General Securities Representative Exam
Practice Questions And Correct Answers
(Verified Answers) Plus Rationale 2026
Q&A| Instant Download Pdf
1.A registered representative is reviewing a new customer’s investment
objectives and financial information before recommending securities. Which
of the following is the primary purpose of gathering this information?
A. To determine the customer’s political affiliation
B. To satisfy suitability obligations and recommend appropriate investments
C. To eliminate all investment risk from the customer’s portfolio
D. To guarantee that the customer will achieve a specific return
Answer: B
The primary purpose of collecting customer financial information,
investment objectives, risk tolerance, and other relevant details is to
satisfy suitability requirements and ensure that recommendations are
appropriate for the customer’s circumstances.
2. A customer purchases 100 shares of common stock at $50 per share.
The company later declares a 2-for-1 stock split. What will be the
customer’s position after the split?
A. 50 shares valued at $100 per share
B. 100 shares valued at $50 per share
C. 200 shares valued at $25 per share
D. 200 shares valued at $50 per share
,Answer: C
A 2-for-1 stock split doubles the number of shares owned while reducing
the market price proportionally. The customer will own 200 shares, and the
approximate market value per share will be reduced to $25.
3. Which of the following securities is considered an equity security?
A. Corporate bond
B. Treasury bill
C. Common stock
D. Commercial paper
Answer: C
Common stock represents ownership in a corporation and is classified as
an equity security. Bonds, Treasury bills, and commercial paper represent
debt obligations.
4. A customer buys a corporate bond at a premium. Which of the
following statements is TRUE regarding the bond’s yield?
A. The yield to maturity is lower than the nominal yield
B. The yield to maturity is higher than the nominal yield
C. The current yield is always higher than the yield to maturity
D. The bond has no interest-rate risk
Answer: A
When a bond is purchased at a premium, the investor pays more than the
par value. Because the investor receives only the par value at maturity, the
yield to maturity is lower than the stated coupon rate.
5. Which of the following securities is issued directly by the U.S.
Treasury?
,A. Municipal revenue bonds
B. Treasury notes
C. Corporate debentures
D. Federal agency securities
Answer: B
Treasury notes are direct obligations issued by the U.S. Treasury and are
backed by the full faith and credit of the U.S. government.
6. A customer places a market order to buy stock. Which of the following
describes how the order will be executed?
A. At a guaranteed price specified by the customer
B. At the best available price in the marketplace
C. Only after approval from the issuer
D. At the previous day’s closing price
Answer: B
A market order instructs the broker-dealer to execute the trade
immediately at the best available price. The exact execution price is not
guaranteed.
7. Which of the following best describes preferred stock?
A. It represents a creditor relationship with a company
B. It generally provides fixed dividends and priority over common
stockholders
C. It always has greater voting rights than common stock
D. It has a guaranteed market value
Answer: B
Preferred stockholders generally receive fixed dividends and have priority
over common shareholders regarding dividends and liquidation proceeds,
although preferred stock does not represent debt.
, 8. A customer buys a call option. What does the customer have the right
to do?
A. Sell the underlying security at a specified price
B. Buy the underlying security at a specified price
C. Receive dividends from the underlying company
D. Force another investor to buy the option
Answer: B
A call option gives the purchaser the right, but not the obligation, to buy
the underlying security at the strike price before expiration.
9. Which of the following is a characteristic of a municipal bond?
A. Interest is generally exempt from federal income tax
B. It is issued only by corporations
C. It has unlimited maturity dates
D. It always provides higher yields than corporate bonds
Answer: A
Interest from municipal bonds is generally exempt from federal income
taxation and may also receive state and local tax advantages depending
on the investor’s location.
10. A customer opens a margin account and purchases securities.
What is the purpose of the margin requirement?
