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FINRA Series 7 practice questions

207 free questions with answers and explanations.

Practice test
  1. 51.A 6% corporate bond with 10 years to maturity is callable in 5 years at 103. The bond is currently priced at $1,050. Using the approximate yield to call formula, what is the bond's approximate yield to call?Investment Information and Suitable Recommendations
  2. 52.A customer sends a text message to a registered representative stating, 'I'm upset—you put me in a fund without asking me first, please fix this.' The representative resolves the matter informally with a branch supervisor, and the customer seems satisfied. Under FINRA rules, how must this text message be treated?Processes and Confirms Transactions
  3. 53.A margin customer signs an agreement permitting the broker-dealer to lend the customer's margin securities to other customers or broker-dealers, such as for short sale delivery. This authorization is contained in which document?Opens Accounts and Evaluates Customer Profile
  4. 54.A grandparent establishes a UGMA custodial account for a 10-year-old grandchild and names herself as custodian. Which statement about this account is TRUE?Investment Information and Suitable Recommendations
  5. 55.XYZ Corporation has $6 cumulative preferred stock outstanding. The company suspended all preferred dividends for the past two years due to poor earnings. Before XYZ can resume paying dividends to common stockholders, what must occur?Investment Information and Suitable Recommendations
  6. 56.A firm's advertisement features a testimonial from a well-known client stating the firm's advisory services "doubled my portfolio in one year." The client was paid $500 for providing this testimonial. Under FINRA Rule 2210, which disclosure is required in this advertisement?Seeks Business for the Broker-Dealer
  7. 57.An investor purchases 100 shares of XYZ stock at $60 per share and simultaneously buys 1 XYZ 60 put for $3 to protect the position. What is the investor's breakeven point on this protective put strategy?Investment Information and Suitable Recommendations
  8. 58.A high-income client subject to the alternative minimum tax (AMT) is considering purchasing a municipal revenue bond issued to finance a privately operated toll road (a private activity bond). What is the most important suitability concern the representative should raise?Investment Information and Suitable Recommendations
  9. 59.A registered representative's customer has an average monthly account equity of $40,000. Over the past 12 months, the representative made total stock purchases of $280,000 in the account. Using the standard annualized turnover rate formula (total purchases ÷ average equity), what is the account's turnover rate, and what does it suggest?Opens Accounts and Evaluates Customer Profile
  10. 60.A customer sells short 100 shares of XYZ stock at $40 per share in a margin account. Under Regulation T, what is the customer's initial margin deposit requirement?Investment Information and Suitable Recommendations
  11. 61.A customer enters an order to sell 10,000 shares of a thinly traded stock and tells the representative that whatever portion cannot be executed immediately should be canceled, but partial fills are acceptable. Which order type should be entered?Processes and Confirms Transactions
  12. 62.A representative sends the same personalized letter promoting a proprietary mutual fund to 30 different prospective retail clients over a two-week period, then sends 10 more copies to additional prospects the following week, bringing the 30-day total to 40 recipients. How should this series of letters be classified and treated under FINRA Rule 2210?Seeks Business for the Broker-Dealer
  13. 63.A customer purchases a corporate bond with a 5% coupon rate at a price of 90. What is the bond's current yield?Investment Information and Suitable Recommendations
  14. 64.A customer instructs the representative that a sell order for 2,000 shares must be executed in its entirety immediately, or the entire order should be cancelled at once. Which order type matches this instruction?Processes and Confirms Transactions
  15. 65.A customer's cash account holds a long-term mutual fund position purchased two years ago. No purchases, sales, or other transactions have occurred in the account during the past 12 months. How frequently must the broker-dealer send account statements to this customer?Processes and Confirms Transactions
  16. 66.A corporation wishes to open a brokerage account to trade securities. Before the account can be opened, the broker-dealer typically requires a corporate resolution. This document primarily serves to:Opens Accounts and Evaluates Customer Profile
