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Series-7 Series 7 General Securities Representative Qualification Examination (GS) Questions and Answers

Questions 4

Which of the following statements incorrectly describes US securities markets?

Options:

A.

a capital market comprised of long-term debt and equity issues

B.

a money market comprised of short-term debt and equity issues

C.

a municipal market comprised of tax-exempt issues of state and local governments

D.

a government and agency market comprised of both short-term and long-term debt issues

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Questions 5

Smart Company, Inc., has cash it intends to use in six months for purchase of equipment. The most prudent investment during the six-month period is:

Options:

A.

common stock

B.

preferred stock

C.

treasury bills

D.

treasury bonds

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Questions 6

Which of the following pairs of corporation characteristics are easiest for a partnership to avoid?

Options:

A.

business objective and centralized management

B.

continuity of life of the business and limited liability

C.

two or more associates and free transferability of assets

D.

continuity of life of the business and transferability of assets

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Questions 7

The FINRA markup policy applies to:

Options:

A.

agency sales OTC

B.

principal transactions in municipal bonds

C.

mutual fund sales

D.

new issues of corporate securities

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Questions 8

A basis point is:

Options:

A.

0.10%

B.

0.01%

C.

1.00%

D.

0.001%

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Questions 9

In the sale of open-end investment company shares, the amount at which the sales charge is reduced on quantity transactions is referred to as the:

Options:

A.

margin

B.

breakpoint

C.

split

D.

spread

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Questions 10

In the distribution of a new issue underwriters or selling group member are prohibited from:

Options:

A.

selling to the public at the so-called public offering price

B.

selling to another broker or dealer who needs to fill an accommodation order

C.

withholding blocks of a new issue in the member’s account

D.

all of the above

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Questions 11

Bubba has a short margin account with a short market value of $22,000, a credit balance of $42,000, and SMA of $500.

What is the equity in Bubba’s account?

Options:

A.

$500

B.

$20,000

C.

$20,500

D.

$37,000

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Questions 12

Bubba buys one XYZ November 65 call at $3 and one XYZ November 65 put at $2. XYZ is trading at $72. The put expires and the call is closed at its intrinsic value.

What is the resulting profit?

Options:

A.

$200

B.

$300

C.

$500

D.

$700

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Questions 13

The Bubba Corporation is offering stock to the public for the first time. The registration statement lists 150,000 shares for sale at $400 per share. The company conducts business in a 100-mile radius that includes towns in two neighboring states.

Which of the following information is not required in the preliminary prospectus for this offering?

Options:

A.

a notice in red ink to the effect that the prospectus has not been approved by the SEC

B.

a section describing how the funds from the sale will be used

C.

a statement of the company’s assets and liabilities

D.

the price at which the issue is offered

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Questions 14

In a corporation’s financial statements, earned surplus is also recognized as:

Options:

A.

gross profit

B.

operating income after payment of interest expense

C.

earnings retained after payment of dividends to shareholders

D.

net income

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Questions 15

Which of the following pairs of terms are synonyms in connection with most mutual funds?

Options:

A.

net asset value and offering price

B.

selling price and bid price

C.

net asset value and redemption price

D.

bid price and management fee

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Questions 16

The term “mutual fund” is popularly used for which of the following?

Options:

A.

all investment companies

B.

pension funds

C.

open-end investment companies

D.

closed-end investment companies

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Questions 17

Under which of the following conditions may a registered representative of a firm that is an underwriter of a new offering of common stock send to a client a copy of the firm’s research report on that stock?

Options:

A.

if it is accompanied by a red herring

B.

if he has permission of his employer

C.

if his firm is not the managing underwriter

D.

under no circumstances

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Questions 18

Bubba buys a bond issued at par with a 5% coupon that is convertible into common stock at $40.

What conversion ratio does Bubba determine?

Options:

A.

40

B.

30

C.

25

D.

15

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Questions 19

Bubba Corporation has net income of $4,200,000. It has 100,000 outstanding shares of 8% preferred stock ($100 par value) and 400,000 shares of common stock ($10 par value).

What are the earnings per share of common stock?

Options:

A.

$8.50

B.

$6.00

C.

$4.20

D.

$10.50

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Questions 20

Which of the following best describes depreciation?

Options:

A.

a tax credit available to investors in heavy equipment

B.

deductions from gross income to offset lower value of equipment

C.

return of principal from real estate investments

D.

capitalized and amortized maintenance costs

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Questions 21

A short sale can be made in which of the following types of accounts?

