Series 7 Final Exam 1 UPDATED ACTUAL
Exam Questions and CORRECT Answers
Prospectus for a variable annuity contract - CORRECT ANSWER - 1. Must be filed with
the SEC
2. May be delivered electronically
3. Must provide full and fair disclosure
4. Must detail all sales charges and ongoing expenses of the contract
The subscription agreement for a limited partnership does NOT specify: - CORRECT
ANSWER - Priority provisions for liquidation.
General Partner signs the subscription agreement.
Sub agreement states suitability standards, who must sign, who check must be made payable to.
Priority provisions for liquidation are found in the Certificate of Limited Partnership.
Business Development Company - CORRECT ANSWER - raises capital by selling
securities to investors and is similar in structure to a closed-end investment company.
Use money it raises to invest mostly in private, small companies, financially troubled companies.
Help these companies by providing funding when they may not be able to raise capital for
themselves.
Trade on an exchange, liquid, not taxed if they distribute at least 90% of income to investors.
Current Income and Capital Appreciation, invest in both debt and equity.
Similar to buying a publicly traded investment in a private equity firm.
,An Operations Professional receives a written complaint from a customer which states that she
recently received two statements. The first statement shows a significant decline in the value of
her portfolio, while the second statement corrects errors to indicate an appreciation in the value
of her portfolio. The customer suspects that the second statement was artificially created. This
complaint should be: - CORRECT ANSWER - Written complaints alleging theft,
misappropriation of funds or securities, or forgery are among events that trigger a requirement to
submit a report to FINRA within 30 days of discovery.
This situation involves the potential forgery of customer statements and trigger the filing of a
report.
Lyle, Molly, and Seena have a joint account registered as Tenants in Common. In the event that
Seena dies, which of the following statements is TRUE? - CORRECT ANSWER - Seena's
estate has a claim on her portion of the account's assets.
BD freeze account, executor will provide documentation to establish authority to act on behalf of
the estate. Estate become third owner in the existing Tenants in Common arrangement.
A client with an options account takes the following position: Long GHI Nov 65 puts and Short
GHI Nov 55 puts. Which of the following statements is TRUE regarding this position? -
CORRECT ANSWER - Position will be profitable if the market price of the security
declines.
Debit Put Spread.
Cost to purchase a put with a higher strike price is more than the amount received for selling a
put with a lower strike price.
Investor will make money if stock declines since the long put will be exercised first (higher
strike)
Higher strike price will always be more valuable than a put with a lower strike price.
, Profitable between 65-55, below 55.
A broker who transacts an order for a customer must send a confirmation disclosing all of the
following information, EXCEPT: - CORRECT ANSWER - If it acted as principal and that
it prepares research on the security.
Must disclose if BD acted as an agent for customer and third party and Yield Computation.
When evaluating convertible bonds and the common stock to which it may be converted, which
of the following situations would produce a profitable arbitrage opportunity? - CORRECT
ANSWER - Common stock price at premium to parity value, bond trading at par.
Arbitrage occurs when price difference in comparable securities.
Selling above parity, value received from converting bond would be more than value of the bond.
Investor sell short the stock and buy the bond, convert it, use stock to cover the short position.
An accumulation unit in a variable annuity contract is: - CORRECT ANSWER -
Accounting measure that is used to determine the contract owner's interest in the separate
account.
The determination of when the NAV of a mutual fund is calculated, is stipulated by: - CORRECT
ANSWER - Prospectus.
NAV calculated whenever stipulated in the fund's prospectus. Most calculate daily, at end of
day's trading.
Which of the following factors is not taken into consideration when determining the markup on a
municipal securities transaction? - CORRECT ANSWER - Financial condition of the
customer.
Exam Questions and CORRECT Answers
Prospectus for a variable annuity contract - CORRECT ANSWER - 1. Must be filed with
the SEC
2. May be delivered electronically
3. Must provide full and fair disclosure
4. Must detail all sales charges and ongoing expenses of the contract
The subscription agreement for a limited partnership does NOT specify: - CORRECT
ANSWER - Priority provisions for liquidation.
General Partner signs the subscription agreement.
Sub agreement states suitability standards, who must sign, who check must be made payable to.
Priority provisions for liquidation are found in the Certificate of Limited Partnership.
Business Development Company - CORRECT ANSWER - raises capital by selling
securities to investors and is similar in structure to a closed-end investment company.
Use money it raises to invest mostly in private, small companies, financially troubled companies.
Help these companies by providing funding when they may not be able to raise capital for
themselves.
Trade on an exchange, liquid, not taxed if they distribute at least 90% of income to investors.
Current Income and Capital Appreciation, invest in both debt and equity.
Similar to buying a publicly traded investment in a private equity firm.
,An Operations Professional receives a written complaint from a customer which states that she
recently received two statements. The first statement shows a significant decline in the value of
her portfolio, while the second statement corrects errors to indicate an appreciation in the value
of her portfolio. The customer suspects that the second statement was artificially created. This
complaint should be: - CORRECT ANSWER - Written complaints alleging theft,
misappropriation of funds or securities, or forgery are among events that trigger a requirement to
submit a report to FINRA within 30 days of discovery.
This situation involves the potential forgery of customer statements and trigger the filing of a
report.
Lyle, Molly, and Seena have a joint account registered as Tenants in Common. In the event that
Seena dies, which of the following statements is TRUE? - CORRECT ANSWER - Seena's
estate has a claim on her portion of the account's assets.
BD freeze account, executor will provide documentation to establish authority to act on behalf of
the estate. Estate become third owner in the existing Tenants in Common arrangement.
A client with an options account takes the following position: Long GHI Nov 65 puts and Short
GHI Nov 55 puts. Which of the following statements is TRUE regarding this position? -
CORRECT ANSWER - Position will be profitable if the market price of the security
declines.
Debit Put Spread.
Cost to purchase a put with a higher strike price is more than the amount received for selling a
put with a lower strike price.
Investor will make money if stock declines since the long put will be exercised first (higher
strike)
Higher strike price will always be more valuable than a put with a lower strike price.
, Profitable between 65-55, below 55.
A broker who transacts an order for a customer must send a confirmation disclosing all of the
following information, EXCEPT: - CORRECT ANSWER - If it acted as principal and that
it prepares research on the security.
Must disclose if BD acted as an agent for customer and third party and Yield Computation.
When evaluating convertible bonds and the common stock to which it may be converted, which
of the following situations would produce a profitable arbitrage opportunity? - CORRECT
ANSWER - Common stock price at premium to parity value, bond trading at par.
Arbitrage occurs when price difference in comparable securities.
Selling above parity, value received from converting bond would be more than value of the bond.
Investor sell short the stock and buy the bond, convert it, use stock to cover the short position.
An accumulation unit in a variable annuity contract is: - CORRECT ANSWER -
Accounting measure that is used to determine the contract owner's interest in the separate
account.
The determination of when the NAV of a mutual fund is calculated, is stipulated by: - CORRECT
ANSWER - Prospectus.
NAV calculated whenever stipulated in the fund's prospectus. Most calculate daily, at end of
day's trading.
Which of the following factors is not taken into consideration when determining the markup on a
municipal securities transaction? - CORRECT ANSWER - Financial condition of the
customer.
