Series 7 Practice UPDATED ACTUAL Exam
Questions and CORRECT Answers
An investor tells his rr to purchase 50m EGG 11.7% debenture bonds. The order goes through
and the bonds are purchased for 113. A year before the bond matures, it is valued at 103. What is
this called? - CORRECT ANSWER - Amortization
In oil and gas limited partnerships is the risk greater in developmental or exploratory programs? -
CORRECT ANSWER - exploratory
What is the best way to measure the GNP? (gross national product) - CORRECT
ANSWER - constant dollars
What is the broker's role in the term "broker/dealer"? - CORRECT ANSWER - executing
trades for client accounts
What is the maximum federal tax rate for corporations on their dividends and other income? -
CORRECT ANSWER - 35%
What is the maximum federal tax rate for individuals on their dividends and other income? -
CORRECT ANSWER - 20%
What type of securities are exempt from registration under the Securities Act of 1933? -
CORRECT ANSWER - government agency issues
Suppose a put is assigned to the writer. Under federal guidlines, the premium received by the
writer of the put is treated in what manner? - CORRECT ANSWER - It is subtracted from
the cost basis when the writer is assigned
How much income must a REIT generate from the real estate properties? - CORRECT
ANSWER - 75%
,How much must a REIT pass-through of its profits to investors? - CORRECT ANSWER -
90%
A portfolio manager of a pension fund desires income but wants to protect the porfolio. What
option position would he make? - CORRECT ANSWER - Write calls against the market
index for income and protection.
A rr should request an extension of time for an invest to pay for stock that he has purchased by
the: - CORRECT ANSWER - Fifth business day
Self-employed people can contribute how much to thier Keogh? - CORRECT ANSWER -
The lesser of 100% of their income or $51,000
Your customer thinks that the stock is aobut to hit the resistance level and break through to the
next level. She would like to take advantage of the situation. Whay type of ORDER would you
suggest she place? - CORRECT ANSWER - Buy Stop order
When an investor buys a corporate bond, they have how many days to pay for it? - CORRECT
ANSWER - 3 business days
What are the rating agencies for ST, LT and Muni Debt Securities? - CORRECT
ANSWER - 1. S&P
2. Moody's
3. Fitch's
4. Best's
What does Best's Rating service rate? - CORRECT ANSWER - they are the one rating
company that rates insurance companies instead of bonds
How are CDs issued? - CORRECT ANSWER - in bearer form only
, Where are CDs shown and for how long? - CORRECT ANSWER - on Nasdaq with a
minimum duration of 14 days
How are CDs quoted? - CORRECT ANSWER - in terms of yield
Who does not issue eurodollar deposits? - CORRECT ANSWER - US government
What kind of taxes is the interest of corporate bonds subject to? - CORRECT ANSWER -
federal income tax and state income tax
If a zero-coupon bond is held for one year and sold above its original value, the investor will
have? - CORRECT ANSWER - ordinary income and capital gain
If a zero-coupon bondholder hold it until maturity they will have no? - CORRECT
ANSWER - no capital gain
What type of muni note does not get rated by MIG because they are backed by a government
bond? - CORRECT ANSWER - CLNs
What does a bond indenture NOT include? - CORRECT ANSWER - re-offering yields
What is required before a revenue bond can be issued? - CORRECT ANSWER -
feasibility study and engineering report
What must a muni bond being issued obtain from a bond counsel? - CORRECT
ANSWER - legal opinion
What 3 things does the bond counsel help do while making its opinion? - CORRECT
ANSWER - 1. research laws to check into tax-exempt status requirements
Questions and CORRECT Answers
An investor tells his rr to purchase 50m EGG 11.7% debenture bonds. The order goes through
and the bonds are purchased for 113. A year before the bond matures, it is valued at 103. What is
this called? - CORRECT ANSWER - Amortization
In oil and gas limited partnerships is the risk greater in developmental or exploratory programs? -
CORRECT ANSWER - exploratory
What is the best way to measure the GNP? (gross national product) - CORRECT
ANSWER - constant dollars
What is the broker's role in the term "broker/dealer"? - CORRECT ANSWER - executing
trades for client accounts
What is the maximum federal tax rate for corporations on their dividends and other income? -
CORRECT ANSWER - 35%
What is the maximum federal tax rate for individuals on their dividends and other income? -
CORRECT ANSWER - 20%
What type of securities are exempt from registration under the Securities Act of 1933? -
CORRECT ANSWER - government agency issues
Suppose a put is assigned to the writer. Under federal guidlines, the premium received by the
writer of the put is treated in what manner? - CORRECT ANSWER - It is subtracted from
the cost basis when the writer is assigned
How much income must a REIT generate from the real estate properties? - CORRECT
ANSWER - 75%
,How much must a REIT pass-through of its profits to investors? - CORRECT ANSWER -
90%
A portfolio manager of a pension fund desires income but wants to protect the porfolio. What
option position would he make? - CORRECT ANSWER - Write calls against the market
index for income and protection.
A rr should request an extension of time for an invest to pay for stock that he has purchased by
the: - CORRECT ANSWER - Fifth business day
Self-employed people can contribute how much to thier Keogh? - CORRECT ANSWER -
The lesser of 100% of their income or $51,000
Your customer thinks that the stock is aobut to hit the resistance level and break through to the
next level. She would like to take advantage of the situation. Whay type of ORDER would you
suggest she place? - CORRECT ANSWER - Buy Stop order
When an investor buys a corporate bond, they have how many days to pay for it? - CORRECT
ANSWER - 3 business days
What are the rating agencies for ST, LT and Muni Debt Securities? - CORRECT
ANSWER - 1. S&P
2. Moody's
3. Fitch's
4. Best's
What does Best's Rating service rate? - CORRECT ANSWER - they are the one rating
company that rates insurance companies instead of bonds
How are CDs issued? - CORRECT ANSWER - in bearer form only
, Where are CDs shown and for how long? - CORRECT ANSWER - on Nasdaq with a
minimum duration of 14 days
How are CDs quoted? - CORRECT ANSWER - in terms of yield
Who does not issue eurodollar deposits? - CORRECT ANSWER - US government
What kind of taxes is the interest of corporate bonds subject to? - CORRECT ANSWER -
federal income tax and state income tax
If a zero-coupon bond is held for one year and sold above its original value, the investor will
have? - CORRECT ANSWER - ordinary income and capital gain
If a zero-coupon bondholder hold it until maturity they will have no? - CORRECT
ANSWER - no capital gain
What type of muni note does not get rated by MIG because they are backed by a government
bond? - CORRECT ANSWER - CLNs
What does a bond indenture NOT include? - CORRECT ANSWER - re-offering yields
What is required before a revenue bond can be issued? - CORRECT ANSWER -
feasibility study and engineering report
What must a muni bond being issued obtain from a bond counsel? - CORRECT
ANSWER - legal opinion
What 3 things does the bond counsel help do while making its opinion? - CORRECT
ANSWER - 1. research laws to check into tax-exempt status requirements