Options:

A.

special cash account

B.

a custodian account

C.

margin account

D.

special memorandum account

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Questions 22

The definition of debentures is:

Options:

A.

a loan secured by real estate

B.

collateralized securities

C.

a worthless security

D.

securities backed by the general credit of the issuers but no specific collateral

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Questions 23

Bubba is concerned about the liquidity of a possible municipal bond purchase. He is therefore probably most interested in the rating supplied by which of the following?

Options:

A.

the bond buyers

B.

Moody’s

C.

White’s

D.

Dow Jones

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Questions 24

Which of the following is true about a customer with a frozen account?

Options:

A.

may not trade corporate securities under any circumstances

B.

may make purchases but not sales of corporate securities

C.

must deposit the full purchase cost before an order is executed

D.

must deposit sufficient cash for each transaction no later than the settlement date

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Questions 25

Under which of the following conditions are homeowners most likely to refinance existing mortgages?

Options:

A.

when interest rates rise

B.

when interest rates fall

C.

when interest rates are stable

D.

when the yield curve is inverted

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Questions 26

What type of security is quoted with a bid price of 4.72 and an asking price of 4.68?

Options:

A.

US treasury note

B.

US treasury bill

C.

US treasury bond

D.

Series H bond

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Questions 27

A group net order is one that benefits municipal syndicate members:

Options:

A.

equally

B.

according to their percentage participation in the account

C.

according to the number of designated orders they’ve received

D.

according to the number of presale orders they’ve received

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Questions 28

In a securities underwriting a participating firm is said to be liable severally but not jointly.

What is this type of underwriting is called?

Options:

A.

a Western account

B.

an Eastern account

C.

a best efforts offering

D.

an all or none offering

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Questions 29

Regulation T is set at 50%. Bubba’s account contains long positions in the following securities with the prices listed:

100 ABC $30

200 XYZ $70

200 QBB $40

200 KKK $25

Total market value = $30,000

Debit balance in the account = $12,000

Net equity balance of the account = $18,000

If Bubba wants to buy 100 shares of DUM at $30 per share, how much additional money must be deposited?

Options:

A.

$3,000

B.

$1,500

C.

$2,000

D.

$0

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Questions 30

Which of the following types of investment companies pays out 90% of its net investment income to shareholders?

Options:

A.

diversified

B.

registered

C.

regulated

D.

balanced

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Questions 31

Under what circumstances may a registered investment company change its investment objective?

Options:

A.

after SEC approval

B.

after it obtains a new charter from the state secretary

C.

after approval by a majority vote of the shareholders

D.

after providing notice that is recorded in the Federal Register

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Questions 32

Which of the following sources provides news of prospective municipal securities sales to underwriters?

Options:

A.

the Blue List

B.

the daily Bond Buyer

C.

the SEC News Digest

D.

The Wall Street Journal

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Questions 33

Bubba owns a subordinated debenture in a company that is liquidating.

When will he get paid?

Options:

A.

after the company pays its outstanding bills, but before paying bank loans

B.

after the bills are paid and the bank is paid, but before the preferred shareholders

C.

before the holders of secured debt

D.

after the shareholders of preferred stock

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Questions 34

A NYSE floor member executing an order for a public customer asks the specialist in the stock to guarantee a price while giving the customer an opportunity to obtain a better price. This procedure is known as:

Options:

A.

a stop order

B.

stopping stock

C.

floor protection

D.

a special deal

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Questions 35

The FINRA markup policy requires that over-the-counter transactions with a customer be at:

Options:

A.

prices reasonably related to the current market price of the security

B.

a markup not to exceed 5% of the current offering price

C.

prices reasonably related to the dealer’s cost

D.

a markup based on previous activity in the customer’s account

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Questions 36

Which of the following does not issue debt securities that trade in the open market?

Options:

A.

Fannie Mae

B.

Freddie Mac

C.

Federal Reserve Banks

D.

Federal Land Banks

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Questions 37

Bubba buys a 5% bond that matures in 15 years with a 5.10 basis. How much did he pay for the bond?

Options:

A.

5.00

B.

98.96

C.

100.00

D.

105.10

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Questions 38

Bubba buys an OTC stock from a firm that is a market -maker in the stock.

What may be said about the price he pays?

