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Series 7 Exam Review Questions

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Series 7 exam review questions are 125 multiple-choice, application-based questions designed by FINRA to test your knowledge of securities products, client suitability, and regulatory rules. They cover topics like options, bonds, mutual funds, account management, and trading, with a heavy emphasis on client scenarios and suitability. Key Topics and Question Areas Suitability and Recommendations (91 Questions): This is the largest section, focusing on recommending appropriate investments (stocks, bonds, options, muni bonds) based on a client's risk profile, financial objectives, and tax... Show more

Series 7 exam review questions are 125 multiple-choice, application-based questions designed by FINRA to test your knowledge of securities products, client suitability, and regulatory rules. They cover topics like options, bonds, mutual funds, account management, and trading, with a heavy emphasis on client scenarios and suitability.

Key Topics and Question Areas
Suitability and Recommendations (91 Questions): This is the largest section, focusing on recommending appropriate investments (stocks, bonds, options, muni bonds) based on a client's risk profile, financial objectives, and tax status.
Customer Accounts (11 Questions): Questions on opening new accounts, margin accounts, and updating client information.
Product Knowledge: Specific questions on mutual funds, variable annuities, direct participation programs (DPPs), and municipal securities.
Regulations and Ethics: Rules regarding prohibited practices, insider trading, and advertising standards.

Common Question Formats
Scenario-Based (Suitability): "A 65-year-old investor seeks income and safety. Which of the following is most suitable?".
Options Calculations: Identifying max gain/loss/break-even on spreads, straddles, or covered calls.
Regulation T and Margin: Calculating equity in a margin account or minimum maintenance requirements.
Bond Math: Calculating accrued interest or yield to maturity.

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Series 7 Exam Review Questions

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25 Questions

1. A Regulation D private placement is

an offering of securities to no more than 35 unaccredited investors in a 1-month periodan intrastate offeringa large offering of commercial paperan offering of securities worth no more than $5 million in a 12-month period

2. Use the following exhibit to answer this question:

NY Close	Strike	Calls Sep	Calls Dec	Puts Sep	Puts Dec
50.5	40	12.00	14.13	0.75	1.50
50.5	50	1.00	2.50	0.88	1.75
50.5	60	0.50	0.75	10.00	12.00

What is the break-even point for an investor who purchases an ABC Dec 60 put?

70485072

3. James Diamond is new to investing and wants to purchase a security that will provide him with current income with minimal risk. Which of the following are you LEAST likely to recommend?

An income fundAn international fundTreasury bondsAA rated municipal bonds

4. All of the following change the conditions of an option contract EXCEPT

a cash dividenda stock splita stock dividendNone of the above

5. All the following activities are a registrar’s functions EXCEPT

accounting for the number of shares outstandingensuring that the outstanding shares do not exceed the number of shares on the corporation’s booksauditing the transfer agenttransferring shares into the name of the new owner

6. Use the following exhibit to answer this question:
Balance Sheet of ABCD Corp.
Assets - Liabilities
Cash $300,000 - Accounts payable $300,000
Accounts receivable $1,500,000 - Taxes payable $250,000
Inventory $1,200,000 - Bonds maturing this year $800,000
Goodwill $2,000,000 - Bonds maturing in 5 years $2,000,000
Machinery $1,500,000 - Land $5,000,000
What is the net worth of ABCD Corporation?

$8,150,000$1,650,000$10,150,000$3,150,000

7. Which two of the following are true of Roth IRAs?
Contributions are made from after-tax dollars.
Contributions are made from pre-tax dollars.
Distributions are tax-free.
Distributions are taxed on the amount above the amount of the contribution.

I and IVII and IVI and IIIII and III

8. One of your wealthier clients is interested in purchasing a fund. If liquidity is high on their list of investment objectives, which of the following would be the least suitable recommendation?

