Series 7 Final Exam 1 2025
Questions and Answers
To compute equity in a margin account with both short and long positions, the formula
is:
A The long market value plus the credit balance minus the short market value minus
the debit balance
B The long market value minus the credit balance minus the short market value minus
the debit balance
C The long market value plus the debit balance minus the short market value minus the
credit balance
D The long market value plus the credit balance plus the debit balance minus the short
market value - ANSWER✔✔-A The long market value plus the credit balance minus the
short market value minus the debit balance
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,A company, which has investors with registration rights, has recently conducted an
initial public offering. Typically, how long must these investors wait to sell their shares
after the IPO?
A One year
B 180 days
C Two years
D Three years - ANSWER✔✔-B 180 days
A corporation has a significant amount of cash on hand and is seeking your advice
regarding income-producing equity investments. Which of the following investments
pay a dividend, but is NOT eligible for the corporate dividend exclusion?
A Common stock
B Preferred stock
C Equity mutual funds
D Real estate investment trusts (REITs) - ANSWER✔✔-D Real estate investment trusts
(REITs)
An investor wants to buy a foreign stock that's trading at $540 per share and paying a
$12.50 annual dividend. The investor's registered representative instead suggests
purchasing an ADR which represents 10% of the value of the foreign stock. If the
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 2
,customer commits to buying 500 shares, what's his cost basis and his first semiannual
dividend from the ADR?
A Cost basis of $270,000 and $6,250 in semiannual dividends
B Cost basis of $27,000 and $625 in semiannual dividends
C Cost basis of $270,000 and $3,125 in semiannual dividends
D Cost basis of $27,000 and $312.50 in semiannual dividends - ANSWER✔✔-D Cost
basis of $27,000 and $312.50 in semiannual dividends
(The ADR per share value is $54 ($540 x 10%) and the annual dividend is $1.25 ($12.50 x
10%). Since the customer gets semiannual dividends, the $625 will be split in half)
In a Delivery Versus Payment (DVP) and Receive Versus Payment (RVP) account,
which of the following is required?
A Settlement to occur on a regular-way basis
B Approval by FINRA to open the account
C A form identifying the third-party agent for the client
D Physical delivery of securities - ANSWER✔✔-C A form identifying the third-party
agent for the client
Portfolio margin permits an investor to:
A Avoid margin deficiencies
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, B Assume greater leverage
C Trade directly with market makers
D Trade without depositing funds until the securities decline in value - ANSWER✔✔-B
Assume greater leverage
Two similar companies issue bonds at the same time. One company issues convertible
bonds, while the other issues non-convertible bonds. Which of the following statements
is TRUE?
A The convertible bonds will offer a higher coupon rate.
B The non-convertible bonds will offer a lower coupon rate.
C The convertible bonds will have a higher current yield.
D The non-convertible bonds will probably have a higher yield to maturity. -
ANSWER✔✔-D The non-convertible bonds will probably have a higher yield to
maturity.
(Since convertible bonds pay less interest, their current yield and YTM will also be
lower)
A registered representative (RR) sent promotional material to 20 prospective retail
clients using a social media site. Then, 20 days later, the RR sends the same material to
30 institutional investors that are not existing clients of the broker-dealer. Under FINRA
rules, the promotional material is:
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Questions and Answers
To compute equity in a margin account with both short and long positions, the formula
is:
A The long market value plus the credit balance minus the short market value minus
the debit balance
B The long market value minus the credit balance minus the short market value minus
the debit balance
C The long market value plus the debit balance minus the short market value minus the
credit balance
D The long market value plus the credit balance plus the debit balance minus the short
market value - ANSWER✔✔-A The long market value plus the credit balance minus the
short market value minus the debit balance
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 1
,A company, which has investors with registration rights, has recently conducted an
initial public offering. Typically, how long must these investors wait to sell their shares
after the IPO?
A One year
B 180 days
C Two years
D Three years - ANSWER✔✔-B 180 days
A corporation has a significant amount of cash on hand and is seeking your advice
regarding income-producing equity investments. Which of the following investments
pay a dividend, but is NOT eligible for the corporate dividend exclusion?
A Common stock
B Preferred stock
C Equity mutual funds
D Real estate investment trusts (REITs) - ANSWER✔✔-D Real estate investment trusts
(REITs)
An investor wants to buy a foreign stock that's trading at $540 per share and paying a
$12.50 annual dividend. The investor's registered representative instead suggests
purchasing an ADR which represents 10% of the value of the foreign stock. If the
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 2
,customer commits to buying 500 shares, what's his cost basis and his first semiannual
dividend from the ADR?
A Cost basis of $270,000 and $6,250 in semiannual dividends
B Cost basis of $27,000 and $625 in semiannual dividends
C Cost basis of $270,000 and $3,125 in semiannual dividends
D Cost basis of $27,000 and $312.50 in semiannual dividends - ANSWER✔✔-D Cost
basis of $27,000 and $312.50 in semiannual dividends
(The ADR per share value is $54 ($540 x 10%) and the annual dividend is $1.25 ($12.50 x
10%). Since the customer gets semiannual dividends, the $625 will be split in half)
In a Delivery Versus Payment (DVP) and Receive Versus Payment (RVP) account,
which of the following is required?
A Settlement to occur on a regular-way basis
B Approval by FINRA to open the account
C A form identifying the third-party agent for the client
D Physical delivery of securities - ANSWER✔✔-C A form identifying the third-party
agent for the client
Portfolio margin permits an investor to:
A Avoid margin deficiencies
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 3
, B Assume greater leverage
C Trade directly with market makers
D Trade without depositing funds until the securities decline in value - ANSWER✔✔-B
Assume greater leverage
Two similar companies issue bonds at the same time. One company issues convertible
bonds, while the other issues non-convertible bonds. Which of the following statements
is TRUE?
A The convertible bonds will offer a higher coupon rate.
B The non-convertible bonds will offer a lower coupon rate.
C The convertible bonds will have a higher current yield.
D The non-convertible bonds will probably have a higher yield to maturity. -
ANSWER✔✔-D The non-convertible bonds will probably have a higher yield to
maturity.
(Since convertible bonds pay less interest, their current yield and YTM will also be
lower)
A registered representative (RR) sent promotional material to 20 prospective retail
clients using a social media site. Then, 20 days later, the RR sends the same material to
30 institutional investors that are not existing clients of the broker-dealer. Under FINRA
rules, the promotional material is:
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