customer wants an immediate execution and wishes to cancel any portion that is not executed immediately is an immediate or cancel order (IOC).

8. Which of the following government securities has the shortest initial maturity?

A) Treasury bills
B) Treasury notes
C) Treasury bonds
D) Treasury STRIPs

Correct answer is A: Treasury bills are issued is 1 month, 3 month, and 6 month maturities. Treasury notes can mature up to 10 years. Treasury bonds are over 10 years. Treasury strips are longer term as well. They are made from treasury notes and bonds.

9. Which of the following is true regarding bonds purchased at a premium?

A) Yield to maturity is greater than the coupon rate
B) Yield to maturity is lower than the coupon rate
C) Yield to maturity is equal to the coupon rate
D) None of the above

Correct answer is B: Bonds purchased at a premium will have a lower yield to maturity than the coupon rate. The coupon rate is only paid to par value. The premium (price above par) will be lost over the life of the bond.

10. A customer owns 100 shares of GHT at $56. The customer is concerned about a steep decline in the stock over the next 2 months. He wants to limit his loss on the stock to a specific price using options. A good recommendation here would be to:

A) Buy a call option
B) Sell a call option
C) Buy a put option
D) Sell a put option

Correct answer is C: A put option allows the holder to sell the stock at a specific price.

Series 7 Sponsor Help

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Bond Exam Training Test Examples

2009-03-16T18:43:00.000-07:00

A bond is trading at $1160, and has a conversion price of $50. At which price would the stock need to trade to be equal to the current bond price?

A) 23
B) 58
C) 50
D) 54

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 ($50). This equals the amount of shares that will be created (20). To come up with the “parity price” that the stock must trade at, do one of 2 things: Divide $1160 by 20, which equals 58 or multiply 20 by each answer choice until the bond price is equaled. Answer is 58.

Which of the following amounts would NOT be covered under SIPC insurance?

A) $350,000 securities + $150,000 cash
B) $400,000 securities + $100,000 cash
C) $200,000 securities + $80,000 cash
D) $500,000 securities + 0 cash

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

A customer purchases a 6% $10,000 municipal bond that pays July 1st and January 1st. The bond is sold on Thursday September 22nd for regular way settlement. How many days of accrued interest are owed to the seller of this bond?

A) 82
B) 84
C) 85
D) 86

Correct answer is D: Municipal bonds pay interest on a 30 day month/360 day year. Each full month is treated as 30 days. The last pay date was July 1st . The seller is owed 30 days for July and 30 days for August. Municipal bonds settle “trade date + 3 business days”. This bond was sold on Thursday September 22nd. It settles on Tuesday September 27th . The settlement date is not included, because the owner relieves the bond on that day, thus the total for September is 26 days, for a total of 86 days.
(July = 30 days August = 30 days September = 26 days)

Selling stock short is done for which of the following reasons?

A) To limit losses on a long position
B) To make small gains with limited risk
C) To gain by the decrease in the price of a stock
D) To gain by the increase in the price 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.

Become a Stockbroker - Series 7 Sponsorship, Independent Brokers and more.

A bond is purchased at $96 ¼ and has a nominal yield of 7%. If this bond was held to maturity, the investor would have a yield of:

A) Greater than 7%
B) Less than 7%
C) Equal to 7%
D) Cannot determine

Correct answer is A: A bond that is purchased at discount and held to maturity, would have a yield greater than the coupon rate. The coupon rate is paid to par and the bond will mature at par. The customer will receive 7% in interest plus the discount difference of $96 ¼ and par ($100).

Which debt security pays principal and interest monthly?

A) Municipal bonds
B) Treasury Bonds
C) Corporate bonds
D) GNMA bonds

Correct answer is D: Government National Mortgage Association (GNMA) bonds are backed by GNMA mortgages. The mortgage holders make monthly principal and interest payments back to GNMA, which in turn pay the bondholders. The other choices all pay semi annual interest and only pay back the principal at maturity (par)

Which of the following does NOT pay dividends?

A) Warrants
B) Preferred stock
C) Cumulative preferred stock
D) Common stock

Correct answer is A: 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. The other choices can all receive dividends.

A customer buys 2 ADF SEP 50 Calls for $300 each. What is the customer’s maximum loss?

A) $300
B) $600
C) $4700
D) Unlimited

Correct answer is B: The maximum loss for any option holder is the total initial cost (Premium). The worst case scenario is that the options expire worthless. The customer bought 2 options for a total of $600. The $600 is the maximum loss.

Online Series 7 Test Training

Financial Advisor Career

Options Test Questions - Bond Exam Questions

2009-03-16T18:33:00.000-07:00

Options and bonds make up a large part of the Series 7 licensing Test. These are recent exam questions reported from students of American Investment Training.

1. An investor Buys 2 MAR 75 Calls, paying $300 for each. The breakeven point for both of these is:

A) 69
B) 72
C) 78
D) 81

Correct answer is C: The breakeven for call options is the strike price plus the premium. The breakeven is always based on each contract (“one for one”)

2.A common shareholder would have the right to vote for all of the following EXCEPT:

A) The declaration of a dividend
B) Board of director elections
C) The issue of new convertible securities
D) Forward stock split

Correct answer is A: The board of directors can declare a dividend without shareholder approval. Once the dividend is declared, each shareholder is entitled to an equal share in the dividend, proportioned to their ownership in the company.

3. Bonds purchased at a discount will mature:

A) Below par
B) Above par
C) At par
D) None of the above

Correct answer is C: All bonds mature at par, regardless of their original purchase
price.

4. A “Positive” treasury yield curve occurs when:

A) Long term yields are equal to short term yields
B) Long term yields are higher than short term yields
C) Long term yields are lower than short term yields
D) There is more buying of long term bonds

Correct answer is B: A positive yield curve is when the curve ascends upward. Yields climb higher as you go longer term. A negative or inverted yield curve is when the opposite takes place.

Learn options, bonds and all of the major topics online by viewing American Investment Training's Virtual University for Series 7 prep.

