FINRA SERIES 7 EXAM FULL UPDATED
ACTUAL Exam Questions and CORRECT
Answers
STRIPS may be attractive to investors for which of the following reasons?
A. They offer semi-annual interest payments
B. The securities are tax-free until they mature
C. They carry almost no reinvestment risk
D. They are offered at only a 20 year maturity which is a maturity that is not offered by
traditional Treasury securities - CORRECT ANSWER - C. They carry almost no
reinvestment risk
The Alternative Minimum Tax (AMT):
A. Adds back in certain "tax preference items" that are deducted for purposes of regular income
tax
B. Is designed to ensure that residents of states with high taxes do not pay more tax as a
percentage of income than residents of states with lower taxes
C. Affects both corporate and individual income tax
D. Requires affected taxpayers to calculate their income tax in two ways and pay the lower
amount - CORRECT ANSWER - A. Adds back in certain "tax preference items" that are
deducted for purposes of regular income tax
A wash sale occurs when:
A. Contemporaneous purchases are made for the same security
B. A sale of a security at a capital loss occurs fewer than 30 days prior to the purchase of the
same or a similar security
C. Any sale of a security occurs within 30 days of a purchase of the same or a similar security
,D. An investor reports capital gains and losses for securities issued by the same company in the
same tax year - CORRECT ANSWER - B. A sale of a security at a capital loss occurs
fewer than 30 days prior to the purchase of the same or a similar security
403(b) plans are available to the following groups of people:
I. Government employees
II. Employees of public educational institutions
III. Employees of nonprofit organizations
IV. Self-employed individuals
A. II and III
B. I and II
C. I and IV
D. III and IV - CORRECT ANSWER - A. II and III
The writer of a put has:
A. The right to sell
B. The obligation to buy
C. The obligation to sell
D. The right to buy - CORRECT ANSWER - B. The obligation to buy
Marilyn writes an ABC Aug20 put @ 4. What is the maximum amount she could lose on this
option?
A. $2,000
B. $1,600
C. Unlimited
D. $400 - CORRECT ANSWER - B. $1,600
,For a call option, the strike price is:
A. The market value of the underlying security at which the option must be exercised
B. The price at which the call holder can buy the underlying security from the call writer
C. The price at which the call writer must buy the underlying securities from the call holder
D. The breakeven point for the holder of the option - CORRECT ANSWER - B. The price
at which the call holder can buy the underlying security from the call writer
An interval fund is a type of investment company that is:
A. Redeemable at any time
B. Must be purchased in periodic intervals
C. Highly liquid
D. Legally classified as a closed-end fund - CORRECT ANSWER - D. Legally classified
as a closed-end fund
Interval funds are a type of investment company that offers higher yields but permits
shareholders to sell their shares only at specific time periods or "intervals." Legally classified as
a closed-end fund, interval funds share characteristics with mutual funds such as the fact that
there is no trading or secondary market for interval funds; instead shares must be purchased and
sold (redeemed) with the fund. An investment in an interval fund is much less liquid than shares
in other types of investment companies, such as mutual funds, closed-end funds, and ETFs.
Which of the following would you be the least interested in looking at to analyze a revenue
bond?
A. Flow of funds
B. Net overall debt per capita
C. Protective covenants
D. Feasibility study - CORRECT ANSWER - B. Net overall debt per capita
, A corporate bond has a coupon rate of 2.75%. What is the amount of a single semiannual interest
payment?
A. $13.75
B. $27.50
C. $275.00
D. $137.50 - CORRECT ANSWER - A. $13.75
Joanna is a registered representative who works from her vacation home occasionally. What is
the maximum number of business days she can work from her vacation home without it being
classified as a branch office?
A. Less than 50
B. Less than 20
C. Less than 30
D. Less than 60 - CORRECT ANSWER - C. Less than 30
A trade confirmation must be sent on or before the settlement date in all of these instances
except?
A. Customer purchases shares in a dividend reinvestment plan
B. Customer purchases a when-issued municipal
C. Customer is at office when trade takes place and sees it
D. Customer sells a mutual fund - CORRECT ANSWER - A. Customer purchases shares
in a dividend reinvestment plan
A customer must receive a trade confirmation for most transactions. For dividend reinvestment
plans, a quarterly account statement may replace an immediate trade confirmation with advance
ACTUAL Exam Questions and CORRECT
Answers
STRIPS may be attractive to investors for which of the following reasons?