ETFsInverse ETFsHedge fundsMoney market funds

9. The trading volume for some large institutional orders is concealed from the public. What is this called?

A violationThird-market tradesFourth market tradesDark pools of liquidity

10. Which of the following option positions provides an investor with potential premium income while limiting the maximum loss potential?

Long straddle or long combinationCredit spreadShort straddle or short combinationDebit spread

11. For investors interested in purchasing CMOs, which of the following tranches is considered the safest?

Planned amortization classZTargeted amortization classCompanion

12. An investor purchases 1 LML Sep 30 call for a premium of 4. This option will expire

on a date to be assigned by the CBOEon the Saturday following the third Friday in Septemberon the third Friday in Septemberon the third Saturday in September

13. Which of the following is the issuer and guarantor of all listed options?

The OCCThe CBOEThe OAAThe ODD

14. One of the advantages of portfolio margin is that it allows

investors to avoid maintenance callssmaller investors the opportunity to purchase securities on margininvestors greater leverageless sophisticated investors a chance to purchase securities on margin

15. Regarding the taxation of dividends from corporate securities, which TWO of the following are TRUE?
Qualified dividends are taxed at the investor’s income tax rate.
Qualified dividends are taxed at a maximum rate of 20 percent.
Nonqualified dividends are taxed at the investor’s tax rate.
Nonqualified dividends are taxed at a maximum rate of 20 percent.

I and IIIII and IIIII and IVI and IV

16. All the following securities are typically sold short EXCEPT

exchange listed stockmunicipal bondsover-the-counter common stockpreferred stock

17. Marcella is a customer who wants to invest in securities. Which of the following is most likely to provide Terri with the highest dividend rate?

Participating preferredStraight preferredCallable preferredConvertible preferred

18. An investor is holding 1 ABC Oct 35 call option. Which of the following option positions, if purchased by this customer, would create a long straddle?

Short 1 ABC Oct 30 call optionLong 1 ABC Oct 35 put optionShort 1 ABC Nov 35 call optionLong 1 ABC Oct 40 call option

19. Which of the following is true regarding Penny Stock Disclosure Documents?

They must be provided to the customer in written form prior to the customer's first transaction in penny stocks.The broker-dealer must provide a link to penny stock rules on their website prior to the confirmation sent to customers after the first transaction in penny stocks.They must be described orally and provided in written form prior to the customer's first transaction in penny stocks.They may be described orally prior to the customer's first transaction in penny stocks.

20. An investor wants to invest in a direct participation program (DPP) with a minimal amount of risk. Which of the following are you LEAST likely to recommend?

An equipment leasing programAn oil and gas income programAn oil and gas developmental programA real-estate partnership that invests in raw land

21. All of the following are types of blue-sky registration EXCEPT

registration by qualificationregistration by cooperationregistration by filingregistration by coordination

22. Which of the following statements regarding municipal bonds with call provisions is TRUE?

Call provisions are not advantageous to issuers.Bonds are likely to be called when interest rates rise.Bonds are likely to be called when interest rates fall.Call provisions favor investors.

23. Mr. Smith has an inactive account with stocks and bonds at a broker-dealer. How often is the firm required to send Mr. Smith an account statement?

Once every six monthsOnce a weekOnce a monthOnce every three months

24. All the following information is required on a preliminary prospectus EXCEPT

the purpose for which the issuer is raising the fundsthe issuer’s history and financial statusthe final offering pricea statement in red lettering stating that items on the preliminary prospectus are subject to change before the final prospectus is issued

25. As a client’s investment objectives change, a registered rep should keep track of those changes so that they can rebalance the client’s portfolio and make proper recommendations. Which of the following changes may affect a customer’s investment objectives?
Growing older
Getting divorced
Having triplets
Getting a higher paying job

I, II, III, and IVI, II, and IIIII, III, and IVI and III

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25 Questions

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All trademarks, logos and brand names are the property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, trademarks and brands does not imply endorsement.

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Privacy | Terms |

Without work one finishes nothing. - Ralph Waldo Emerson
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