Series 7 and 66 Online Virtual Courses - Series 24, 6 and 65 included.

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Types of Orders - Stock Limit Orders

2009-01-18T10:54:00.000-08:00

A limit order is when an order is placed to buy or sell a security at a specific price or better. When buying, the trade will be executed only at the limit price or lower. A customer entering a buy limit order is stating that he is willing to pay no more than the limit price.

Buy Limit (below the market)

Buy orders are placed below the market. If ABC stock is trading at $60 a share, an investor would place a limit order below the current price to see if it can be bought cheaper during the day or perhaps over the course of several days. If the customer is just looking to buy the stock right away, he should not use a limit order, he should just but it at the market (a market order).

Sell Limit (above the market)

Investors will sell stock using limits above the current market. If a customer owned a stock at $65 and wanted to sell it using limit directives - he would place a sell limit at $66 or other where the stock could rise up to.

Finance Book Titles

Series 7 Online Training Course

Stockbroker Job Training - Financial Advisor Career, New York Broker Career

2008-11-20T18:25:00.000-08:00

Begin a career as an investment advisor or financial planner with a fortune 500 company with offices in Long Island, New York, Connecticut and dozens more. Licensed Insurance and financial advisors are welcome.

People who succeed in the investment and financial field have changed their lives. Many full service firms are now hiring people on these jobs who possess winning qualities and the work ethic to succeed as investment advisors. Job training is included for the right individuals.

Long Island - New York and other openings available. Benefits and 401K open to the right candidates. These openings are fully confidential.

Full training after job acceptance and ongoing career training for producing $100,000+ within your first 2 years. Learn to be an expert financial advisor and planner in non profit and corporate retirement planning. New York, Long Island and Northeast office opportunities.

Series 7 Training - Series 7 Exam Sponsorship

Stockbroker Jobs

Custom Search

Software CD, Test Questions - Preparation Questions

2008-11-05T08:58:00.000-08:00

A key to passing the Series the first time is using the very best computer based software test cd to test your exam readiness. The preparation period can be quickened as well when you use a top cd software program or online test questions.

American Investment Training provides over 7000 updated exam questions. The software has chapter exams in every area of the Series 7 and updated final exams. What the American Investment Training CD does is deliver "Exam Tough" questions where the difficulty is usually 5-7 points harder than the real Series 7.

Options

One of the areas that gives students the most trouble is the Options section. The AIT CD dleivers 5 different tests of 50 questions each in targeted tests covering option concepts, spreads, straddles, stock with options, rules and other areas to make sure the maximum prep is given to the Series 7 Exam student.

Bonds (including Municipal Bonds)

Multiple subject tests are given to cover the bond section of the exam. The CD also has a municipal bond only 100 question exam.

Taxes and Retirement Planning

Mutual Fund Questions

Stock and Equities Tests

BUY CD

You can purchase the American Investment Training CD of over 7000 exam questions on the top right of this blog through Google.

Online Course

A full virtual online course for the Series 7, Series 66 and other licenses can be taken now and delivered through the Internet as you need it. Free demo look as well.

Virtual Course

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Registration, Licensing, Sponsorship - Series 7 Expiration

2008-10-09T17:25:00.000-07:00

Much of the more frequently asked questions we get here at series7class.blogspot.com are in the areas of Series 7 registration - including sponsorship and when a license comes up for expiration. People looking to take the Series 7 exam must be sponsored by a FINRA (NASD) brokerage firm. That basically means you must be employed first before you can gain registration and licensing.

Sponsorship

As just mentioned, this means a brokerage firm that you work for submits the paperwork to FINRA so you can register for the Series 7 test. Sponsorship is required for the Series 7. It is not required for many other exams.

Licensing

When you pass the exam, you are Series 7 licensed but you may not be able to transact business right away if you have not registered in the states you are calling. Licensing may not mean you can solicit customers just yet.

Registration

After licensing, FINRA and your firm will oversea your registration. If you leave your firm, the license is sent to your new firm.

Expiration

The license remains in effect as long as you are working for a firm or have not had it suspended or revoked. If you leave the brokerage business entirely, the expiration rule will take effect. The Series 7 expires after 2 years of last employment. A person will have to re-test to get their license.

Online FINRA Broker License Courses

American Investment Training

Finance Jobs

Debit Spreads - Option Spreads Series 7 Help

2008-09-26T05:13:00.000-07:00

Spreads are a part of the options section on the series 7 that many people need help on. A spread is when an investor buys and sells the same type of option (calls or puts) in order to gain a spread on the net premium gain or a spread on trading the options later - including making a full spread on the strike price difference if exercised. A debit spread is when the premiums have resulted in a loss and the gain then must come from trading or exercing them.

An example of a debit spread could be:

BUY 1 DFT SEP 30 CALL $700
SELL 1 DFT SEP 40 CALL $300

In this example, the customer has a net loss of $400 on the premiums bought and sold. This loss on the option premiums makes this a debit spread. This could be a Series 7 question

Bullish or Bearish

Debit spreads can be bullish or bearish. Call debits are always bullish because since a premium loss has occurred, the only the investor can make money is if the options get help by the market. Since call options need the market to rise, the traders would be bullish.

Options Book

Exam Study Help

2008-08-14T14:16:00.000-07:00

Yes the series 7 exam is a tough test to pass, but it is not a hard exam by subject IMO. It is in mainly the totality of the areas of focus that makes it a hard test to study for and why people need help.

Why?

Rules change and frankly - FINRA (formerly the NASD) has many people who feel they always have to add regulation to an already crowded FINRA manual. Is it as complex as the tax code? No, but the exams that FINRA gives - including the Series 7, always have updates and excess rules to the exam.

The best way to apss the Series 7 is to take each section one at a time. Do not try to take in 20 sections at once or dive right into practice exams. Even our massive Series 7 Practice Test CD should not be used to take the very tough final exams right from the start. Even if you feel you are seasoned in the business or in a rush to pass. You will need help in the end.

