Series 7 Exam Practice Test 24

1. Which TWO of the following are TRUE relating to a firm that sells securities out of its own inventory?

I. It is acting as a broker.

II. It is acting as a dealer.

III. It charges a commission.

IV. It charges a markup.

A. I and III

B. I and IV

C. II and III

D. II and IV

2. Use the following exhibit to answer this question:

NY Close	Strike	Calls		Puts
ABC		Sep	Dec	Sep	Dec
50.50	40	12	14.13	0.75	1.50
50.50	50	1	2.50	0.88	1.75
50.50	60	0.50	0.75	10	12

What is the break-even point for an investor who purchases an ABC Dec 60 put?

A. 48

B. 50

C. 70

D. 72

3. All of the following are good delivery for a trade of 930 shares EXCEPT

A. 1 certificate for 900 shares, 1 for 30 shares

B. 2 certificates for 400 shares each, 2 for 50 shares each, 2 for 15 shares each

C. 4 certificates for 200 shares each, 10 for 13 shares each

D. 4 certificates for 200 shares each, 13 for 10 shares each

4. An investor has a child who will be going to college in 15 years. Which of the following is a suitable investment?

A. T-bills

B. T-notes

C. Treasury receipts

D. Long call options

5. Which of the following statements is TRUE about revenue bonds?

A. Their value is measured by the municipal project's capacity for generating revenue.

B. They are secured by a mortgage-backed bond.

C. They are a type of general obligation bond.

D. They are subject to the statutory debt limitations of the issuing jurisdiction.

6. Which of the following is the balance sheet equation?

A. assets = liabilities + shareholder's equity

B. assets + liabilities = shareholder's equity

C. shareholder's equity + assets = liabilities

D. None of the above

7. Regarding the taxation of dividends from corporate securities, which TWO of the following are TRUE?

I. Qualified dividends are taxed at the investor's income tax rate.

II. Qualified dividends are taxed at a maximum rate of 20 percent.

III. Nonqualified dividends are taxed at the investor's tax rate.

IV. Nonqualified dividends are taxed at a maximum rate of 20 percent.

A. I and III

B. I and IV

C. II and III

D. II and IV

8. All of the following change the conditions of an option contract EXCEPT

A. a stock split

B. a cash dividend

C. a stock dividend

D. None of the above

9. Cain Weidman owns 1,000 shares of HIT Corp. HIT issues stock with cumulative voting. What is the maximum number of votes that Cain can cast for one candidate if there are four vacancies on the board of directors of HIT?

A. 100

B. 250

C. 1,000

D. 4,000

10. Where can an investor find the most information about a new municipal issue?

A. In a prospectus

B. In an official statement

C. In a tombstone ad

D. In a registration statement

11. Records of written customer complaints must be kept on file for at least

A. 2 years

B. 3 years

C. 4 years

D. 6 years

12. Which two of the following are true of Roth IRAs?

I. Contributions are made from after-tax dollars.

II. Contributions are made from pre-tax dollars.

III. Distributions are tax-free.

IV. Distributions are taxed on the amount above the amount of the contribution.

A. I and III

B. I and IV

C. II and III

D. II and IV

13. All of the following can validate a mutilated certificate EXCEPT

A. the issuer

B. the broker-dealer

C. the registrar

D. the paying agent

14. One of your clients wants to start adding some diversity to their portfolio by investing in mutual funds. Which of the following is the most important consideration when choosing a mutual fund?

A. Whether the fund is load or no-load

B. Management fees

C. Investment objectives

D. 12b1 fees

15. Common stockholders in a corporation can do which of the following?

A. Elect the corporation's board of directors

B. Make decisions about the day-to-day dealings, such as the office supply dealer used by the corporation

C. Receive interest payments

D. Expect to be paid par value for their stock if the corporation goes out of business

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Series 7 Exam Practice Test 24

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