SERIES 7 PRACTICE QUESTIONS WITH
CORRECT ANSWERS
An qinvestor qtells qhis qrr qto qpurchase q50m qEGG q11.7% qdebenture qbonds. qThe
qorder qgoes qthrough qand qthe qbonds qare qpurchased qfor q113. qA qyear qbefore qthe
qbond qmatures, qit qis qvalued qat q103. qWhat qis qthis qcalled? q- q✔✔Amortization
In qoil qand qgas qlimited qpartnerships qis qthe qrisk qgreater qin qdevelopmental qor
qexploratory qprograms? q- q✔✔exploratory
What qis qthe qbest qway qto qmeasure qthe qGNP? q(gross qnational qproduct) q-
q✔✔constant qdollars
What qis qthe qbroker's qrole qin qthe qterm q"broker/dealer"? q- q✔✔executing qtrades qfor
qclient qaccounts
What qis qthe qmaximum qfederal qtax qrate qfor qcorporations qon qtheir qdividends qand
qother qincome? q- q✔✔35%
What qis qthe qmaximum qfederal qtax qrate qfor qindividuals qon qtheir qdividends qand
qother qincome? q- q✔✔20%
What qtype qof qsecurities qare qexempt qfrom qregistration qunder qthe qSecurities qAct qof
q1933? q- q✔✔government qagency qissues
Suppose qa qput qis qassigned qto qthe qwriter. qUnder qfederal qguidlines, qthe qpremium
qreceived qby qthe qwriter qof qthe qput qis qtreated qin qwhat qmanner? q- q✔✔It qis
qsubtracted qfrom qthe qcost qbasis qwhen qthe qwriter qis qassigned
How qmuch qincome qmust qa qREIT qgenerate qfrom qthe qreal qestate qproperties? q-
q✔✔75%
How qmuch qmust qa qREIT qpass-through qof qits qprofits qto qinvestors? q- q✔✔90%
A qportfolio qmanager qof qa qpension qfund qdesires qincome qbut qwants qto qprotect qthe
qporfolio. qWhat qoption qposition qwould qhe qmake? q- q✔✔Write qcalls qagainst qthe
qmarket qindex qfor qincome qand qprotection.
, A qrr qshould qrequest qan qextension qof qtime qfor qan qinvest qto qpay qfor qstock qthat qhe
qhas qpurchased qby qthe: q- q✔✔Fifth qbusiness qday
Self-employed qpeople qcan qcontribute qhow qmuch qto qthier qKeogh? q- q✔✔The qlesser
qof q100% qof qtheir qincome qor q$51,000
Your qcustomer qthinks qthat qthe qstock qis qaobut qto qhit qthe qresistance qlevel qand
qbreak qthrough qto qthe qnext qlevel. qShe qwould qlike qto qtake qadvantage qof qthe
qsituation. qWhay qtype qof qORDER qwould qyou qsuggest qshe qplace? q- q✔✔Buy qStop
qorder
When qan qinvestor qbuys qa qcorporate qbond, qthey qhave qhow qmany qdays qto qpay qfor
qit? q- q✔✔3 qbusiness qdays
What qare qthe qrating qagencies qfor qST, qLT qand qMuni qDebt qSecurities? q- q✔✔1.
qS&P
2. qMoody's
3. qFitch's
4. qBest's
What qdoes qBest's qRating qservice qrate? q- q✔✔they qare qthe qone qrating qcompany
qthat qrates qinsurance qcompanies qinstead qof qbonds
How qare qCDs qissued? q- q✔✔in qbearer qform qonly
Where qare qCDs qshown qand qfor qhow qlong? q- q✔✔on qNasdaq qwith qa qminimum
qduration qof q14 qdays
How qare qCDs qquoted? q- q✔✔in qterms qof qyield
Who qdoes qnot qissue qeurodollar qdeposits? q- q✔✔US qgovernment
What qkind qof qtaxes qis qthe qinterest qof qcorporate qbonds qsubject qto? q- q✔✔federal
qincome qtax qand qstate qincome qtax
If qa qzero-coupon qbond qis qheld qfor qone qyear qand qsold qabove qits qoriginal qvalue,
qthe qinvestor qwill qhave? q- q✔✔ordinary qincome qand qcapital qgain
If qa qzero-coupon qbondholder qhold qit quntil qmaturity qthey qwill qhave qno? q- q✔✔no
qcapital qgain
What qtype qof qmuni qnote qdoes qnot qget qrated qby qMIG qbecause qthey qare qbacked
qby qa qgovernment qbond? q- q✔✔CLNs
What qdoes qa qbond qindenture qNOT qinclude? q- q✔✔re-offering qyields