Taking chapter exams and writing out the correct answer explanations is one of my favorite study techniques we have given the students of American Investment Training for years. All of us write slower than we read, so it makes sense that writing out exam answers to questions you got wrong during your study test will help you not make the mistake again vs. just reading the answer to yourself.

Once you are passing the practice questions (AIT gives unlimited help to their students), then you can start hitting the final exams. Preparing for the finals - literally studying for the final exams is very important. You don't want to be at a point where you are memorizing questions.

American Investment Trainign is known for their VERY tough practice exams. A 75% is truly a 75%. So you want to study and prepare for the final tests in the CD or the books. The actual Series 7 should not be any tougher.

Margin Accounts Series 7 - Margin Help, Long Accounts

2008-07-29T16:05:00.000-07:00

A margin account is when a brokerage firm opens an account for a customer for the purpose of loaning that customer money to leverage into securities transactions. These trades must be with marginable securities designated by the FRB and the NYSE.

The Series 7 asks questions related to long margin accounts and some students require extra help than what their books are showing. It can also be a bit of a formula and math section on the exam.

The FRB Regulation T allows for firms to loan up to 50% for transactions in margin accounts. The firm may require more from the customer depending on the risk of the security and whether it is a new account or not. When just speaking to long margin accounts, the firm loans money as leverage. This amount is known as the debit balance. This debit does not change with market fluctuation and is charged margin interest. It can rise if the customer buys more securities and takes out more margin. The Series 7 will test on these balances as purchases and sales happen.

The Long Market Value is the total value of the long position owned. This does not take into account the equity or debit balance. The Long Market Value or LMV minus the Debit Balance or DB equals the equity for the customer.

An example is best for Series 7 understanding and help (or other exam):

A customer buys $40,000 of AGH Stock in a long margin account and is loaned 50% as per Reg T. The account will look as follows:

LMV: $40,000
DB: $20,000
EQ: $20,000

The debit balance will not fluctuate with the market. Only the LMV and the equity will rise or fall with the market.

If AGH rises to $45,000, the debit balance would remain at $20,000 as that is what is owed to the firm. The firm is not going to penalize you for the market rising and they are not sharing in profits in any way. This is not a shared account. The $20,000 was a 50% leverage loan on the original $40,000. So the LMV is $45,000, the DB is $20,000 and the equity is now $25,000.

If the market declined to $35,000, the same would hold true as far as what changes. The LMV would be $35,000, the debit balance would be $20,000 and the equity would now only be $15,000.

This account would be considered restricted. There are certain rules with restricted accounts. We will do a specific post to these accounts soon for Series 7, Series 24 or other license studends and others looking to learn about margin accounts and get help.

Series 7 Online Training Course - No books or CD's needed. Full support by subject and totally interactive.

Series 53 Test Questions - Series 53 Municipal Principal Exam

2008-07-01T10:47:00.000-07:00

These are additional questions for the Series 53 exam. These updated exam subjects are available through American Investment Training's home study courses.

Series 53 June 2008 Extra Questions

1.During a period when market interest rates are generally increasing, which municipal bond would be the most appropriate investment for a customer that is concerned about interest rate risk?

a. 10 year maturity, AA rated, General Obligation bond with a 6.209c coupon
b. 20 year maturity, A rated General Obligation bond with a 6.009c coupon
c. 5 year maturity, AA rated General Obligation bond with a 4.70S7c coupon
d. 30 year maturity, A rated General Obligation bond with a 6.40S7c coupon

2.Under MSRB Rule G-13, all of the following statements are true about nominal
quotes EXCEPT nominal quote,,:

a. are permitted
b. must be firm
c. must be clearly indicated as such
d. are given solely for informational purposes

3. Under MSRB Rule G-13, a dealer that wishes to publish the quote of another
municipal securities dealer:

a. is prohibited from doing so
b. can only do so if the name of the dealer that is the source of the quote is disclosed at the time of publication of the quote by the intermediary dealer
c. can only do so if the publishing dealer has no reason to believe that the quote does not represent the best judgment of the security's fair market value as determined by the dealer that is the source of the quote
d. can only do so if the publishing dealer has validated the price of the quote in relation to contemporaneous purchases and sales of the same or similar securities

4. The main advantage of choosing a Coverdell Education Savings Account over a 529 Plan IS:

a. there are no limits on the annual contributions that can be made into a
Coverdell Education Savings Account

b. there are no federal income taxes due when distributions are taken from a Coverdell Education Savings Account but federal income tax is due when distributions
are taken from a 529 plan

c. Coverdell Education Savings Account distributions can be used for many different
types of education expenses whereas 529 plan distributions can only be used for college expenses

d. high earning individuals can contribute to Coverdell Education Savings Accounts
but cannot contribute to 529 Plans

5. Which recommendation IS most suitable for a customer that wishes to minimize
interest rate risk?

a. Municipal variable rate demand note
b. Municipal zero-coupon bond
c. Callable 30 year General Obligation bond
d. Non-Callable 30 year Revenue Bond

Series 53

Short Option Straddle - Short Call and Put, Straddle

2008-06-05T18:10:00.000-07:00

One of the option set ups on the Series 7 is selling or shorting straddles. A short straddle is very risky. It involved selling a call and a put on the same stock - usually with the same strike price and expiration month.

This strategy is most profitable when the investor expects the market to remain stable and thus both the call and put will expire worthless. No movement is what a trader wants. The goal is to short the options, collect the premiums and hope the options expire worthless.

Since selling a call short and selling a put short carries an obligation if the options are exercised, the investor has large or unlimited loss potential here. A writer or seller of a call option - whether in a straddle or not, if unprotected is obligated to purchase the stock (in a rising market) and selling it at the strike price (which will be lower). The person on this end of the straddle will lose money and in the case of the call option - an unlimited amount.

The Put also carries a large loss exposure, only this comes from the bottom side of the short straddle market. If the market declines below a certain point and the put is exercised, the investor is obligated to purchase the stock at the higher strike price while the real market for the stock is lower or even worthless.

