Series 7 - Equity & Debt Securities
UPDATED ACTUAL Exam Questions and
CORRECT Answers
Why would a company buy back stock? - CORRECT ANSWER - Increases E/S and use
for future acquisitions
What are debentures? - CORRECT ANSWER - A debt instrument NOT secured by
physical assets or collateral, backed only by the creditworthiness of the issuer
What do shareholders get to vote on? - CORRECT ANSWER - Issuance of new securities,
stock splits, and board members
Who issues ADRs? - CORRECT ANSWER - Large commercial U.S. banks (foreign
department within the bank does the issuance)
Transfer agent vs. registrar - CORRECT ANSWER - Transfer agent - distributes additional
shares in the event of forward stock splits or new certificates in reverse stock splits
Registrar - ensures corps. do not exceed their authorized shares
DERP
When is the ex-date? - CORRECT ANSWER - Declaration, ex, recorded, payment
Ex-date (set by exchanges) is TWO days before record date (set by BOD)
Why is preferred stock similar to bonds? - CORRECT ANSWER - Affected by IR
,Decrease in IR means increase in value, and vice versa
The overnight repo interest rate is usually lower than bank rates and just below or comparable to
the:
A)
prime rate.
B)
T-bill rate.
C)
discount rate.
D)
Fed funds rate. - CORRECT ANSWER - Fed funds rate
Which of the following statements are TRUE of Ginnie Maes?
I.They are quoted in 1/8ths.
,II.They are quoted in 1/32nds.
III.They are traded with an accrued interest computed on an actual day basis.
IV.They are traded with an accrued interest computed on a 30/360 basis.
A)
II and III.
B)
I and III.
C)
I and IV.
D)
II and IV. - CORRECT ANSWER - D) II and IV
A collateralized mortgage obligation (CMO) issued by a financial institution or a home builder
would be known as
, A)
a targeted amortization (TAC) CMO
B)
an agency issued CMO
C)
a planned amortization (PAC) CMO
D)
a private label issued CMO - CORRECT ANSWER - D) a private label issued CMO
Private label CMOs are issued by private entities such as financial institutions, investment banks
or even home builders
Two registered representatives (RRs) are discussing a collateralized debt obligation (CDO)
backed by cash flow from credit card payments. All of their statements during the discussion are
true EXCEPT
UPDATED ACTUAL Exam Questions and
CORRECT Answers
Why would a company buy back stock? - CORRECT ANSWER - Increases E/S and use
for future acquisitions
What are debentures? - CORRECT ANSWER - A debt instrument NOT secured by
physical assets or collateral, backed only by the creditworthiness of the issuer
What do shareholders get to vote on? - CORRECT ANSWER - Issuance of new securities,
stock splits, and board members
Who issues ADRs? - CORRECT ANSWER - Large commercial U.S. banks (foreign
department within the bank does the issuance)
Transfer agent vs. registrar - CORRECT ANSWER - Transfer agent - distributes additional
shares in the event of forward stock splits or new certificates in reverse stock splits
Registrar - ensures corps. do not exceed their authorized shares
DERP
When is the ex-date? - CORRECT ANSWER - Declaration, ex, recorded, payment
Ex-date (set by exchanges) is TWO days before record date (set by BOD)
Why is preferred stock similar to bonds? - CORRECT ANSWER - Affected by IR
,Decrease in IR means increase in value, and vice versa
The overnight repo interest rate is usually lower than bank rates and just below or comparable to
the:
A)
prime rate.
B)
T-bill rate.
C)
discount rate.
D)
Fed funds rate. - CORRECT ANSWER - Fed funds rate
Which of the following statements are TRUE of Ginnie Maes?
I.They are quoted in 1/8ths.
,II.They are quoted in 1/32nds.
III.They are traded with an accrued interest computed on an actual day basis.
IV.They are traded with an accrued interest computed on a 30/360 basis.
A)
II and III.
B)
I and III.
C)
I and IV.
D)
II and IV. - CORRECT ANSWER - D) II and IV
A collateralized mortgage obligation (CMO) issued by a financial institution or a home builder
would be known as
, A)
a targeted amortization (TAC) CMO
B)
an agency issued CMO
C)
a planned amortization (PAC) CMO
D)
a private label issued CMO - CORRECT ANSWER - D) a private label issued CMO
Private label CMOs are issued by private entities such as financial institutions, investment banks
or even home builders
Two registered representatives (RRs) are discussing a collateralized debt obligation (CDO)
backed by cash flow from credit card payments. All of their statements during the discussion are
true EXCEPT