CORRECT ANSWERS
An qinvestor qtells qhis qrr qto qpurchase q50m qEGG q11.7% qdebenture qbonds. qThe
qorder qgoes qthrough qand qthe qbonds qare qpurchased qfor q113. qA qyear qbefore qthe
qbond qmatures, qit qis qvalued qat q103. qWhat qis qthis qcalled? q- q✔✔Amortization
In qoil qand qgas qlimited qpartnerships qis qthe qrisk qgreater qin qdevelopmental qor
qexploratory qprograms? q- q✔✔exploratory
What qis qthe qbest qway qto qmeasure qthe qGNP? q(gross qnational qproduct) q-
q✔✔constant qdollars
What qis qthe qbroker's qrole qin qthe qterm q"broker/dealer"? q- q✔✔executing qtrades qfor
qclient qaccounts
What qis qthe qmaximum qfederal qtax qrate qfor qcorporations qon qtheir qdividends qand
qother qincome? q- q✔✔35%
What qis qthe qmaximum qfederal qtax qrate qfor qindividuals qon qtheir qdividends qand
qother qincome? q- q✔✔20%
What qtype qof qsecurities qare qexempt qfrom qregistration qunder qthe qSecurities qAct qof
q1933? q- q✔✔government qagency qissues
Suppose qa qput qis qassigned qto qthe qwriter. qUnder qfederal qguidlines, qthe qpremium
qreceived qby qthe qwriter qof qthe qput qis qtreated qin qwhat qmanner? q- q✔✔It qis
qsubtracted qfrom qthe qcost qbasis qwhen qthe qwriter qis qassigned
How qmuch qincome qmust qa qREIT qgenerate qfrom qthe qreal qestate qproperties? q-
q✔✔75%
How qmuch qmust qa qREIT qpass-through qof qits qprofits qto qinvestors? q- q✔✔90%
A qportfolio qmanager qof qa qpension qfund qdesires qincome qbut qwants qto qprotect qthe
qporfolio. qWhat qoption qposition qwould qhe qmake? q- q✔✔Write qcalls qagainst qthe
qmarket qindex qfor qincome qand qprotection.
, A qrr qshould qrequest qan qextension qof qtime qfor qan qinvest qto qpay qfor qstock qthat qhe
qhas qpurchased qby qthe: q- q✔✔Fifth qbusiness qday
Self-employed qpeople qcan qcontribute qhow qmuch qto qthier qKeogh? q- q✔✔The qlesser
qof q100% qof qtheir qincome qor q$51,000
Your qcustomer qthinks qthat qthe qstock qis qaobut qto qhit qthe qresistance qlevel qand
qbreak qthrough qto qthe qnext qlevel. qShe qwould qlike qto qtake qadvantage qof qthe
qsituation. qWhay qtype qof qORDER qwould qyou qsuggest qshe qplace? q- q✔✔Buy qStop
qorder
When qan qinvestor qbuys qa qcorporate qbond, qthey qhave qhow qmany qdays qto qpay qfor
qit? q- q✔✔3 qbusiness qdays
What qare qthe qrating qagencies qfor qST, qLT qand qMuni qDebt qSecurities? q- q✔✔1.
qS&P
2. qMoody's
3. qFitch's
4. qBest's
What qdoes qBest's qRating qservice qrate? q- q✔✔they qare qthe qone qrating qcompany
qthat qrates qinsurance qcompanies qinstead qof qbonds
How qare qCDs qissued? q- q✔✔in qbearer qform qonly
Where qare qCDs qshown qand qfor qhow qlong? q- q✔✔on qNasdaq qwith qa qminimum
qduration qof q14 qdays
How qare qCDs qquoted? q- q✔✔in qterms qof qyield
Who qdoes qnot qissue qeurodollar qdeposits? q- q✔✔US qgovernment
What qkind qof qtaxes qis qthe qinterest qof qcorporate qbonds qsubject qto? q- q✔✔federal
qincome qtax qand qstate qincome qtax
If qa qzero-coupon qbond qis qheld qfor qone qyear qand qsold qabove qits qoriginal qvalue,
qthe qinvestor qwill qhave? q- q✔✔ordinary qincome qand qcapital qgain
If qa qzero-coupon qbondholder qhold qit quntil qmaturity qthey qwill qhave qno? q- q✔✔no
qcapital qgain
What qtype qof qmuni qnote qdoes qnot qget qrated qby qMIG qbecause qthey qare qbacked
qby qa qgovernment qbond? q- q✔✔CLNs
What qdoes qa qbond qindenture qNOT qinclude? q- q✔✔re-offering qyields