This is one reason why short option straddle positions are the most risky in the market. On the Series 7 exam, options are an important section. Knowing the risks and rewards of the multiple strategies like Straddles, Spreads and Stock with options can make the difference between passing and failing.

Recommended Reading:

Option Volatility & Pricing: Advanced Trading Strategies and Techniques

Study Material - Exam Prep Material

2008-04-15T09:11:00.000-07:00

American Investment Training is a recognized leader in Series 7 exam home study material and online prep courses.

Books, CD Rom based training and online Series 7 courses are available.

The CD rom is the largest test software program available with 7000 practice exam questions and detailed answer explanations.

Using the right study prep material that is current is the key to passing the exam.

Series 7 Online Class

Series 7 Books

Formulas To know for The Series 7 Exam - Test Formula

2008-02-22T10:35:00.000-08:00

Although formula calculations are a pretty small part of the Series 7 exam. The following are the most asked and memorizing them will be helpful to be ready on test date.

Many of these calculations and formulas are in the analysis section. These are all covered in the American Investment Training SERIES 7 STUDY MATERIAL

1. CURRENT YIELD= ANNUAL INCOME DIVIDED BY THE MARKET PRICE (STOCK OR BOND)

2. TAX EQUIVELENT YIELD= MUNICIPAL YIELD DIVIDED BY 100 MINUS THE TAX BRACKET

3. PRICE EARNINGS RATIO= MARKET PRICE DIVIDED BY THE EARNINGS PER SHARE

4. EARNINGS PER SHARE= NET INCOME MINUS PREFERRED DIVIDENDS DIVIDED BY THE
COMMON SHARES OUTSTANDING

5. CURRENT RATIO= CURRENT ASSETS DIVIDED BY CURRENT LIABILITIES

6. QUICK ASSET RATIO (ACID TEST)= CURRENT ASSETS-INVENTORY DIVIDED BY CURRENT
LIABILITIES

7. CONVERSION
ALWAYS USE PAR VALUE (1000) DIVIDED BY THE CONVERSION PRICE FIRST.
THAT GIVES YOU THE AMOUNT OF SHARES YOU CAN OWN (CONVERSION RATIO)
THEN DO 1 OF 2 THINGS DEPENDING ON THE QUESTION:
A) AMOUNT OF SHARES TIMES STOCK PRICE= PARITY FOR THE BOND
OR
B) AMOUNT OF SHARES DIVIDED INTO THE BOND PRICE= PARITY FOR THE STOCK

8. DEBT SERVICE COVERAGE RATIO= NET REVENUE DIVIDED BY DEBT SERVICE

9. MUTUAL FUND SALES CHARGE= THE DIFFENCE BETWEEN THE N.A.V. AND THE P.O.P DIVIDED
BY THE P.O.P

10. PUBLIC OFFERING PRICE= N.A.V DIVIDED BY 100-SALES CHARGE

11. MARGIN INITIAL MINIMUM DEPOSIT REQUIREMENT
LONG ACCOUNT= 2,000 UNLESS THE TOTAL PURCHASE VALUE IS LESS THAN $2,000
SHORT ACCOUNT= $2000 REQUIREMENT MINIMUM ONLY

12. MINIMUM MAINTANENCE -MARGIN CALL WILL OCCUR IF ACCT FALLS BELOW THESE LEVELS
LONG ACCOUNT= YOU MUST HAVE EQUITY NO LESS THAN 25% OF THE MARKET VALUE
SHORT ACCOUNT= YOU MUST HAVE EQUITY NO LESS THAN 30% OF THE MARKET VALUE

Online FINRA NASD Courses Series 7, Series 66 and more...Free sample view

Bond Questions Series 7 Exam - Bonds Test

2008-02-14T13:01:00.000-08:00

Use and view the following Bond practice exams for the Series 7. Bonds on the test include CMO's, US Treasury Bonds, Corporate Securities and more. The Series 7 will test on new issues, bond yields and formulas.

Series 7 Test Prep

Assuming all of the following bonds from the same issuer are callable now, which one would most likely get called first?

A) 8% maturing 1-15-2016
B) 8% maturing 1-15-2006
C) 4% maturing 1-15-2012
D) 4% maturing 1-15-2006

Correct answer is A: Bonds with the highest coupon rates would be the first to most likely get called. The issuer will look to issue new debt at a lower rate. Since there are two 8% bonds, the one that would most likely get called, would be the issue with the longest maturity. This is because the bond is potentially more expensive with the amount of years it has compared to the shorter one.

A customer sells a 6% corporate bond on Tuesday October 4th for regular way settlement. The bond pays interest on July 1st and January 1st. How many days of accrued interest is this customer owed?

A) 98
B) 97
C) 96
D) 57

Correct answer is C: Accrued interest is the interest that is due a seller of a bond since the last day they were paid. Corporate bonds pay on a 30 day month/360 day year. They also settle on the 3rd business day following the trade date (T+3). The trade settles on Friday October 7th. The last pay date was July 1st. The customer is owed 30 days for July, 30 days for August , 30 days for September and 6 days for October. You do not include the settlement date of the 7th.

Interest income from which of the following is exempt from state and local taxation?

A) CMO’s
B) Corporate bonds
C) Commercial paper
D) Treasury notes

Correct answer is D: Treasury notes are federally taxed, but are exempt from state and local tax. CMO’s and all corporate debt are fully taxable.

Which of the following debt securities are direct obligations of the U.S. Government?

A) GNMA
B) FNMA
C) Commercial paper
D) Secured corporate bonds

Correct answer is A: Government National Mortgage Association (GNMA) is a direct obligation of the Government. FNMA is a private agency. Commercial paper and all corporate debt are only guaranteed by the issuing company.

More Series 7 questions and answers are added to this blog every week.

Which of the following securities have initial maturities of one year or less?

I Treasury notes
II Treasury bills
III Commercial paper
IV Treasury stock

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

Correct answer is C: Treasury bills have initial maturities of 1 month, 3 months and 6 months. Commercial paper has maturities of 270 days or less. Treasury notes have maturities out to two years. Treasury stock is not a debt security and has no maturity.