Options:

A.

it does not include a markup

B.

it includes a markup

C.

it includes a commission and a markup

D.

it includes a special fee

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Questions 39

Which of the following securities has the highest amount of market risk?

Options:

A.

US treasury bills

B.

US treasury certificates

C.

US treasury notes

D.

savings bank deposits

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Questions 40

A large manufacturing company has current assets of approximately $9,400,000 and current liabilities of about $4,900,000.

Which of the following statements is true about the current ratio?

Options:

A.

it is substantially below the standard minimum

B.

it is somewhat below the standard minimum

C.

it is about the standard minimum

D.

it is somewhat above the standard minimum

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Questions 41

In June, Bubba bought 100 shares of XYZ at $35. In November, he bought a listed put in XYZ with a $35 strike price and a July expiration for a premium of $600. In April, Bubba exercises the put option and uses his stock for delivery.

What is his resulting tax consequence?

Options:

A.

a $600 capital loss

B.

neither profit nor loss

C.

cannot be determined without knowing the market price of XYZ upon exercise

D.

this is a wash sale and cannot be included in the investor’s tax calculations

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Questions 42

Which of the following best describes depreciation?

Options:

A.

tax credit available to investors in heavy equipment

B.

deductions from gross income to offset lower value of equipment

C.

return of principal from real estate investors

D.

capitalized an amortized maintenance costs

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Questions 43

A corporate bond is quoted as having a net change in value of plus one point.

By how much did the bond price increase?

Options:

A.

$1,000

B.

$100

C.

$10

D.

$1

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Questions 44

Which of the following may occasionally be purchased at a discount from net assets value?

Options:

A.

no-load funds

B.

closed-end funds

C.

open-end funds

D.

contractual plans

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Questions 45

Bubba holds 200 shares of common stock in a utility company and receives rights to subscribe to an additional 100 shares at $20. The utility company is raising $40 million of new capital.

How many shares of common stock for the utility company were outstanding prior to the rights offering?

Options:

A.

2,000,000

B.

4,000,000

C.

1,000,000

D.

40,000,000

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Questions 46

A corporation makes a rights offering to raise $10 million of new capital by issuing one million shares of common stock. If it already has six million shares outstanding at the time of the offering.

What subscription ratio is the corporation establishing for each new share?

Options:

A.

6 rights per share

B.

10 rights per share

C.

6 million rights per share

D.

10 million rights per share

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Questions 47

Bubba Corporation issued bonds that pay interest on January 15 and July 15 each year until maturity. An investor purchasing these bonds on Monday, April 12, must pay the contract price plus accrued interest for:

Options:

A.

87 days

B.

89 days

C.

93 days

D.

90 days

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Questions 48

Crossover is best defined as:

Options:

A.

the point at which the program becomes profitable

B.

the point at which income exceeds deductions

C.

the fact that there are more general partners than limited partners

D.

the profit of limited partners exceeding profit of general partners

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Questions 49

A leveraged company is best described as one that has a small portion of its capitalization represented by:

Options:

A.

common stock

B.

preferred stock

C.

debentures

D.

convertible bonds

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Questions 50

Bubba purchases 100 shares of XYZ at 78 and, on the same day, writes 1 XYZ October 80 call for a premium of 4. If the option expires unexercised, what is Bubba’s profit on the 100 shares of stock?

Options:

A.

$200

B.

$400

C.

$600

D.

cannot be determined

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Questions 51

Bubba buys 100 shares of XYZ stock at $40 per share and sells a listed July XYZ call at 45 for a $2 premium.

What is his loss potential?

Options:

A.

$3,800

B.

$4,000

C.

$4,200

D.

$4,500

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Questions 52

Bubba buys municipal bonds with a $100,000 principal amount at 89 on margin. His account has no cash or securities.

What is his minimum required deposit?

Options:

A.

$5,080

B.

$13,350

C.

$22,500

D.

$50,000

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Questions 53

A public offering by an investment banker in which any securities not sold are returned to the issuer is known as:

Options:

A.

a firm commitment

B.

a best efforts offering

C.

an all or none offering

D.

a contingency offering

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Questions 54

Bubba is a registered representative who wishes to buy shares of a new issue his firm is distributing. Under FINRA Conduct Rules, Bubba may:

Options:

A.

not do so under any circumstance

B.

do so if he has a history of buying hot issues

C.

not do so for his own account, buy may purchase shares for his sister’s account

D.

do so if his allotment is insubstantial and not disproportionate to public orders

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Questions 55

Which of the following statements about the custodian for an open-end mutual fund is correct?

