Series 7 Sample Questions & Answers
Investment analysis, portfolio theory, equity securities, and debt securities dominate the weighting, with smaller sections on customer communications and underwriting, opening and qualifying accounts, and handling execution, settlement, and error complaints.
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- Question 1
Municipal bond brokers generally conduct the following:
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Correct answer: A
A
- Question 2
All sales literature and advertising relating to investment company shares prepared by members of FINRA must be filed for review with which of the following?
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Correct answer: B
B--Explanation:
FINRA. Sales literature regarding investment company shares must be filed with FINRA within three days after the first use. - Question 3
Bubba Securities, Inc. offers 3,000,000 shares of Top Notch Manufacturing Corporation common stock at $27 per share. The next day an advertisement appears in the Wall Street Journal announcing the offering and listing the names of some of the underwriting firms.
This ad is commonly referred to as a:
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Correct answer: C
C--Explanation:
tombstone ad. Tombstone ads are used to announce new issues. They do not offer to buy or sell securities. They are informational only. - Question 4
Bubba plans to borrow some money and pledge securities as collateral.
Which of the following can he not use as collateral?
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Correct answer: C
C--Explanation:
Series EE bonds. Because Series EE bonds are not negotiable, they have no collateral value. They cannot be sold back to the US government. - Question 5
An issuer is most likely to request an investment letter from the purchaser in connection with which of the offerings?
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Correct answer: B
B--Explanation:
a private placement. Normally, private placements are conducted with an investment letter. - Question 6
Which of the following pairs of corporation characteristics are easiest for a partnership to avoid?
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Correct answer: C
C--Explanation:
continuity of life of the business and transferability of assets. Partnerships may seek to avoid continuance of the business life and asset transfer. The other choices are too important for partnerships to sacrifice. - Question 7
In a corporation’s financial statements, earned surplus is also recognized as:
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Correct answer: B
B--Explanation:
earnings retained after payment of dividends to shareholders. The other choices are clearly incorrect. Earned surplus is also referred to as retained earnings. - Question 8
A typical money market instrument carries which of the following?
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Correct answer: B
B--Explanation:
short-term maturity. A money market maintains liquidity and is defined as having maturity of less than one year. - Question 9
Mutual fund salespersons may not represent that a product is like of safer than:
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Correct answer: C
C--Explanation:
all of the above. A broker/dealer must demonstrate that what is said or printed about a product is not fraudulent. Representing a mutual fund as safer than any of the choices above is likely fraudulent. - Question 10
What is the possible reward for investing in raw land?
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Correct answer: A
A--Explanation:
potential capital appreciation. This is the only correct choice. Any income is not deferred, raw land cannot be depreciation for a large deduction, and there is substantial risk.
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