Zero coupon bonds pay interest:

A) At maturity
B) Semi annual
C) Monthly
D) None of the above

Correct answer is D: 0 Coupon bonds do not pay interest at all. The rate of return is based on the discount price that is paid, and the par that is received at maturity.

A customer places an order to buy ten 4% US Treasury Notes on Monday August 3rd for regular way settlement. This trade will settle on:

A) Monday August 3rd
B) Tuesday August 4th
C) Wednesday August 5th
D) Thursday August 6th

Correct answer is B: All US Government Securities, including Treasury Notes, settle on the next business day. This trade will settle on Tuesday August 4th.

Treasury Notes pay interest:

A) Monthly
B) Semi annually
C) Quarterly
D) At maturity

Correct answer is B: Treasury notes and treasury bonds pay interest semi annually. Treasury bills are non interest bearing and pay par value at maturity.

A customer wants to invest in a bond that has the least amount of reinvestment risk. Which of the following would be the most appropriate?

A) Treasury bond
B) Treasury note
C) Treasury STRIP
D) None of the above

Correct answer is C: Reinvestment risk occurs with income paying investments that are reinvested into lower paying vehicles. Treasury STRIPs are zero coupon bonds issued by the US Government. They do not pay any income or interest during the term of the bond. There would be no reinvestment risk, since there is no income to reinvestment.

SERIES 7 ONLINE

Margin Accounts Exam - Series 7 Margin

2008-01-25T06:46:00.000-08:00

A customer 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 equity in the account?

A) $500
B) $20,000
C) $20,500
D) $37,000

Correct answer is B: The equity in a short margin account is equal to the credit balance minus the short market value. SMA is not used when computing equity.

A customer 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 on this account?

A) $5500
B) $6000
C) $6600
D) $12,600

Correct answer is C: Minimum equity maintenance on short margin accounts is 30%. NYSE rules state that you must maintain at least 30% equity based on the current short market value. The short market value of $22,000 must be multiplied by 30%. This equals $6600.

. Initial margin deposit minimum requirements are set by the:

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

Correct answer is D: The Federal Reserve Board sets the initial margin deposit requirements (Reg. T). The NYSE sets the ongoing minimum equity maintenance requirements.

A customer has a short margin account. The account has equity of $15,000 and a credit balance of $28,000. What is the current NYSE minimum maintenance equity requirement on this account?

A) $3900
B) $4500
C) $3250
D) $3750

Correct answer is A: The minimum maintenance on short accounts is 30% of the current market value. The credit balance is $28,000. The market value can be found by subtracting the equity ($15,000) from the credit balance ($28,000). This puts the short market value at $13,000. $13,000 times 30% is $3900.

When the market value in a long margin account decreases, the SMA will:

A) Increase
B) Decrease
C) Stay the same
D) Fluctuate

Correct answer is C: SMA does not decline as the market declines.

The type of account that designates power of attorney to an investment adviser for the benefit of others, is a(an):

A) Joint account
B) Omnibus account
C) Margin account
D) Affiliate account

Correct answer is B: An omnibus account is set up for investment advisers, so they can handle multiple accounts that they may be managing. Individual accounts must be set up for each client as well.

A corporate margin account requires which of the following documents?

A) Corporate resolution
B) Corporate charter
C) Both A and B
D) None of the above

Correct answer is C: Corporate margin accounts require the corporate resolution and the corporate charter. Cash accounts would only require the corporate resolution.

A customer in a new margin account sells 100 shares short of GYW at $50. Assuming this is the only position in the account, what would the opening credit balance be?

A) $10,000
B) $7500
C) $5000
D) $2500

Correct answer is B: Reg. T is 50%. Although this is a new account transaction, $2500 would be required (50% of $5000). This requirement would be added to the proceeds of the short sale transaction. $5000 was sold short plus $2500 margin would equal a credit balance of $7500. This amount is available to cover the short sale.

SEE: Series 7 Course

Options Test - Calls and Puts Options Exam for Series 7

2008-01-23T06:35:00.001-08:00

The following are sample option questions with answers for the Series 7 exam. Calls and Puts are 2 types of options. The Series 7 will ask many different types of questions on options

A customer sells 100 shares of GHT short at $58 and buys 1 GHT Mar 60 Call @3. What is the customer’s maximum loss?

A) $500
B) $100
C) Unlimited
D) $5500

Correct answer is A: The customer sold short at $58. The call with a strike price of 60, gives this person the right to buy back the stock at $60. If the stock rises, the call can be used to limit the loss to 2 points. The customer can lose $200 on the stock. The customer also paid a $300 premium. Loss potential is $500.

Long term options to buy a security at a specific price, are known as:

A) ADR’s
B) Warrants
C) Index options
D) BA’s

Correct answer is B: Warrants are long term option to buy a security at a specific price. Expirations can be 5 years or longer.

A customer buys 100 shares of GTR at $36, and buys 1 GTR MAR 35 Put @4. What is the customer’s maximum loss?

A) $4000
B) Unlimited
C) $3200
D) $500

Correct answer is D: The customer owns the stock at $36. The Put allows the stock to be sold at the strike price (35), which limits the loss on the stock to $100. The customer also a paid a $400 premium, so the maximum loss is $500.

A customer owns 200 shares of GHY at $90, and wishes to hedge the position while generating income. What is the best recommendation?

A) Sell calls
B) Sell puts
C) Buy calls
D) Buy puts

Correct answer is A: Selling options will create income. The customer should sell calls. Calls are covered by the underlying stock. If the calls were exercised, the stock would be delivered to meet the obligation. The income also reduces the break-even of the stock.

If Pete Tulip purchased 2 FER Sep 30 calls at 3, what would be Pete’s breakeven and maximum gain for this transaction?