Options:

A.

the custodian performs all management, supervisory, or investment functions

B.

the custodian may perform an essential clerical service for the fund and its shareholders

C.

the custodian takes part in the sale of fund shares

D.

the custodian affords protection against decline in value of fund shares

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Questions 56

Which of the following items is not deducted to determine a corporation’s net income?

Options:

A.

taxes

B.

dividends

C.

interest

D.

all of the above

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Questions 57

A four-letter symbol assigned to an issue is characteristic of an equity security that is:

Options:

A.

authorized for inclusion in the NASDAQ system

B.

listed on the NYSE

C.

admitted to unlisted trading privileges on a regional stock exchange

D.

trading in less than 100-share units on the American Stock Exchange

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Questions 58

In June, Bubba bought 100 shares of XYZ at $35. In November, he bought a listed put in XYZ with a $35 strike price and a July expiration for a premium of $600.

If Bubba sells the stock at $45 in July, what is his resulting tax liability for that transaction?

Options:

A.

no liability established until the offsetting option position is closed

B.

a $400 gain

C.

a $1,000 gain

D.

a $400 capital loss

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Questions 59

A corporation makes a rights offering to raise $10 million of new capital by issuing one million shares of common stock. If it already has six million shares outstanding at the time of the offering.

How many rights will the corporation distribute to its shareholders?

Options:

A.

one million

B.

six million

C.

ten million

D.

sixteen million

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Questions 60

Bubba is age 54 and has investments in a retirement plan with his former employer valued at $104,500. Bubba withdraws $25,000 to open a retail clothing store.

Which of the following statements is true regarding Bubba’s tax consequences?

Options:

A.

the entire account is terminated and $104,500 is immediately taxable

B.

a penalty of 10% of the withdrawn amount is assessed

C.

a penalty of 10% on all assets in Bubba’s account is assessed

D.

only regular income tax is due on the amount withdrawn

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Questions 61

If a mutual fund has invested its assets by allocating about one-third each for bonds, preferred stocks, and common stocks, it is identified as:

Options:

A.

an income fund

B.

a specialized fund

C.

a balanced fund

D.

a unit investment trust fund

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Questions 62

The amount for which the securities of a close-end investment company are selling above net asset value is know as:

Options:

A.

premium

B.

discount

C.

commission

D.

sales charge

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Questions 63

Which of the following is the least important method of money control exercised by the Federal Reserve?

Options:

A.

reserve requirements

B.

open market operations

C.

discount rate

D.

Regulation T

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Questions 64

Regulation T is set at 50%. Bubba’s account contains long positions in the following securities with the prices listed:

100 ABC $30

200 XYZ $70

200 QBB $40

200 KKK $25

Total market value = $30,000

Debit balance in the account = $12,000

Net equity balance of the account = $18,000

What is Bubba’s excess equity in the account?

Options:

A.

$3,000

B.

$18,000

C.

$12,000

D.

$0

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Questions 65

Bubba wants to buy 500 shares of an NYSE listed stock at 38.87 but he wants to buy at one time, right away, or else forget it.

What kind of order should the registered representative enter?

Options:

A.

fill or kill

B.

all or none

C.

immediate or cancel

D.

now or never

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Questions 66

A registered representative is given a limited trading authorization by a client. This permits the representative to:

Options:

A.

withdraw money from the account

B.

enter orders for the account at the representative’s discretion

C.

withdraw securities from the account

D.

all of the above

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Questions 67

Feasibility studies and engineering surveys are most necessary prior to which of the following new offerings?

Options:

A.

general obligation bonds

B.

limited tax bonds

C.

revenue bonds

D.

corporate debentures

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Questions 68

The expiration date of a listed option is:

Options:

A.

the last day of the expiration month

B.

the third Saturday of the expiration month

C.

the Saturday following the third Friday of the expiration month

D.

the third Friday of the expiration month

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Questions 69

Convertible preferred stock has all of the following characteristics except:

Options:

A.

a lower dividend rate than non-convertible preferred

B.

a dilution of earnings if converted into common stock

C.

a requirement for shareholders to always accept the call price when called

D.

required dividend payments to shareholders before any dividends are paid to holders of common stock

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Questions 70

An investment company acting as a conduit in the distribution of net investment income, pursuant to IRS rules, is called:

Options:

A.

balanced

B.

diversified

C.

regulated

D.

dual-purpose

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Questions 71

What Federal Reserve Board regulation governs the extension of securities-related credit by banks?