A. To eliminate all losses
B. To allow customers to borrow money using securities as collateral
C. To prevent customers from purchasing securities
D. To guarantee dividends
Answer: B
Practice Questions And Correct Answers
(Verified Answers) Plus Rationale 2026
Q&A| Instant Download Pdf
1.A registered representative is reviewing a new customer’s investment
objectives and financial information before recommending securities. Which
of the following is the primary purpose of gathering this information?
A. To determine the customer’s political affiliation
B. To satisfy suitability obligations and recommend appropriate investments
C. To eliminate all investment risk from the customer’s portfolio
D. To guarantee that the customer will achieve a specific return
Answer: B
The primary purpose of collecting customer financial information,
investment objectives, risk tolerance, and other relevant details is to
satisfy suitability requirements and ensure that recommendations are
appropriate for the customer’s circumstances.
2. A customer purchases 100 shares of common stock at $50 per share.
The company later declares a 2-for-1 stock split. What will be the
customer’s position after the split?
A. 50 shares valued at $100 per share
B. 100 shares valued at $50 per share
C. 200 shares valued at $25 per share
D. 200 shares valued at $50 per share
,Answer: C
A 2-for-1 stock split doubles the number of shares owned while reducing
the market price proportionally. The customer will own 200 shares, and the
approximate market value per share will be reduced to $25.
3. Which of the following securities is considered an equity security?
A. Corporate bond
B. Treasury bill
C. Common stock
D. Commercial paper
Answer: C
Common stock represents ownership in a corporation and is classified as
an equity security. Bonds, Treasury bills, and commercial paper represent
debt obligations.
4. A customer buys a corporate bond at a premium. Which of the
following statements is TRUE regarding the bond’s yield?
A. The yield to maturity is lower than the nominal yield
B. The yield to maturity is higher than the nominal yield
C. The current yield is always higher than the yield to maturity
D. The bond has no interest-rate risk
Answer: A
When a bond is purchased at a premium, the investor pays more than the
par value. Because the investor receives only the par value at maturity, the
yield to maturity is lower than the stated coupon rate.
5. Which of the following securities is issued directly by the U.S.
Treasury?
,A. Municipal revenue bonds
B. Treasury notes
C. Corporate debentures
D. Federal agency securities
Answer: B
Treasury notes are direct obligations issued by the U.S. Treasury and are
backed by the full faith and credit of the U.S. government.
6. A customer places a market order to buy stock. Which of the following
describes how the order will be executed?
A. At a guaranteed price specified by the customer
B. At the best available price in the marketplace
C. Only after approval from the issuer
D. At the previous day’s closing price
Answer: B
A market order instructs the broker-dealer to execute the trade
immediately at the best available price. The exact execution price is not
guaranteed.
7. Which of the following best describes preferred stock?
A. It represents a creditor relationship with a company
B. It generally provides fixed dividends and priority over common
stockholders
C. It always has greater voting rights than common stock
D. It has a guaranteed market value
Answer: B
Preferred stockholders generally receive fixed dividends and have priority
over common shareholders regarding dividends and liquidation proceeds,
although preferred stock does not represent debt.
, 8. A customer buys a call option. What does the customer have the right
to do?
A. Sell the underlying security at a specified price
B. Buy the underlying security at a specified price
C. Receive dividends from the underlying company
D. Force another investor to buy the option
Answer: B
A call option gives the purchaser the right, but not the obligation, to buy
the underlying security at the strike price before expiration.
9. Which of the following is a characteristic of a municipal bond?
A. Interest is generally exempt from federal income tax
B. It is issued only by corporations
C. It has unlimited maturity dates
D. It always provides higher yields than corporate bonds
Answer: A
Interest from municipal bonds is generally exempt from federal income
taxation and may also receive state and local tax advantages depending
on the investor’s location.
10. A customer opens a margin account and purchases securities.
What is the purpose of the margin requirement?
A. To eliminate all losses
B. To allow customers to borrow money using securities as collateral
C. To prevent customers from purchasing securities
D. To guarantee dividends
Answer: B
