TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD
OWNER: EMILLYCHARLOTTE
COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED
FIRST PUBLISHED: SEPTEMBER 2024
FINRA Series 7 Stimulated Exam 3
Questions and Answers | 100% Pass
Which of the following option strategies, besides going long a call, can be used to
purchase stock below its current market value?
A) Short call
B) Short straddle
C) Long put
D) Short put - ✔️✔️Correct-A) Short call
B) Short straddle
C) Long put
D) Short put✅
If the put is exercised by the owner, the writer of the put will be obligated to purchase
the stock. The cost of the stock is reduced by the amount of premium taken in when the
put was written, allowing the investor to purchase the stock at a net cost lower than the
stock's current market value.
The sale of securities in a restricted margin account affects all of the following except
A) market value.
B) special memorandum account.
1/33
,TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD
OWNER: EMILLYCHARLOTTE
COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED
FIRST PUBLISHED: SEPTEMBER 2024
C) debit balance.
D) equity. - ✔️✔️Correct-A) market value.
B) special memorandum account.
C) debit balance.
D) equity.✅
A restricted margin account is one where the equity is below the 50% Regulation T
level. When a sale of securities owned in that margin account takes place, if the client
wishes to remove proceeds, the maximum permitted is 50% of the sale.
Your client's investment portfolio is 50% growth stocks, 10% foreign stocks, and 40%
blue-chip stocks. If the client is interested in further diversification, which mutual fund
would best meet that goal?
A) Aggressive growth fund
B) Emerging market fund
C) Bond fund
D) Global equity fund - ✔️✔️Correct-A) Aggressive growth fund
B) Emerging market fund
C) Bond fund✅
D) Global equity fund
2/33
,TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD
OWNER: EMILLYCHARLOTTE
COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED
FIRST PUBLISHED: SEPTEMBER 2024
All of the current holdings are equities. To further diversify the current portfolio, the bond
fund would be the best choice of those given to meet this objective.
If 1 OEX 375 call is purchased at 3.25 and exercised when the S&P 100 closes at 381,
the writer delivers which of the following to the holder?
A) $600 cash
B) $600 in stocks
C) $325 cash
D) $381 in securities - ✔️✔️Correct-A) $600 cash✅
B) $600 in stocks
C) $325 cash
D) $381 in securities
Index options settle in cash. Physical delivery does not occur. The call buyer receives
cash equal to the difference between the strike price and the index closing value on the
day the option is exercised. With the index closing price of 381 and the strike price at
375, that difference is 6 points. With a multiplier of $100, the settlement is $600.
If a customer buys 100 XYZ at 49 and writes 1 XYZ Nov 50 call, receiving $350 in
premiums, the breakeven point is
A) $52.50.
B) $53.50.
C) $45.50.
3/33
, TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD
OWNER: EMILLYCHARLOTTE
COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED
FIRST PUBLISHED: SEPTEMBER 2024
D) $46.50. - ✔️✔️Correct-A) $52.50.
B) $53.50.
C) $45.50.✅
D) $46.50.
This is a covered call, so the investor is protected against declining stock prices to the
extent of the premium received, and the breakeven is $45.50 $49 − $3.50).
A municipal issuer publishes an official notice of sale to indicate that the offering will be
made
A) for none of these.
B) on a competitive basis.
C) on a negotiated basis.
D) through a private placement. - ✔️✔️Correct-A) for none of these.
B) on a competitive basis.✅
C) on a negotiated basis.
D) through a private placement.
An official notice of sale is the issuer's method of inviting competitive bids on a new
issue. It sets forth all of the information about the issue that a dealer would need to
make a bid, including the size of the offering; the maturity dates; and the date, time, and
place of the sale.
4/33
OWNER: EMILLYCHARLOTTE
COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED
FIRST PUBLISHED: SEPTEMBER 2024
FINRA Series 7 Stimulated Exam 3
Questions and Answers | 100% Pass
Which of the following option strategies, besides going long a call, can be used to
purchase stock below its current market value?
A) Short call
B) Short straddle
C) Long put
D) Short put - ✔️✔️Correct-A) Short call
B) Short straddle
C) Long put
D) Short put✅
If the put is exercised by the owner, the writer of the put will be obligated to purchase
the stock. The cost of the stock is reduced by the amount of premium taken in when the
put was written, allowing the investor to purchase the stock at a net cost lower than the
stock's current market value.
The sale of securities in a restricted margin account affects all of the following except
A) market value.
B) special memorandum account.
1/33
,TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD
OWNER: EMILLYCHARLOTTE
COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED
FIRST PUBLISHED: SEPTEMBER 2024
C) debit balance.
D) equity. - ✔️✔️Correct-A) market value.
B) special memorandum account.
C) debit balance.
D) equity.✅
A restricted margin account is one where the equity is below the 50% Regulation T
level. When a sale of securities owned in that margin account takes place, if the client
wishes to remove proceeds, the maximum permitted is 50% of the sale.
Your client's investment portfolio is 50% growth stocks, 10% foreign stocks, and 40%
blue-chip stocks. If the client is interested in further diversification, which mutual fund
would best meet that goal?
A) Aggressive growth fund
B) Emerging market fund
C) Bond fund
D) Global equity fund - ✔️✔️Correct-A) Aggressive growth fund
B) Emerging market fund
C) Bond fund✅
D) Global equity fund
2/33
,TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD
OWNER: EMILLYCHARLOTTE
COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED
FIRST PUBLISHED: SEPTEMBER 2024
All of the current holdings are equities. To further diversify the current portfolio, the bond
fund would be the best choice of those given to meet this objective.
If 1 OEX 375 call is purchased at 3.25 and exercised when the S&P 100 closes at 381,
the writer delivers which of the following to the holder?
A) $600 cash
B) $600 in stocks
C) $325 cash
D) $381 in securities - ✔️✔️Correct-A) $600 cash✅
B) $600 in stocks
C) $325 cash
D) $381 in securities
Index options settle in cash. Physical delivery does not occur. The call buyer receives
cash equal to the difference between the strike price and the index closing value on the
day the option is exercised. With the index closing price of 381 and the strike price at
375, that difference is 6 points. With a multiplier of $100, the settlement is $600.
If a customer buys 100 XYZ at 49 and writes 1 XYZ Nov 50 call, receiving $350 in
premiums, the breakeven point is
A) $52.50.
B) $53.50.
C) $45.50.
3/33
, TITLE: EMILLYCHARLOTTE 2024/2025 ACADEMIC PERIOD
OWNER: EMILLYCHARLOTTE
COPYRIGHT STATEMENT: ©2024 EMILLYCHARLOTTE. ALL RIGHTS RESERVED
FIRST PUBLISHED: SEPTEMBER 2024
D) $46.50. - ✔️✔️Correct-A) $52.50.
B) $53.50.
C) $45.50.✅
D) $46.50.
This is a covered call, so the investor is protected against declining stock prices to the
extent of the premium received, and the breakeven is $45.50 $49 − $3.50).
A municipal issuer publishes an official notice of sale to indicate that the offering will be
made
A) for none of these.
B) on a competitive basis.
C) on a negotiated basis.
D) through a private placement. - ✔️✔️Correct-A) for none of these.
B) on a competitive basis.✅
C) on a negotiated basis.
D) through a private placement.
An official notice of sale is the issuer's method of inviting competitive bids on a new
issue. It sets forth all of the information about the issue that a dealer would need to
make a bid, including the size of the offering; the maturity dates; and the date, time, and
place of the sale.
4/33