Options:

A.

Regulation G

B.

Regulation T

C.

Regulation U

D.

Regulation X

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Questions 72

The gross spread in a new issue depends upon which of the following?

Options:

A.

the amount of the issue

B.

the type of industry in which the issuer is engaged

C.

the past record of the issuing corporation

D.

all of the above

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Questions 73

To qualify as an intrastate offering under SEC Rule 147, which of the following is true of the issue?

Options:

A.

it must be approved by the SEC

B.

it must be sold only to bona fide residents of one state

C.

it cannot exceed $1,500,000 in value

D.

it must consist of common stock only

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Questions 74

A company may pay a declared dividend in which of the following ways:

Options:

A.

with stock in a subsidiary company

B.

with property

C.

with cash

D.

all of the above

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Questions 75

Bubba buys a 5% municipal bond maturing in 15 years that is trading at a market price of 85 . What is the nominal yield?

Options:

A.

5.88%

B.

5.1%

C.

5.00%

D.

cannot be determined

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Questions 76

The minimum denomination for a US treasury bond is:

Options:

A.

$100

B.

$1,000

C.

$10,000

D.

$100,000

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Questions 77

Bubba opens an account at a broker/dealer with instructions to “transfer and ship”. This means that:

Options:

A.

all correspondence to Bubba must be sent registered mail

B.

each trade report must note Bubba’s certificate registration instructions

C.

securities purchased must be registered in Bubba’s name and then delivered to him

D.

transactions for Bubba will be transferred to another broker for processing

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Questions 78

Which of the following does not affect the public offering price of a new issue?

Options:

A.

anticipated earnings of the issuer in the next year

B.

dividend projections for the next year

C.

the book value of the issuer

D.

the selling group’s determination of value in the prevailing market conditions

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Questions 79

Which of the following is not an intangible drilling cost?

Options:

A.

salaries

B.

supplies and fuel

C.

machinery and pipe

D.

repairs

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Questions 80

Which of the following stock exchanges is not registered with the SEC?

Options:

A.

Pacific Stock Exchange

B.

Boston Stock Exchange

C.

Chicago Stock Exchange

D.

all are registered

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Questions 81

Level III of NASDAQ provides which of the following?

Options:

A.

representative quotations

B.

firm quotations

C.

subject markets

D.

workout markets

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Questions 82

If a municipality has funds available to make a partial call of an issue of outstanding serial bonds, which bonds should be called first?

Options:

A.

the shortest maturity

B.

the maturity with the largest number of bonds

C.

the longest maturity

D.

the maturity bearing the lowest interest rate

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Questions 83

A market-maker has purchased a particular stock over a period of time for prices as high as $9 per share and as low as $3 per share. The average cost is approximately $6 per share. The current NASDAQ quote for the stock is 5 to 5.25. According to the FINRA Conduct Rules, the dealer’s offering price to the public should be based upon:

Options:

A.

the current market for the stock

B.

$3

C.

$9

D.

$6

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Questions 84

In a monthly review of customer statements, Bubba notices that one of his firm’s clients has paid for seven purchases five days late.

What does he do?

Options:

A.

decides this situation is acceptable provided payment was received before any securities were sold

B.

ascertains whether the client had a sufficient bank balance on settlement date

C.

nothing because this is not a violation provided the securities were not listed on the NYSE

D.

ascertains that extensions had been obtained under Reg T

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Questions 85

Call loans made by banks to broker/dealers are generally for the purpose of which of the following?

Options:

A.

expansion of office facilities

B.

meeting operating expenses

C.

carrying margin accounts

D.

financing securities held in inventory

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Questions 86

Under Regulation T, when must money be deposited to cover requirements for Bubba’s new purchases on margin?

Options:

A.

no later than the fifth business day after the trades

B.

no later than the seventh business day after the trades

C.

on the day of the trades

D.

on the next business day following the trades

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Questions 87

A mutual fund with an 8% load and a 1% redemption fee carries a current quote of $6.25 - $6.79. If an investor has tendered his shares for redemption on that basis, the per share price he will receive is approximately:

Options:

A.

$6.79

B.