A. $33 per share and a maximum gain of $600
B. $30 per share and a maximum gain of $3,000
C. $27 per share and a maximum gain of $3,300
D. $33 per share and a maximum gain that is unlimited

Correct answer is D: The maximum gain is unlimited. The calls allow the customer to purchase the stock at $30. Since the market can rise infinitely, the gain potential is unlimited. The breakeven for this is 33. The market must rise 3 points, to make up for the 3 point premium spent.

Mr. Giles buys 1 WRD SEP 80 Call@5 and also shorts 1 WRD SEP 90 Call@2. What strategy is this?

A) Spread
B) Long straddle
C) Short straddle
D) Combination

Correct answer is A: Buying and selling the same type of options (calls or puts), is a spread. A long straddle is when you buy a call and buy a put. A short straddle is when you sell a call and a put. A combination is a straddle that has different expiration months or different strike prices. This is a call spread.

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Series 7 Online Web Course

Series Seven Practice Final Exam Questions 20-50

2008-01-22T11:22:00.000-08:00

21. Mr.Gold buys 1 ASF NOV 80 PUT for $400. What is Mr. Gold’s maximum potential gain?

A) $400
B) $7600
C) $8400
D) Unlimited

Correct answer is B: The maximum gain for the holder of a put option is the difference between the strike price (80) and the premium paid ($400). The holder of this put option has the right to sell the stock at 80. If this stock declines to 0, the holder can make $8000 minus the $400 premium.

22. A customer buys 1 DFG OCT 40 CALL for $500 and sells 1 DFG OCT 50 CALL for $100. This strategy is a:

A) Long straddle
B) Short straddle
C) Combination
D) Spread

Correct answer is D: A spread is the buying and selling of calls or puts. A long straddle is when you only buy calls and puts. A short straddle is when you only sell calls and puts.

23. Which of the following is true regarding the Specialist on the NYSE?

I The specialist can purchase a security for his own inventory
II The specialist can “stop stock” (hold a price) for a floor broker
III The specialist can accept discretionary orders
IV Specialists are also known as floor brokers

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

Correct answer is D: 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.

24. A customer owns 4% of THD non-cumulative preferred stock. In 2003, THD pays a 3% dividend to the preferred stockholders. In 2004, what would THD owe to the preferred shareholders?

A) 2 %
B) 3 %
C) 4 %
D) 5 %

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.

25. A customer tells an account representative that she wishes to not have her name on her account statements, preferring to have them designated as a number instead. Which of the following is true?

I This is only allowed if the customer has had an account with the firm for 3 years
II This is not permitted for individual accounts
III This is allowed if the customer submits her request in writing to the firm
IV This is only permitted for corporate accounts

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

Correct answer is C: Accounts designated by number on an account statement is permitted, if the customer submits this request in writing. It can be done for individual or corporate accounts. The firm must have the customers name on file at the firm as well.

26. Which of the following are NOT voted on by common shareholders?

A) New issue of common stock
B) New issue of convertible bonds
C) Board of directors elections
D) Forward stock split

Correct answer is A: Corporations allow existing shareholders to subscribe to new issues of common stock before the general public, thus there is no voting that is required. The other choices are all voted on by the shareholders.

27. An OTC trader wants to find information and pricing on several “penny stocks”. Where could this trader find this information?

I NASDAQ
II Pink sheets
III OTC bulletin board
IV Blue list

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

Correct answer is D: Penny stocks are defined as stocks that are $5 or less and not traded on an exchange. This includes NYSE and NASDAQ. Information on these securities are found in the pink sheets and the OTC bulletin board.

28. A bond is trading at $1160, and has a conversion price of $50. At which price would the stock need to trade to be equal to the current bond price?

A) 23
B) 58
C) 50
D) 54

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 ($50). This equals the amount of shares that will be created (20). To come up with the “parity price” that the stock must trade at, do one of 2 things: Divide $1160 by 20, which equals 58 or multiply 20 by each answer choice until the bond price is equaled. Answer is 58.

29. Which of the following amounts would NOT be covered under SIPC insurance?

A) $350,000 securities + $150,000 cash
B) $400,000 securities + $100,000 cash
C) $200,000 securities + $80,000 cash
D) $500,000 securities + 0 cash

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

30. A customer purchases a 6% $10,000 municipal bond that pays July 1st and January 1st. The bond is sold on Thursday September 22nd for regular way settlement. How many days of accrued interest are owed to the seller of this bond?

A) 82
B) 84
C) 85
D) 86

Correct answer is D: Municipal bonds pay interest on a 30 day month/360 day year. Each full month is treated as 30 days. The last pay date was July 1st . The seller is owed 30 days for July and 30 days for August. Municipal bonds settle “trade date + 3 business days”. This bond was sold on Thursday September 22nd. It settles on Tuesday September 27th . The settlement date is not included, because the owner relieves the bond on that day, thus the total for September is 26 days, for a total of 86 days. (July = 30 days August = 30 days September = 26 days)

31. Selling stock short is done for which of the following reasons?

A) To limit losses on a long position
B) To make small gains with limited risk
C) To gain by the decrease in the price of a stock
D) To gain by the increase in the price 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.

32. A bond is purchased at $96 ¼ and has a nominal yield of 7%. If this bond was held to maturity, the investor would have a yield of:

A) Greater than 7%
B) Less than 7%
C) Equal to 7%
D) Cannot determine

Correct answer is A: A bond that is purchased at discount and held to maturity, would have a yield greater than the coupon rate. The coupon rate is paid to par and the bond will mature at par. The customer will receive 7% in interest plus the discount difference of $96 ¼ and par ($100).

33. Which debt security pays principal and interest monthly?

A) Municipal bonds
B) Treasury Bonds
C) Corporate bonds
D) GNMA bonds

Correct answer is D: Government National Mortgage Association (GNMA) bonds are backed by GNMA mortgages. The mortgage holders make monthly principal and interest payments back to GNMA, which in turn pay the bondholders. The other choices all pay semi annual interest and only pay back the principal at maturity (par)

34. Which of the following does NOT pay dividends?

A) Warrants
B) Preferred stock
C) Cumulative preferred stock
D) Common stock

Correct answer is A: 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. The other choices can all receive dividends.

