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FINRA Series 7 Exam 336 Questions with Verified Answers,100% CORRECT
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FINRA Series 7 Exam 336 Questions with Verified Answers
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FINRA Series 7 Exam 336 Questions with Verified AnswersWhat information must be disclosed by a broker dealer in a research report? -
CORRECT ANSWER Any investment banking compensation paid in past 12 months,
anticipated price target, if analyst is a director of the company, any ownership in
the company held by the analyst or analyst family members.
Subordinated Debenture Bonds - CORRECT ANSWER Unsecured bonds, secured
by the full faith and credit and no specific collateral of the corporation.
Section 457 Plan - CORRECT ANSWER Retirement plan used by public sector
workers. Similar to 401(k), have similar tax and contribution features. Used by
some local government workers as well.
ETNs (Exchange-traded notes) - CORRECT ANSWER Carry issuer risk tied to the
creditworthiness of the institution backing the note. They typically do not pay
interest. Returns are linked to the performance of an index, currency, or
commodity and suitable for investors looking to speculate on an index.
CD (Certificate of Deposit) - CORRECT ANSWER Issued by banks, they have a fixed
maturity date and interest rate that is paid. Early withdrawal from a CD will
typically result in a penalty. Short term money-market security.
What is typically associated with an expanding economy? (expansion). - CORRECT
ANSWER Rising interest rates, increased costs along with lower unemployment.
An increasing demand for goods. Inflation begins to occur as well.
Balance Sheet - CORRECT ANSWER Consists of a company's Assets, liabilities, and
shareholder's equity. Equation: Total Assets= Total Liabilities + Shareholders
Equity.
How long does a customer have to return the options agreement? - CORRECT
ANSWER Within 15 days of the approval of the account. After these 15 days, the
customer is only permitted to close out existing options positions. A customer
,may enter options transactions before the options agreement is returned, but
after those 15 days they cannot.
How are Treasury Bonds quoted? - CORRECT ANSWER Treasury Bonds are quoted
in 32nds of a point, and are then calculated as a percentage of their par value. Ex.
The difference between 98.4 and 98.8 is 4/32. Since one point equals $10, 4/32 or
1/8 equals $1.25.
How do you find the ask price (also known as POP or public offering price) of a
open-end investment company? - CORRECT ANSWER Divide the net asset value by
the complement of the sales charge. NAV/(100%-sales charge)= ask price.
Variable life insurance policy characteristics - CORRECT ANSWER Value of the
policy increases or decreases in relation to the performance of the separate
account. Poor performance could cause the cash value to decline to zero. Death
benefit can increase or decrease, but cannot fall below a separate amount.
Premiums are fixed for the lifetime of the policy. The expense guarantee clause
prevents insurance companies from raising expense charges for the
administration of the policy.
How do you calculate Accrued Interest? - CORRECT ANSWER Accrued interest =
(Principal x Rate x Days of Interest) / 360. Ex. Monday, June 15, investor
purchases $20,000 face value of 8% municipal bonds that mature on November 1,
2035. November 1 is one maturity date, May 1 the other (because 6 months). 30
days for May, 17 for June. So calculation would be Accrued Interest = (20,000 x
8% x 47) / 360.
How the premium of an option calculated? - CORRECT ANSWER Premium =
Intrinsic Value + Time Value
Credit Spread - CORRECT ANSWER A spread in which the premium of the option
being sold is higher. In a credit spread, the customer will profit if the spread
narrows.
Defined Benefit Plan - CORRECT ANSWER A type of pension fund. It is tax-differed,
therefore it would not benefit from the tax exemption of municipal bonds. Plan
promises to pay employees a specified amount of money each year once the
,employee retires. Payment based on age, years of service, salary history. Actuarial
calculations are used to determine the amount an employer must deposit each
year.
Sales Breakpoint (Mutual Fund) - CORRECT ANSWER The minimum dollar amount
(not share amount) of a purchase of a mutual fund where a volume discount is
given.
Penny Stock - CORRECT ANSWER According to SEC rules, a stock that sells for less
than $5.00, is not listed on Nasdaq or NYSE. A stock quoted on the OTC Bulletin
Board or OTC Pink Market that has a bid price less than $5.00 is a penny stock.
When don't penny stock rules apply? - CORRECT ANSWER The customer is defined
as an existing customer, as in someone who has had an account with a broker-
dealer for more than one year and who has previously engaged in 3 penny stock
transactions. In transactions by an institutional accredited investor, in
transactions nonrecommended, in transactions by a broker-dealer that is not a
market maker in that security.
What is the maintenance requirement on stocks sold short? - CORRECT ANSWER
If the security is less than $5 per share, a minimum maintenance requirement of
$2.50 per share or 100% market value, whichever is greater, applies. Otherwise,
it's 50% of market value.
Eurodollars - CORRECT ANSWER U.S. dollars on deposit in foreign banks. Doesn't
have to be Europe.
Registered Options Principal (ROP) - CORRECT ANSWER Responsible for firm's
compliance program with options. Duties include establishing guidelines for
options retail communication, reviewing this material, reviewing the method of
allocation of exercise notices.
2x Leveraged ETF - CORRECT ANSWER Designed to reflect twice the performance
of the underlying index. So, if a 2x leveraged ETF appreciates by 10%, it is actually
appreciating by 20%.
Treasury STRIP - CORRECT ANSWER A type of zero coupon bond.
, What type of bond has the most interest rate risk? - CORRECT ANSWER A zero
coupon bond.
Risk Disclosure Document - CORRECT ANSWER A document required to be
delivered in order for an account to begin options trading. A brokerage firm must
deliver the document at or prior to the account being approved for options
trading.
What municipal bonds are most likely to be refunded? - CORRECT ANSWER Bonds
with the highest interest rates. If a municipality can borrow money at a lower
rate, then they will refund high interest bonds.
Additional Bonds Test - CORRECT ANSWER Determines what will happen to the
coverage of revenue bonds when more bonds are issued in the future. The
additional bonds test sets a minimum level of coverage of debt service for interest
and principal for all outstanding bonds and for future debt.
Does a secondary market exist for commercial paper? - CORRECT ANSWER Yes.
Private Activity Bond - CORRECT ANSWER A type of municipal bond in which funds
being raised will be used to benefit a non-public company. If the person receiving
the bond's interest is subject to AMT, the interest is taxable at the federal level.
Clients subject to the AMT should not purchase private activity bonds.
How is property tax computed? - CORRECT ANSWER Property Tax = Assessed
value x millage rate
A mill = 0.001 or $1 per $1,000 assessed value.
When do T-Bill auctions occur and when do they settle? - CORRECT ANSWER The
auction for 13 and 26- week T-Bills is held each Monday. Settlement is Thursday
of the same week.
When exercised, when do stock index options in cash settle? - CORRECT ANSWER
On the next business day.
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