$6.72

C.

$6.25

D.

$6.19

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Questions 88

Provisions of SEC Rule 145 normally apply to an exchange of one security for another as a result of:

Options:

A.

a stock split

B.

a change in par value

C.

a merger

D.

a “no-sale” ruling issued by the SEC

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Questions 89

What is the term applied to a classification of CMO securities having a stated maturity, average life, and estimated yield?

Options:

A.

tranche

B.

tier

C.

bracket

D.

bucket

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Questions 90

Which of the following oil and gas programs does not directly involve drilling?

Options:

A.

exploratory

B.

developmental

C.

balanced

D.

income

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Questions 91

Bubba buys one XYZ October 80 put and sells one XYZ October 70 put.

What is his position called?

Options:

A.

calendar spread

B.

money spread

C.

straddle

D.

combination

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Questions 92

At the time it underlying stock is trading at 48, Bubba buys a listed call option with a $50 strike price for $300. At what minimum price must that stock trade for Bubba to recover his investment (ignoring commission and taxes)?

Options:

A.

$45

B.

$48

C.

$51

D.

$53

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Questions 93

Who is responsible for verifying that limited partners meet net worth and income requirements?

Options:

A.

the limited partners

B.

the general partner

C.

the sponsor

D.

the registered representative

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Questions 94

Regulation T is set at 50%. Bubba’s account contains long positions in the following securities with the prices listed:

100 ABC $30

200 XYZ $70

200 QBB $40

200 KKK $25

Total market value = $30,000

Debit balance in the account = $12,000

Net equity balance of the account = $18,000

What is the buying power in Bubba’s account?

Options:

A.

$3,000

B.

$6,000

C.

$11,000

D.

$0

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Questions 95

Bubba is eligible for a Roth IRA. He may convert his SEP-IRA to a Roth IRA:

Options:

A.

without restriction

B.

only after the two-year holding period

C.

after a 90-day holding period

D.

not ever

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Questions 96

On which of the following is depreciation permitted?

Options:

A.

rental property whose value is declining

B.

residential property not used for business

C.

property whose maintenance exceeds the investment credit

D.

equipment subject to recapture

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Questions 97

Which of the following is not found in the final prospectus?

Options:

A.

a statement as to possible stabilization by the manager

B.

the public offering price

C.

a copy of the underwriting agreement

D.

a statement that the SEC neither approves nor disapproves of the issue

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Questions 98

Which of the following sets out the details for the management board of condominiums, including the board’s powers and limitations?

Options:

A.

master deed

B.

bylaws

C.

rental agreement

D.

loan agreement

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Questions 99

When depositors withdraw money from savings institutions to invest in US treasury securities, this is called:

Options:

A.

the multiplier effect

B.

disintermediation

C.

reverse repo

D.

open market operations

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Questions 100

Which of the following have a stated interest rate on the face of the certificates?

Options:

A.

treasury bills

B.

treasury notes

C.

treasury bonds

D.

both B and C

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Questions 101

Bubba sells 100 shares of XYZ short at $58 and buys 1 XYZ Mar 60 Call at $3.

What is the customer’s maximum loss?

Options:

A.

$500

B.

$100

C.

unlimited

D.

$5,500

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Questions 102

A mutual fund custodian is paid according to which of the following specifications when receiving deposits from a shareholder’s reinvestment plan?

Options:

A.

a commission for each share purchased

B.

a percentage of the sales charge

C.

a processing fee

D.

a percentage of the fund’s net asset value

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Questions 103

Bubba entered an order to sell long 100 shares of XYZ at 38.75 stop limit. Thereafter, the following round-lot transactions occurred: 38.75, 38.65, 38.50.

At what price was Bubba’s order executed?

Options:

A.

38.75

B.

38.65

C.