  17. 67.A REIT must distribute what minimum percentage of its taxable income to shareholders each year to maintain its favorable tax status?Investment Information and Suitable Recommendations
  18. 68.A customer sells short 200 shares of XYZ stock at $30 per share in a margin account. Under Reg T, how much must the customer deposit as initial margin?Processes and Confirms Transactions
  19. 69.A client in the 32% federal tax bracket asks her registered representative why municipal bond interest is attractive compared with a corporate bond paying a similar coupon. Which statement best explains the primary tax advantage?Investment Information and Suitable Recommendations
  20. 70.A broker-dealer's operations department receives a trade confirmation from a contra-broker showing a quantity that does not match the firm's own trade blotter. What should the firm send to the contra-broker to formally dispute the trade details?Processes and Confirms Transactions
  21. 71.A client with a high salary from employment and no other passive income sources is interested in a real estate limited partnership primarily for the tax losses it generates. Which statement most accurately describes the suitability concern?Investment Information and Suitable Recommendations
  22. 72.A retired couple purchasing an immediate variable annuity payout wants the payments to continue as long as either spouse is alive, with a guarantee that payments will be made for at least 15 years even if both die early. Which payout option are they selecting?Investment Information and Suitable Recommendations
  23. 73.A customer tells his registered representative, 'Buy me some blue-chip stock whenever you think the price is right, but don't spend more than $10,000.' The representative later executes a purchase without further contact from the customer. For this order to be handled properly as a discretionary order, the firm must have on file:Opens Accounts and Evaluates Customer Profile
  24. 74.A new customer opens a margin account and wants to purchase 100 shares of XYZ stock at $15 per share. Under Regulation T and FINRA margin rules, what is the minimum amount the customer must deposit for this transaction?Opens Accounts and Evaluates Customer Profile
  25. 75.A customer wants to purchase 200 shares of ABC stock at $60 per share in a margin account. Under Regulation T, what is the minimum initial margin deposit required?Investment Information and Suitable Recommendations
  26. 76.A registered representative executes a customer's order acting solely as agent and charges the customer a commission. What must the trade confirmation disclose regarding this transaction?Processes and Confirms Transactions
  27. 77.A customer's long margin account shows a market value of $8,000 and a debit balance of $6,500. FINRA maintenance margin requires 25% of market value. What action, if any, must the broker-dealer take?Processes and Confirms Transactions
  28. 78.A broker-dealer's institutional sales desk sends a market outlook piece exclusively to registered investment advisers and banks with over $50 million in assets. Under FINRA rules, this institutional communication:Seeks Business for the Broker-Dealer
  29. 79.A client signs a letter of intent (LOI) to invest $50,000 in Class A mutual fund shares to qualify for a reduced sales charge breakpoint but initially invests only $48,000. Under FINRA rules, within what time frame must the client invest the remaining $2,000 to receive the breakpoint discount?Investment Information and Suitable Recommendations
  30. 80.A newly registered FINRA member firm, less than one year old, wants to use a new print advertisement targeting retail investors. Under FINRA Rule 2210 filing requirements, this firm must generally:Seeks Business for the Broker-Dealer
  31. 81.A high-net-worth customer requests that her account be opened as a 'numbered account' rather than in her own name, primarily for privacy purposes. What must the broker-dealer obtain before opening this account?Opens Accounts and Evaluates Customer Profile
  32. 82.A client sells 100 shares of ABC stock at a $2,000 loss on November 15. On December 5, the same client repurchases 100 shares of ABC stock in the same account. Under IRS wash sale rules, what is the tax treatment of this transaction?Investment Information and Suitable Recommendations
  33. 83.A customer instructs the representative to execute a special 'cash' trade (not regular way) for 500 shares of ABC stock on Monday. When must this trade settle?Processes and Confirms Transactions
