Series 7 - General Securities Representative Exam questions
and answers 2026\2027 A+ Grade
What are joint accounts considered by SIPC?
- correct answer Separate from Individual
Explain the concept of holding securities in "Street Name"
- correct answer When client securities are held & registered in the name of the BD (Broker/Dealer)
True or False: Issuers of unsponsored ADRs are subject to SEC reporting requirements
- correct answer False
Which department of a BD writes reports about markets & securities for investors?
- correct answer Research Department
___________ stock is the amount of stock a corporation is legally permitted to issue.
- correct answer Authorized stock
Which instrument has the longest maturity?
- Rights
- Options
- Warrants
- correct answer Warrants
6 Types of Preferred Stock
- correct answer Straight - No Fixed Maturity
Cumulative - Paid arrears for bad years
Callable - Can be bought back @ anytime
Convertible - Can convert to common
,Adjusted Rate - Dividend modified by changes in benchmark rate
Participating - Paid extra after debts settled (Special dividends)
Right to buy newly issued stock from positioned company (Maintain ownership)
- correct answer Stock Rights (Pre-emptive rights)
Certificate granting rights to purchase stock at a set higher price in the future. Usually done as a
sweetener
- correct answer Warrants
How are voting issues determined, by shares or shareholders?
- correct answer Majority of Shares
Any T-Note/T-Bond where a BD has stripped the interest and principal payments to sell separately as
zero-coupons
- correct answer T-STRIPS
True or False: A FINRA member firm must disclose whether it has the ability to influence the issuer of
securities.
- correct answer True - Control Relationship
The number of years after issuance during which bonds may not be called by the issuer
- correct answer Call Protection
True or False: The Investment Company Act of 1940 requires mutual funds to register.
- correct answer True
What are not considered equity securities?
- correct answer Fixed-Income products such as bonds & notes
If attached to the issuance of a bond, may warrants be traded separately?
- correct answer Yes, traditional warrants are traded in conjunction, but they are often detachable and
can be sold on the secondary market before expiration.
,__________ preferred stock allows owners to exchange the preferred shares for common shares.
- correct answer Convertible Preferred
What is forced conversion?
- correct answer An issuer calls bonds at a point where the stock is worth more than the bond's call price
True or False: The interest rate reset periods on Auction Rate Securities range from 7,28, to 35 days.
- correct answer True
Name 3 of the advantages of buying convertible bonds
- correct answer - Consistent interest payments
- Appreciation if stocks rise
- Downside protection if stock falls
True or False: Long-term CDs more than 1 year are considered money-market instruments
- correct answer False: Maturity is too long
The new issue market is also known as the _____________ market
- correct answer Primary market
List 4 short term interest rates
- correct answer - Discount Rate
- Fed Funds Rate
- Prime Rate
- London Interbank Offered Rate (LIBOR)
2 Non-Equity Options
- correct answer Index & Currency
Premium = Intrinsic Value
, The price at which it becomes profitable for investors to convert their convertible bonds into shares of
common stock
- correct answer Parity
Define Purchase and Sale of Calls & Puts
- correct answer Calls
- Long Calls (Purchase) Bullish
- Short Calls (Sell) Bearish
Puts
- Long Puts (Purchase) Bearish
- Short Puts (Sell) Bullish
Letter of Intent in regard to Mutual Funds (Days)
- correct answer An investor may sign an LOI (Letter of Intent), which allows the investor to receive
breakpoint discounts based upon a commitment to buy a specified number of mutual fund shares over a
period of time, usually 13 months. The LOI may be backdated up to 90 days from the initial purchase.
May Eurodollar bonds be issued in the US?
- correct answer No, they are not registered with the SEC
What are the 4 roles of the BD operations?
- correct answer - Process paperwork
- Handle funds
- Handle securities transfers
- Settle & confirm transactions
A financial product that derives its value from the value of underlying assets such as stocks, bonds, or
mortgages
- correct answer Derivative
____________ is the SRO(Self-Regulatory Organization) for the OTC (Over-The-Counter) market
What is the organization?
