2022 The Most Effective Series7 with 400 Questions Answers
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NEW QUESTION 90
Bubba buys a municipal bond at a discount and holds it to maturity. Which of the following is true?
- A. the capital gain is tax exempt, but the interest is taxable as ordinary income
- B. interest is tax exempt, but the capital gain is taxable
- C. the capital gain is tax exempt
- D. interest is taxable as ordinary income
Answer: B
Explanation:
interest is tax exempt, but the capital gain is taxable. This happens because Bubba
purchased the bond in the secondary market with a different price than the original issue face amount.
NEW QUESTION 91
Which of the following sets of prices is that of a closed-end investment company?
- A. $10.10 $11.00
- B. $20.15 $21.85
- C. $28.14 $27.75
- D. $7.50 $8.10
Answer: C
Explanation:
NAV=$28.14 and Asked Price=$27.75. In this case the ask price is less than NAV, which is
never true of an open-end investment company.
NEW QUESTION 92
A typical money market instrument carries which of the following?
- A. short-term maturity date
- B. serial bond maturity date
- C. medium-term maturity date
- D. long-term maturity date
Answer: A
Explanation:
short-term maturity. A money market maintains liquidity and is defined as having maturity of
less than one year.
NEW QUESTION 93
Municipal syndicate allocation procedures are described in which of the following?
- A. underwriting agreement
- B. agreement among the underwriters
- C. official statement
- D. syndicate account letter
Answer: D
Explanation:
syndicate account letter. This letter is sent by the manager of a competitive bid syndicate to
the other members. The priority and other procedures, including allocation amounts, are specified in the
letter. Members signify acceptance by signing the letter and returning it to the manger.
NEW QUESTION 94
Distribution from an IRA can begin at age 591/2 and must begin by age:
- A. whenever the individual is retired
- B. 701/2
- C. 0
- D. 1
Answer: B
Explanation:
701/2 . This the age at which IRA withdrawals are required.
NEW QUESTION 95
A wealth investor gives Bubba discretion to invest $50,000 for him in any way Bubba sees fit. Therefore,
Bubba must:
- A. a registered representative with the SEC under the Investment Advisors Act of 1940
- B. be registered with the NYSE and FINRA as a representative
- C. furnish written documents of authority to the brokerage firm executing the orders
- D. conform to the prudent man requirements in that state
Answer: C
Explanation:
furnish written documents of authority to the brokerage firm executing the orders. The
wealthy investor has simply given Bubba discretion over the account. The brokerage firm only requires
evidence that this authority has been granted to Bubba.
NEW QUESTION 96
Which of the following activities by a limited partner may subject the partner to unlimited liability?
- A. participating in management of the partnership
- B. all of the above
- C. making loans beyond those specified in the partnership agreement
- D. committing the partnership in any manner
Answer: B
Explanation:
all of the above. Each of these actions by a limited partner causes the loss of limited liability.
NEW QUESTION 97
Bubba buys a ten-year municipal and at 102 and sells it five years later at 101. What is tax treatment?
- A. the $10 loss is applied against future profits in municipal securities
- B. the $10 loss is applied as a reduction against ordinary income
- C. no capital loss or income deduction is realized
- D. a $10 long-term capital loss is realized
Answer: C
Explanation:
no capital loss or income deduction is realized. The $20 premium is amortized over the
ten-year life of the bond. After five years, half of the premium has been written down. The remaining
premium is the same as the premium received upon selling the bond. The sale at 101 results in no loss or
gain.
NEW QUESTION 98
Upon opening a new account for a customer, a registered representative should:
- A. all of the above
- B. inquire about age
- C. investigate the customer's credit rating
- D. determine what is suitable for the customer based upon his financial background
Answer: A
Explanation:
all of the above. These are required I Rule 405 of the NYSE and under suitability
requirements in the Rules of Fair Practice of the FINRA.
NEW QUESTION 99
In a competitive bidding for mortgage bonds of a large public utility the winning underwriter is determined
by:
- A. the highest dollar amount paid to the issuer
- B. the refunding and sinking fund terms in the indenture
- C. the shortest maturity date for the bonds
- D. the lowest net interest cost to the issuer
Answer: D
Explanation:
the lowest net interest cost to the issuer. All competitive bids are based upon the lowest
interest cost.
NEW QUESTION 100
Bubba buys $100,000 of US Treasury 101/2 s of 31 on margin. If the current market price is 92.16, what is
Bubba's minimum deposit requirement?
- A. $4,625
- B. $25,000
- C. $10,000
- D. $5,550
Answer: D
Explanation:
$5,500. The NYSE maintenance requirements on obligations of the US treasury vary
depending upon the term of the instrument. For 20-year bonds, the requirement is 6% of the market value.
Multiplying the market value of $92,500 by 6% equals $5,500.
NEW QUESTION 101
Which of the following would be least useful to an analyst making a technical market report?
- A. new highs and lows
- B. the short interest
- C. advances and declines
- D. predictions of recession in the economy
Answer: D
Explanation:
predictions of recession in the economy. All of the other choices are technical market
indicators. An economic forecasts is "fundamental" market data.
NEW QUESTION 102
A four-letter symbol assigned to an issue is characteristic of an equity security that is:
- A. trading in less than 100-share units on the American Stock Exchange
- B. admitted to unlisted trading privileges on a regional stock exchange
- C. authorized for inclusion in the NASDAQsystem
- D. listed on the NYSE
Answer: C
Explanation:
authorized for inclusion in the NASDAQ system. Stocks listed on an exchange have no more
than three characters in their symbols.
NEW QUESTION 103
Bubba has a short margin account with a short market value of $22,000, a credit balance of $42,000, and
SMA of $500. What is the NYSE minimum equity maintenance for this account?
- A. $12,600
- B. $5,500
- C. $6,000
- D. $6,600
Answer: D
Explanation:
$6,600. The NYSE maintenance requirement on short margin accounts is 30%. Multiplying
the short market value of $22,000 by 30% equals $6,600.
NEW QUESTION 104
A dealer buys 100 shares of XYZ common, which is an actively traded stock, at 23.50. Three days later,
when XYZ common is quoted at 19.50 - 19.75, he sells the 100 shares to a customer. The basis for the
dealer's markup is:
- A. 19 7/8
- B. 23 1/2
- C. 10 5/8
- D. 5% above cost
Answer: A
Explanation:
19 7/8. The markup is always based on the current market price, not upon cost. Therefore,
the markup is based on the offering side of the current quotation.
NEW QUESTION 105
The practice of positioning stock in response to a customer's order and immediately after marking it up for
resale to the customer is:
- A. all of the above
- B. a simultaneous transaction
- C. a factor to consider in the FINRA guideline
- D. a riskless transaction
Answer: A
Explanation:
all of the above. A transaction that is simultaneous and thus riskless calls for a smaller than
usual markup under FINRA guidelines.
NEW QUESTION 106
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