A. They offer semi-annual interest payments
B. The securities are tax-free until they mature
C. They carry almost no reinvestment risk
D. They are offered at only a 20 year maturity which is a maturity that is not offered by
traditional Treasury securities - CORRECT ANSWER - C. They carry almost no
reinvestment risk
The Alternative Minimum Tax (AMT):
A. Adds back in certain "tax preference items" that are deducted for purposes of regular income
tax
B. Is designed to ensure that residents of states with high taxes do not pay more tax as a
percentage of income than residents of states with lower taxes
C. Affects both corporate and individual income tax
D. Requires affected taxpayers to calculate their income tax in two ways and pay the lower
amount - CORRECT ANSWER - A. Adds back in certain "tax preference items" that are
deducted for purposes of regular income tax
A wash sale occurs when:
A. Contemporaneous purchases are made for the same security
B. A sale of a security at a capital loss occurs fewer than 30 days prior to the purchase of the
same or a similar security
C. Any sale of a security occurs within 30 days of a purchase of the same or a similar security
,D. An investor reports capital gains and losses for securities issued by the same company in the
same tax year - CORRECT ANSWER - B. A sale of a security at a capital loss occurs
fewer than 30 days prior to the purchase of the same or a similar security
403(b) plans are available to the following groups of people:
I. Government employees
II. Employees of public educational institutions
III. Employees of nonprofit organizations
IV. Self-employed individuals
A. II and III
B. I and II
C. I and IV
D. III and IV - CORRECT ANSWER - A. II and III
The writer of a put has:
A. The right to sell
B. The obligation to buy
C. The obligation to sell
D. The right to buy - CORRECT ANSWER - B. The obligation to buy
Marilyn writes an ABC Aug20 put @ 4. What is the maximum amount she could lose on this
option?
A. $2,000
B. $1,600
C. Unlimited
D. $400 - CORRECT ANSWER - B. $1,600
,For a call option, the strike price is:
A. The market value of the underlying security at which the option must be exercised
B. The price at which the call holder can buy the underlying security from the call writer
C. The price at which the call writer must buy the underlying securities from the call holder
D. The breakeven point for the holder of the option - CORRECT ANSWER - B. The price
at which the call holder can buy the underlying security from the call writer
An interval fund is a type of investment company that is:
A. Redeemable at any time
B. Must be purchased in periodic intervals
C. Highly liquid
D. Legally classified as a closed-end fund - CORRECT ANSWER - D. Legally classified
as a closed-end fund
Interval funds are a type of investment company that offers higher yields but permits
shareholders to sell their shares only at specific time periods or "intervals." Legally classified as
a closed-end fund, interval funds share characteristics with mutual funds such as the fact that
there is no trading or secondary market for interval funds; instead shares must be purchased and
sold (redeemed) with the fund. An investment in an interval fund is much less liquid than shares
in other types of investment companies, such as mutual funds, closed-end funds, and ETFs.
Which of the following would you be the least interested in looking at to analyze a revenue
bond?
A. Flow of funds
B. Net overall debt per capita
C. Protective covenants
D. Feasibility study - CORRECT ANSWER - B. Net overall debt per capita
, A corporate bond has a coupon rate of 2.75%. What is the amount of a single semiannual interest
payment?
A. $13.75
B. $27.50
C. $275.00
D. $137.50 - CORRECT ANSWER - A. $13.75
Joanna is a registered representative who works from her vacation home occasionally. What is
the maximum number of business days she can work from her vacation home without it being
classified as a branch office?
A. Less than 50
B. Less than 20
C. Less than 30
D. Less than 60 - CORRECT ANSWER - C. Less than 30
A trade confirmation must be sent on or before the settlement date in all of these instances
except?
A. Customer purchases shares in a dividend reinvestment plan
B. Customer purchases a when-issued municipal
C. Customer is at office when trade takes place and sees it
D. Customer sells a mutual fund - CORRECT ANSWER - A. Customer purchases shares
in a dividend reinvestment plan
A customer must receive a trade confirmation for most transactions. For dividend reinvestment
plans, a quarterly account statement may replace an immediate trade confirmation with advance