35. A customer buys 2 ADF SEP 50 Calls for $300 each. What is the customer’s maximum loss?

A) $300
B) $600
C) $4700
D) Unlimited

Correct answer is B: The maximum loss for any option holder is the total initial cost (Premium). The worst case scenario is that the options expire worthless. The customer bought 2 options for a total of $600. The $600 is the maximum loss.

36. Which of the following must be done before an account can begin options trading?

I Determine suitability
II New account is approved by a registered options principal
III Customer must sign and return the “options agreement”
IV Customer must receive the “risk disclosure” document

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

Correct answer is A: The options agreement is not required for an options account begins trading. It is required within 15 days of the account being approved. All of the other choices must be done prior to the account being able to trade in options.

37. FSG brokerage firm wants to set their long margin account minimum equity maintenance levels at 35% per account. Which of the following is true?

A) This is not permitted, because the NYSE minimum equity requirement is 25%
B) This is only permitted if the firm receives permission from the NASD
C) This is permitted. A firm can increase their minimum maintenance levels.
D) None of the above.

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%.

38. Securities trading on NASDAQ would be part of the:

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

Correct answer is B: Over the counter trading of OTC securities, including NASDAQ, is the Second market.

39. Treasury bills are auctioned:

A) Quarterly
B) Monthly
C) Weekly
D) Daily

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

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

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

Correct answer is D: The support level is the low end of a stocks trading range. Breaking though a support level is a sign of weakness and is considered bearish.

41. A NASDAQ market maker has not honored or filled firm quotes on a consistant 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”. Backing away is prohibited by the NASD. A firm must honor its firm quotes.

42. A Call option is “in the money” when:

A) The strike price is higher than the market price
B) The strike price is lower than the market price
C) The strike price is equal to the market price
D) None of the above

Correct answer is B: Call options are “in the money” when the strike price is lower than the market price. The holder has the right to buy the security at the strike price, thus it is more valuable when the market is above the strike price. Answer choice C would describe an “at the money” option.

43. A common shareholder will vote on all of the following EXCEPT:

A) Board of director elections
B) Stock Split
C) Rights offering
D) A new issue of convertible bonds

Correct answer is C: Existing shareholders are given an opportunity to buy any new issue of common stock through a rights offering. There is no voter approval needed. All of the other choices would require a shareholder vote.

44. 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 custodian can be listed and registered on a minor account. Discretionary authority cannot be given to other individuals or custodians.

45. The maximum allowable gift to customers and associated persons under NASD
rules is:

A) $50
B) $75
C) $100
D) $150

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

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

I Dividends are declared in overseas currency
II Dividends are declared in US currency
III Dividends are paid to shareholders in dollars
IV Dividends are paid to shareholders in overseas currency

A) I and IV
B) II and III
C) II and IV
D) I and III
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. An affiliated institution in the US will convert the dividend to US dollars and distribute it to the shareholders in the US.

47. A customer has a long margin account with a total market value of $27,000. The account has a current debit balance of $13,000 and $1000 in SMA. The equity in this account is:
A) $13,000
B) $14,000
C) $14,500
D) $15,000

Correct answer is B: The equity in a long margin account is the long market value ($27,000) minus the debit balance ($13,000). SMA is not used when calculating equity.

48. Prepayment risk or extension risk would most likely be part of which securities?
A) Corporate 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.

49. A listed security on the NYSE has been traded OTC by a NYSE member firm. This trade took place in what “market”?
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. Off hours or better pricing through another broker dealer could be reasons for these trades.

50. A customer buys 2 ADF JUN 40 CALLS paying $200 each for them. The breakeven for both contracts is:
A) 44
B) 42
C) 38
D) 36

Correct answer is B: The breakeven for all call options in the strike price (40) plus the premium ($200). The number of contracts does not matter. The customer needs the stock to rise 2 points on each contract owned. The breakeven is 42 for each contract.

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Series 7 Sample Exam

2008-01-22T11:17:00.000-08:00

1. Mr. Johnson buys one 6% Corporate Bond at a price of 101 ½. The bond is non callable and has a maturity of June 1st 2012. If Mr. Johnson holds this bond to maturity, his yield would be:

A) less than 6%
B) greater than 6%
C) equal to 6%
D) cannot be determined

Correct answer is A: Bonds purchased at a premium (above par) and held to maturity will have a lower overall yield (less than the coupon rate). This bond pays $60 per year. All bonds pay the coupon rate only to par and mature at par. The customer does not receive any interest on the premium that was paid (1 ½ or $15). He is losing 1 ½ points over the life of the bond. That is why his yield is lower than 6%.

2. Which type of order specifies a price that will activate the order, but then becomes a market order , which allows it to be executed at any price thereafter?

A) market order
B) stop order
C) limit order
D) stop-limit order

Correct answer is B: A stop order will specify a price that activates or “triggers” the order. This takes places when the security trades at or through the “stop price”. It then becomes a market order, which allows it to be executed immediately at the next available price.

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

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

Correct answer is C: Initial transactions in a short margin account require a $2,000 minimum Deposit.

Series 7 Test Questions Continued

4. Which of the following are NOT money market securities?

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

Correct answer is A: Treasury bonds are not money market securities. Money market securities are short term debt instruments that are not as reactive to interest rate movements as longer term investments. Treasury bills, commercial paper and municipal notes are all short term debt. Treasury bonds are long term and have market (interest rate) risk.

5. On January 4th, An investor sells short 1 GHI FEB 30 CALL for $400. 2 weeks later the call is closed out at $200. How should this second transaction be marked?

A) opening purchase
B) closing sale
C) opening sale
D) closing purchase

Correct answer is D: Short options that are covered or repurchased are marked on tickets as “closing purchases“. The original opening short sale trade was marked “opening sale”.

