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series 7 -- final exam 4 questions with verified answers
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series 7 -- final exam 4 questions with verified answers
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series 7 -- final exam 4A "SPDR" is a(n): - correct answer ✔✔ETF
The self-supporting spouse of a registered representative has an account with your firm. Your firm is
underwriting the initial public offering (IPO) of ACME Co. common stock, and the spouse inquires about
whether it is possible to receive an allocation. The registered representative should inform the spouse
that the issue: - correct answer ✔✔cannot be purchased through an IPO
(FINRA prohibits the purchase of equity IPOs (Initial Public Offerings) by industry "insiders." The list of
prohibited purchasers includes FINRA member firms for their own accounts, officers and employees of
member firms (and their immediate family members), fiduciaries to member firms (such as accountants
and lawyers that are retained by FINRA member firms); and investment managers for investment
companies, insurance companies, pension plans, who want to buy personally, etc.)
Distributions from Section 401(k) plans are: - correct answer ✔✔100% taxable
Which statements are TRUE when comparing PAC CMO tranches to "plain vanilla" CMO tranches?
I Holders of PAC CMO tranches have lower prepayment risk
II Holders of PAC CMO tranches have higher prepayment risk
III Holders of "plain vanilla" CMO tranches have lower prepayment risk
IV Holders of "plain vanilla" CMO tranches have higher prepayment risk - correct answer ✔✔I and IV
(Older CMOs are known as "plain vanilla" CMOs, because the repayment scheme is relatively simple - as
payments are received from the underlying mortgages, interest is paid pro-rata to all tranches; but
principal repayments are paid sequentially to the first, then second, then third tranche, etc. Thus, the
earlier tranches are retired first. The PAC tranche is a "Planned Amortization Class." Surrounding this
tranche are 1 or 2 Companion tranches. Interest payments are still made pro-rata to all tranches, but
principal repayments made earlier than that required to retire the PAC at its maturity are applied to the
Companion class; while principal repayments made later than expected are applied to the PAC maturity
before payments are made to the Companion class)
Zero-coupon bonds trade: - correct answer ✔✔flat
, Which of the following statements are TRUE regarding tax sheltered annuities for employees of non-
profit organizations?
I These are known as 401(k) plans
II These are known as 403(b) plans
III Monies contributed to this plan are excluded from taxable income
IV Monies contributed to this plan are included in taxable income - correct answer ✔✔II and III
An investor buys 100 shares of an open-end investment company with a 4% contingent deferred sales
charge. The sales charge is reduced by 1% for every full year that the fund is held. The investor redeems
the 100 shares at an NAV of $20 per share after holding them for 1 year and 2 months. The investor will
receive: - correct answer ✔✔$1,940
The legislation that requires the CEO (Chief Executive Officer) of a publicly traded company to make an
annual certification of the information presented in the company's financial statements is the: - correct
answer ✔✔Sarbanes Oxley Act of 2002
If the IRS considers a tax shelter to be abusive, which of the following can happen?
I Tax deductions are disallowed
II Interest is charged on the tax due
III Penalties are charged on the tax due
IV The IRS can charge the tax shelter promoter and investors with fraud - correct answer ✔✔I, II, III, IV
Maximum income limits that reduce permitted contributions do NOT apply to:
I IRAs
II Spousal IRAs
III Roth IRAs
IV Coverdell Education Savings Accounts - correct answer ✔✔I and II
What is the Net Asset Value per share of a mutual fund? - correct answer ✔✔(assets - liabilities) /
outstanding shares
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