38.50

D.

it was never executed

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Questions 104

After an extended period of backing and filling, a stock moves up sharply through a resistance level on heavy volume. A technical analyst would likely call this a:

Options:

A.

buy-in

B.

technical rally

C.

buying climax

D.

breakout

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Questions 105

The preferred stock of Greatest Technology Corporation has a $100 par and is convertible into four shares of common stock. The preferred is trading at 104.50. The preferred is callable at 101. If the common stock price is presently 27.89, which of the following actions would be a successful arbitrage:

Options:

A.

purchase 400 shares of common stock and sell 100 shares of preferred stock as “short exempt” (that is, the sale is exempt from the uptick rule)

B.

purchase the preferred stock and sell an appropriate amount of the common stock “short exempt”

C.

purchase both the common and the preferred stocks as a hedge against further market risk

D.

purchase the preferred stock and let it be called, which is inevitable at these market prices

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Questions 106

Although a corporation has no earnings in a particular year, it is obligated to pay interest on all its outstanding debt except the following:

Options:

A.

convertible subordinated debentures

B.

collateral trust bonds

C.

adjustment bonds

D.

equipment trust certificates

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Questions 107

Under an initial federal requirement of 70% equity, Bubba purchases 100 shares of XYZ at $40 per share and wishes to satisfy the margin call by delivering another listed security into his account.

He may do so by depositing stocks with a market value of:

Options:

A.

$9,333

B.

$5,714

C.

4,000

D.

$2,800

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Questions 108

Bubba has a cash account and fails to make full and prompt payment for a purchase. The broker liquidated the transaction. Two weeks later, Bubba places another buy order for 100 shares of XYZ.

What does the broker do?

Options:

A.

refuses the order

B.

handles the order after obtaining a promise from Bubba to effect prompt settlement

C.

requires a 25% down payment before executing the order

D.

executes the order at its own risk

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Questions 109

Service charges by a FINRA dealer for transfer and safekeeping of customer securities held in street name:

Options:

A.

may not be levied under FINRA Conduct Rules

B.

may not be levied unless there is no trading in the account for more than six months

C.

may be levied only if the security has a value of less than $5,000

D.

may be levied only if the charge if fair, reasonable, and non-discriminatory

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Questions 110

Bubba has a short margin account with a short market value of $22,000, a credit balance of $42,000, and SMA of $500.

What is the NYSE minimum equity maintenance for this account?

Options:

A.

$5,500

B.

$6,000

C.

$6,600

D.

$12,600

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Questions 111

How many days after the settlement date must a broker/dealer “buy in” a customer who has failed to deliver securities?

Options:

A.

10 days

B.

15 days

C.

30 days

D.

45 days

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Questions 112

With respect to the public offering of securities by an underwriting syndicate, which of the following is true?

Options:

A.

the underwriting spread is greater than the selling concession

B.

the reallowance is greater than the selling concession

C.

the selling concession is greater than the underwriting spread

D.

the reallowance is greater than the underwriting spread

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Questions 113

Which of the following is not prohibited of a general partner?

Options:

A.

acting in such a way as to impede the orderly business of the partnership

B.

buying or selling assets of the partnership except to foster the business of the partnership

C.

competing in any way with the partnership

D.

accepting compensation from any other partnership

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Questions 114

When a corporation dissolves, who gets paid first?

Options:

A.

bank lenders

B.

senior bond holders

C.

the tax collector

D.

the lawyer

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Questions 115

Customers who engage in increased activity of wiring money from their account could indicate which of the following activities?

Options:

A.

Interpositioning

B.

Churning

C.

Crossing

D.

Money laundering

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Questions 116

Which of the following option positions is indicative of the same class of option?

Options:

A.

long one XYZ July 70 put and one XYZ July 70 call

B.

long one XYZ October 20 call and one XYZ January 30 call

C.

short one XYZ February 60 put and one ABC February 60 put

D.

short one XYZ June 40 call and one ABC June 20 call

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Questions 117

Bubba is opening a margin account with a member organization. He wishes to purchase 100 shares of XYZ at $15 per share.

What is Bubba’s initial cash deposit?

Options:

A.

$375

B.

$1,050

C.

$1,500

D.

$2,000

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Questions 118

What is the possible reward for investing in raw land?

Options:

A.

deferred income

B.

large deductions

C.

potential capital appreciation

D.

lack of investment risk

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Questions 119

In a 401(k) plan, when are employee’s contributions of compensation deferral vested?

Options:

A.

after 2 years

B.

immediately

C.

after 5 years

D.

the same as the employer’s contributions

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Questions 120

In the offering of new securities, members of the syndicate are permitted to sell to other dealers less the reallowance. The amount of the reallowance is determined by:

Options:

A.

the FINRA

B.

the issuing corporation

C.

the syndicate manager

D.

the SEC

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Exam Code: Series-7
Exam Name: Series 7 General Securities Representative Qualification Examination (GS)
Last Update: Mar 14, 2025
Questions: 400

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