6. Which of the following is true regarding restricted margin accounts?

I at least 50% of sale proceeds must be used towards debit balance reduction
II at least 25% of sale proceeds must be used towards debit balance reduction
III new purchases cannot be margined when the account is restricted
IV new purchases can be margined when the account is restricted

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

Series 7 Exam Practice Sample

Correct answer is A: An account is restricted when the debit balance exceeds the equity in the account. No deposit is required. Any sales that are done in the account require a minimum allocation of 50% to pay down the debit balance. The other 50% goes to SMA. New purchases can be fullymargined when the account is restricted.

7. An investor would most likely want “call protection” on a bond, when interest rates are:

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

Correct answer is B: Call protection is the time between a bond being purchased and it’s first available call date. This protection would be most valuable in a declining interest environment, since bonds get called when interest rates go down. During this declining period, the bond price would increase and the issue could not be called during the protection period.

8. A bank and an insurance company trade a large block of stock without the use of a broker. This trade most likely took place in the:

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

Correct answer is D: The fourth market is “INSTINET” or ECN. Institutions trade with one another through electronic exchanges without the use of a broker.

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

A) right to vote
B) preemptive rights
C) right to convert to common stock
D) right to convert to a bond

Correct answer is C: Preferred stock normally has the right to convert to common stock based on a fixed conversion price. They do not usually have the right to vote, unless it is specified as “voting preferred”. You can never convert to debt (bond) of a company. Preemptive rights are the right to accumulate more. Although this feature is inherent in common stock, it is not for preferred.

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

A) The stock must be purchased within 7 business days
B) it must be done in a cash account
C) it must be done in a margin account
D) it can only be done with exchange listed securities

Correct answer is C: Selling short must be done in a margin account. The firm requires cash collateral to cover any potential losses should the market rise. Short sales do not have to be covered or repurchased in 7 days. OTC securities can be sold short as well. They do not have to be listed securities.

Series 7 Test Online Training

Series 7 Test 7 with Answer and Help

2007-11-18T09:54:00.000-08:00

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

2007-11-18T09:50:00.000-08:00

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

2007-11-18T09:11:00.000-08:00

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

2007-11-18T09:08:00.000-08:00

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”. The NASD prohibits backing away. A firm must honor its firm quotes.

Series 7 Study Course

Bonds Exam For Series 7

2007-11-18T08:53:00.000-08:00

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

FINRA NASD Exam Test Series 7

2007-11-17T19:17:00.000-08:00

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

2007-11-17T19:10:00.000-08:00

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

2007-11-17T18:58:00.000-08:00

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

2007-11-17T18:56:00.001-08:00

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

2007-11-17T18:53:00.000-08:00

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

2007-11-17T18:51:00.000-08:00

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

Series 7 Sponsorship

2007-09-14T09:37:00.000-07:00

Sponsorship and Testing

Certain NASD exams require sponsorship from an NASD member firm or another Self Regulatory Agency. The most popular representative exams requiring company sponsorship include:

SERIES 6 - Investment Company and Variable Products Representative

SERIES 7 - General Securities Representative

SERIES 11 - Assistant Representative

SERIES 62 - Corporate Securities Representative

Exams not requiring sponsorship include:

SERIES 3 - Futures and Commodities

SERIES 63 - Uniform State Laws

SERIES 65 - Registered Investment Adviser

SERIES 66 - Combined State Law (S63/S65 combined)

“What does sponsorship mean and why do I need it?”

Sponsorship means that a firm registered with the NASD (basically all Stock brokerage firms) must approve and present a candidate to the NASD for testing. The purpose and application of a SERIES 7 license for instance, is to sell securities to customers. Well, that is only possible if the person is representing a firm in some capacity. So the NASD requires a firm to act as sponsor, to basically be the responsible party for that candidate. Now you can work as an investment broker independently (working out of your own office or home) but you still must be affiliated or employed with a firm before you can sign up for a sponsored test. Basically, you can’t sell securities yourself without a firm facilitating the trading of that security. We dedicate a section to the set up process of working independently later on.

“ I want to get my Series 7 before I look for a job”

Some people looking to enter the industry inquire about getting licensed first before securing employment. Well, there are some licenses that you can get on your own but the SERIES 7 isn’t one of them. Again, because the NASD does not consider the license relevant unless you are with a firm at that time to sponsor you. It is not like a Real Estate license. But, what many people do not realize is although some wish to hire SERIES 7 brokers; most firms do not require a SERIES 7 for employment consideration.

“I want to work as an independent broker out of my office or my home”

Literally hundreds of different firms allow individuals to work as independent brokers for them. There are thousands of brokers working in their home making very good incomes working out of their house. What firms like this do is get you set up as a broker including sponsorship for the SERIES 7 (if required)

Note: If you are only selling Mutual Funds, Retirement Plans and other types of certain “packaged securities”, you will only need a SERIES 6.

You will basically act as a broker as if you are in the firm’s very own office. They will provide you with phone access to the traders to call in your transactions. You will have access to the firm’s research. The firm will also allow you to have access to real time quotes and pricing software. Another big advantage to working independently with a firm is payout. The payout for someone in working on their own can be as high as 70-80% of the total trade compared to 40-50% working at a firm’s office. There is no long-term salary in these situations. They are simply setting you up and you must now run it as your own business. Some companies will also look for some sort of minimum sales volume after you are established.

http://www.aitraining.com/careerguide.htm

Online Class

2007-08-22T14:07:00.000-07:00

The Series 7 can be prepared for using the American Investment Training online course. Going through real situations that are covered on the exam is key to passing the test.

Whether the question deals with Bonds, Stocks or Options, the virtual training will give you the ability to score well and pass the Series 7 the first time.

There are exam questions and detailed answers that follow each section. Students have 24/7 access to their online class to use as needed.

http://www.aitraining.com/onlineseries7.htm

Series 7 Training

2007-08-10T18:17:00.000-07:00

The Series 7 is the license that is required for stockbrokers and many other securities brokers.

You can take an online class or participate with your firm for an in house or on site class by American Investment Training.

The online course can be taken by anyone regardless of location and is best suited for individuals looking to use class training for the Series 7.

This test normally requires 6-8 weeks of total study time.

http://www.aitraining.com/7classes.htm