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Series 7 > Exam Wrong Answers 1 > Flashcards

Exam Wrong Answers 1 Flashcards

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1
Q

With regard to a collect on delivery order, what is the proper procedure for the receiving firm should the funds not be available to pay for the securities at delivery?

A

He receiving firm must promptly return the securities to the selling firm

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2
Q

What is the meaning of the term strike price as used in an options contract?

A

The strike price is the value at which the option can be exercised throughout the option period

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3
Q

Equity options expire

A

At 11:59 pm ET on the third Friday of the month

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4
Q

A client places an order to sell stocks that are not in his account, stating he will deliver the securities. What must be discussed to meet the broker/dealer’s obligation in the trade?

A

Securities must be in good delivery status including a signature on the back for ease of transfer of ownership, not be physically damaged and meet the 100 share rule with the exact number of shares presented.

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5
Q

When a member offers an investment analysis tool to retail customers, it must make the investment analysis tool available to

A

FINRA within 10 business days of its first use by the public

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6
Q

ABC is a broker/dealer underwriting it’s own IPO. ABC is required to hire an independent underwriter to facilitate the IPO. What are the qualifications for the independent underwriter?

A

The underwriter must have done at least three offerings in the last 3 years. These three offerings must have been at least 50% of the size and type of ABC’s offering.

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7
Q

In a municipal offering, “group net” orders are treated by the manager

A

For the benefit of the syndicate as a whole

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8
Q

What is the lowest price that a seller is willing to accept for a security from a customer?

A

Ask price

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9
Q

ABC Corporation has issued a tender offer to the shareholders of XYZ Corp. Which of the following is a permissible way for a shareholder to sell into the offer?

A

Deliver one round lot of the stock

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10
Q

The difference between a stock’s actual return and its beta is

A

Alpha

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11
Q

For violations of the Securities Exchange Act of 1934 with respect to bribing a foreign official, which of the following are true?

A

An individual can be subject to a $100,000 fine, imprisonment for 5 years or both

A business entity can be subject to a $2,000,000 fine

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12
Q

Which of the following statements regarding overnight repurchase agreements is incorrect?

A

There is no interest rate risk

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13
Q

Which of the following preferred shares has the highest yield?

A

Callable

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14
Q

Which of the following corporate characteristics is the most difficult to avoid when structuring a direct participation program?

A

Centralized management

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15
Q

According to MRSB rules, all of the following would be an advertisement except3

A

Listings of offerings

Preliminary official statements

Final official statements

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16
Q

Which of the following is an exploratory well?

A

Well in an unproven area

Well is a primary site

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17
Q

A margin account has $11,000 market value and $4,500 debit balance. How much excess equity is in the account?

A

$1,000

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18
Q

Which of the following are characteristics of BABs?

A

They may provide federal subsidy to the issuer

They may provide a tax credit to the investor

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19
Q

Regarding a broker dealer retail sale to a customer, how can an order be filled?4

A

From inventory
Sell short to customer
Simultaneous or riskless transaction
As an agent

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20
Q

The SIPC (Securities Investor Protection Corporation) insures a customer’s account for unreturned securities for up to

A

$500,000

21
Q

Which has the best rating?

A

Aaa 5 years to maturity

22
Q

A broker goes to a designated market maker (DMM) to sell 100 XYZ. The DMM stops the broker at 31. Which of the following is true?

A

The DMM has guaranteed the broker a price of 31

23
Q

Which of the following statements regarding commercial paper is false?

A

Registration is required by the SEC

24
Q

A man is 52 years old. He is terminating his employment at a state university. He is fully vested in a 457(b) plan. If he withdraws the money from his 457(b) plan,

A

He must pay income tax

25
Q

Interest income from US government bonds is

A

Subject to federal income tax but exempt from state income tax

26
Q

All of the following are oil and gas DPPs except

A

Appreciation

27
Q

A closed-end management company has shares that

A

Are not redeemable

28
Q

XYZ is a publicly traded company and its stock has been doing well for the last several years. XYZ is planning to expand into new markets and would like to raise additional capital to finance this expansion. How may this be done?

A

Add-on offering

29
Q

TIPS are not issued in which of the following maturities?

A

20 year

30
Q

Which of the following is not true of section 1035 Policy Exchanges?

A

Any exchange made under Section 1035 of the Internal Revenue Code must be completed within 30 days

31
Q

FINRA bylaws which relate to a member firm’s dealings with the public are provided for in the

A

Conduct Rules

32
Q

A bond whose fixed nominal rate increases to a higher fixed rate in its latter years is called a

A

Step coupon bond

33
Q

Which of the following are characteristics of TIPS?

A

Fixed interest rate

Fluctuating principal

34
Q

Yield curve analysis is useful to an investor purchasing debt securities for which of the following reasons?

A

Allows the comparison of rates of return as maturities are extended

Is useful in determining the market expectations for interest rates

35
Q

A stock’s trading range is 86-92. Which of the following statements are correct if the stock has been decking below 90?3

A

Breakout at 93
Breakout at 85
Support is 86

36
Q

In pricing a new issue a municipal bond underwriter would most likely check

A

The 30 day visible supply

37
Q

The strike price and premium of Treasury bond options are stated as a percentage of the

A

Face amount of the underlying bonds

38
Q

Which of the following is true of restricted stock?

A

The purchase must be paid for in its entirety

39
Q

If certain requirements are met, a corporation can offer securities sold within the borders of one state using the intrastate offering exemption, also known as

A

Rule 147

40
Q

The credit rating of a pre-refunded bond is

A

AAA

41
Q

A technical analyst states that the market is consolidating. This means that the market trend line is moving

A

Sideways

42
Q

A client has both a cash and margin account, and actively trades stocks in both. He does not own stock ZZZ at the moment, but has been following it for some time and is convinced it is going to steeply decline in price. He plans to short sell the stock, but wants to know any advantages to buying puts on the stock instead. All of the following are correct except put buying

A

Returns are enhanced by gradual erosion of the option’s time value

43
Q

Under MRSB rules, which of the following call provisions could affect the yield required to be shown on a customer’s municipal bond confirmation?

A

In-whole

44
Q

The husband of an options clients also trades options, but does so in a separate account at another brokerage firm. Both of them are currently hedging short sale positions in stock VVV with options. However, the options client is long 32,000 VVV calls, while her husband is short 30,000 VVV puts. The current contract position limit for VVV stock is 60,000 contracts. Which of the following applies to this situation?

A

This couple’s current options positions are in violation of the position limit rules

45
Q

In a limited partnership, what best describes the cross over point?

A

Taxable income exceeds deductions

46
Q

At which point does a registered representative come under the NYSE constitution and rules?

A

When employed by the firm

47
Q

A director of a public corporation wishes to sell some of his stock in the company. Under SEC Rule 144, how long is the holding period?

A

6 months

48
Q

Which of the following statements are true regarding the over the counter market?

A

The Federal Reserve Board regulates which OTC securities are marginable

FINRA regulates trading practices in the OTC market

49
Q

A US corporation imports goods from Switzerland. Which of the following option positions should it choose to best protect itself?

A

Buy Swiss franc calls

Series 7 (47 decks)

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