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Series 7 Top-off Question Review:correctly answered graded A+(updated)
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Series 7 Top-off Question Review:correctly answered graded A+(updated)
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Series 7 Top-off Question Review:Net overall debt of a municipality is:
A) funded debt minus overlapping debt.
B) net direct debt plus overlapping debt.
C) funded debt plus overlapping debt.
D) net direct debt minus overlapping debt. - correct answer ✔✔B
Net overall debt of a municipality is defined as net direct debt plus overlapping debt
When XYZ stock trades at 40 and an XYZ Oct 35 call trades at 5, which of the following is TRUE?
A) The time value is zero.
B) The option's time value equals its intrinsic value.
C) The option is out-of-the-money.
D) The option is at-the-money. - correct answer ✔✔A
An option's premium consists of time value and intrinsic value. In this situation, the call is in-the-money
by 5 (intrinsic value is 5), because the market value of 40 exceeds the strike price of 35 by 5. If the total
premium is 5 and the intrinsic value is 5, the time value must be 0. The option is at parity, which means
the premium equals the intrinsic value
If XYZ common stock has a $4 dividend, a yield of 4.2%, a PE ratio of 12, and is trading at $96, its
approximate earnings per share (EPS) is:
A) $50.40.
B) $48.00.
C) $4.00.
D) $8.00. - correct answer ✔✔D
,The stock's PE ratio is price to earnings per share (EPS). Dividing the stock's price by the PE will give the
earnings per share ($ = $8 EPS)
In the underwriting of a municipal bond, which of the following is determined by the issuer rather than
the underwriter?
A) Underwriting spread.
B) Maturity.
C) Yield to maturity.
D) Net interest cost. - correct answer ✔✔B
The maturity is determined by the issuer and stated in the official notice of sale before bids are received.
Which of the following investment vehicles has the highest credit risk?
A) New Housing Authority bonds.
B) Ginnie Mae pass-through certificates.
C) General obligation bonds.
D) Industrial revenue bonds. - correct answer ✔✔D
The industrial revenue bonds would have the highest risk because debt service is the responsibility of
the corporation leasing the facility rather than the issuing municipality
U.S. Treasury bills are issued for all of the following maturities EXCEPT:
A) 26 weeks.
B) 4 weeks.
C) 13 weeks.
D) 8 weeks. - correct answer ✔✔D
U.S. Treasury bills are issued with 4, 13, and 26-week maturities. There have been 52-week T- bills in the
past, but there are no 8-week T-bills.
,Your firm is interested in submitting a bid on a forthcoming general obligation municipal bond issue. Your
firm could obtain the appropriate bid worksheets through a service provided by:
A) Standard & Poor's.
B) The Wall Street Journal.
C) the Bond Buyer.
D) the MSRB. - correct answer ✔✔C
Official notices of sale announcing the offering of municipal issues to competitive bidders are published
in the Bond Buyer, which offers a service to subscribers-called the New Issue Worksheet and Record
Service-that summarizes each notice. It provides information about new issues put up for bid and
worksheets for underwriters to determine yields and prices when bidding
Which of the following increases SMA?
A) Purchase of margin securities.
B) Receipt of a cash dividend.
C) Withdrawal of margin securities.
D) Decline in market value of long positions. - correct answer ✔✔B
Cash dividends are credited to SMA dollar for dollar
Underwriters and selling group members violate rules regarding sales of new equity issues to restricted
persons when they do which of the following?
I. Sell a new issue to one of their own customers.
II. Sell blocks of the new issue to accounts of partners or officers of the member firm.
III. Sell to member firms that deal only in investment company products.
IV. Sell to brokers and dealers outside the selling group who position the securities for later resale at
higher prices.
A) I and III.
B) I and IV.
, C) II and III.
D) II and IV. - correct answer ✔✔D
Rules prohibit the sale of a new equity issue to other brokers, partners, officers, employees of firms in
the syndicate or selling group offering the issue, and their supported family members. Firms selling only
investment company products and/or direct participation programs, and their employees, are exempt
from these rules
A commercial bank purchasing qualified GO bonds may deduct what percentage of the interest cost
necessary to fund the purchase?
A) 80%.
B) 50%.
C) 100%.
D) 20%. - correct answer ✔✔A
A bank-qualified municipal bond issue is a small issue, generally a GO issue of $10 million or less. If a
bank were to purchase any part of a qualified issue, 80% of the annual costs necessary to fund the
purchase would be tax deductible to the bank
Which of the following positions exposes a customer to unlimited risk?
A) Short 200 shares of XYZ.
B) All of these.
C) Short 200 shares of XYZ and short 2 XYZ puts.
D) Short 2 XYZ uncovered calls - correct answer ✔✔B
All of the positions expose the client to unlimited risk because a loss will occur if the stock price rises
Which of the following statements regarding a discretionary account is NOT true?
A) Securities in a discretionary account may not be rehypothecated.
B) A principal must review all account activity frequently.
C) A principal must accept the account in writing.
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