- correct answer FINRA
and answers 2026\2027 A+ Grade
What are joint accounts considered by SIPC?
- correct answer Separate from Individual
Explain the concept of holding securities in "Street Name"
- correct answer When client securities are held & registered in the name of the BD (Broker/Dealer)
True or False: Issuers of unsponsored ADRs are subject to SEC reporting requirements
- correct answer False
Which department of a BD writes reports about markets & securities for investors?
- correct answer Research Department
___________ stock is the amount of stock a corporation is legally permitted to issue.
- correct answer Authorized stock
Which instrument has the longest maturity?
- Rights
- Options
- Warrants
- correct answer Warrants
6 Types of Preferred Stock
- correct answer Straight - No Fixed Maturity
Cumulative - Paid arrears for bad years
Callable - Can be bought back @ anytime
Convertible - Can convert to common
,Adjusted Rate - Dividend modified by changes in benchmark rate
Participating - Paid extra after debts settled (Special dividends)
Right to buy newly issued stock from positioned company (Maintain ownership)
- correct answer Stock Rights (Pre-emptive rights)
Certificate granting rights to purchase stock at a set higher price in the future. Usually done as a
sweetener
- correct answer Warrants
How are voting issues determined, by shares or shareholders?
- correct answer Majority of Shares
Any T-Note/T-Bond where a BD has stripped the interest and principal payments to sell separately as
zero-coupons
- correct answer T-STRIPS
True or False: A FINRA member firm must disclose whether it has the ability to influence the issuer of
securities.
- correct answer True - Control Relationship
The number of years after issuance during which bonds may not be called by the issuer
- correct answer Call Protection
True or False: The Investment Company Act of 1940 requires mutual funds to register.
- correct answer True
What are not considered equity securities?
- correct answer Fixed-Income products such as bonds & notes
If attached to the issuance of a bond, may warrants be traded separately?
- correct answer Yes, traditional warrants are traded in conjunction, but they are often detachable and
can be sold on the secondary market before expiration.
,__________ preferred stock allows owners to exchange the preferred shares for common shares.
- correct answer Convertible Preferred
What is forced conversion?
- correct answer An issuer calls bonds at a point where the stock is worth more than the bond's call price
True or False: The interest rate reset periods on Auction Rate Securities range from 7,28, to 35 days.
- correct answer True
Name 3 of the advantages of buying convertible bonds
- correct answer - Consistent interest payments
- Appreciation if stocks rise
- Downside protection if stock falls
True or False: Long-term CDs more than 1 year are considered money-market instruments
- correct answer False: Maturity is too long
The new issue market is also known as the _____________ market
- correct answer Primary market
List 4 short term interest rates
- correct answer - Discount Rate
- Fed Funds Rate
- Prime Rate
- London Interbank Offered Rate (LIBOR)
2 Non-Equity Options
- correct answer Index & Currency
Premium = Intrinsic Value
, The price at which it becomes profitable for investors to convert their convertible bonds into shares of
common stock
- correct answer Parity
Define Purchase and Sale of Calls & Puts
- correct answer Calls
- Long Calls (Purchase) Bullish
- Short Calls (Sell) Bearish
Puts
- Long Puts (Purchase) Bearish
- Short Puts (Sell) Bullish
Letter of Intent in regard to Mutual Funds (Days)
- correct answer An investor may sign an LOI (Letter of Intent), which allows the investor to receive
breakpoint discounts based upon a commitment to buy a specified number of mutual fund shares over a
period of time, usually 13 months. The LOI may be backdated up to 90 days from the initial purchase.
May Eurodollar bonds be issued in the US?
- correct answer No, they are not registered with the SEC
What are the 4 roles of the BD operations?
- correct answer - Process paperwork
- Handle funds
- Handle securities transfers
- Settle & confirm transactions
A financial product that derives its value from the value of underlying assets such as stocks, bonds, or
mortgages
- correct answer Derivative
____________ is the SRO(Self-Regulatory Organization) for the OTC (Over-The-Counter) market
What is the organization?
- correct answer FINRA