  34. 84.A customer's account profile shows a total net worth of $600,000, consisting of $250,000 in home equity, $100,000 in a 401(k) retirement account, and $250,000 in a taxable brokerage account holding stocks and cash. The customer has no outstanding liabilities. For suitability purposes when evaluating an illiquid investment recommendation, what is the customer's approximate liquid net worth?Opens Accounts and Evaluates Customer Profile
  35. 85.A customer enters a GTC buy limit order at $48 for a stock currently trading at $50 and does not mark the order 'do not reduce.' The stock then goes ex-dividend for a $0.50 cash dividend. What happens to the customer's order?Processes and Confirms Transactions
  36. 86.A customer purchases stock in a margin account on Monday (trade date); the trade settles T+1 on Tuesday. The customer cannot pay in full, and the firm requests and receives a Regulation T extension of two additional business days. By which day must the customer make full payment?Processes and Confirms Transactions
  37. 87.A customer's margin account currently has $6,000 of SMA (Special Memorandum Account) and no margin call outstanding. If the customer wishes to purchase additional stock using only the SMA as buying power, what is the maximum dollar value of stock the customer can purchase without depositing additional cash?Processes and Confirms Transactions
  38. 88.XYZ stock is trading at $53 per share cum rights. The subscription price for a rights offering is $48, and 4 rights plus the subscription price are required to purchase one new share. What is the theoretical value of one right?Investment Information and Suitable Recommendations
  39. 89.A shareholder receives a subscription rights offering from a company in which she owns common stock. What is the primary purpose of preemptive rights granted to existing shareholders?Investment Information and Suitable Recommendations
  40. 90.Mr. and Mrs. Chen hold a brokerage account registered as joint tenants with rights of survivorship (JTWROS). Mr. Chen passes away. What happens to his interest in the account?Opens Accounts and Evaluates Customer Profile
  41. 91.A customer owns 300 shares of XYZ stock long in a cash account and instructs the representative to sell short 300 shares of the same stock in a margin account ('short against the box') to lock in a gain before year-end. XYZ is trading at $40 per share. What is the Reg T margin requirement for this short sale?Processes and Confirms Transactions
  42. 92.A customer purchases 1,000 shares of ABC stock at $40 per share in a margin account, depositing the required Reg T margin. The stock later rises to $50 per share with no change in the debit balance. How much SMA is generated by this price appreciation?Processes and Confirms Transactions
  43. 93.A customer places an order to buy 1,000 shares of XYZ stock and tells the registered representative, 'I want this filled today — use your judgment on the exact timing and price.' The customer does not sign any discretionary trading authorization. What type of order has the customer given?Processes and Confirms Transactions
  44. 94.A representative wants to cold call a former client whose last securities transaction with the firm occurred 20 months ago. Under the established business relationship exemption to the Do-Not-Call rules, this call:Seeks Business for the Broker-Dealer
  45. 95.A married couple opens a new brokerage account and instructs their registered representative to register the account as 'Tenants in Common.' If one spouse dies, what happens to that spouse's share of the account?Opens Accounts and Evaluates Customer Profile
  46. 96.Under the USA PATRIOT Act's Customer Identification Program (CIP) requirements, a broker-dealer must collect certain minimum data elements before opening an account for a new individual customer. Which of the following is NOT one of the required CIP data elements?Opens Accounts and Evaluates Customer Profile
  47. 97.A municipality issues bonds to build a new public school. The bonds will be repaid through the municipality's general taxing authority, including property taxes. This type of municipal bond is best classified as a:Investment Information and Suitable Recommendations
  48. 98.A client asks about the taxation of interest received from GNMA (Government National Mortgage Association) pass-through certificates. The representative should explain that this interest is:Investment Information and Suitable Recommendations
  49. 99.A 40-year-old client purchases a variable life insurance policy. Which of the following statements about the policy's death benefit and cash value is TRUE?Investment Information and Suitable Recommendations
  50. 100.A client purchased 100 shares of ABC stock on March 1, Year 1. To qualify for long-term capital gains tax treatment, the earliest date the client could sell the shares would be:Investment Information and Suitable Recommendations