Free FINRA Series-7 Practice Exam with Questions & Answers | Set: 12

every month. Collateralized Mortgage Obligations generally pay interest each month. However, some CMOs pay interest quarterly or semiannually.

it was never executed. The first transaction at 38.75 elected the order, but since it was both a stop order and a limit order, there was never another transaction at 38.75. Consequently, Bubba’s order was never executed.

the custodian may perform an essential clerical service for the fund and its shareholders. The custodian holds the cash and securities of the investment company and performs the bookkeeping functions. It does not have a supervisory role.

200. In an issue of rights, there is always one right per share. Bubba owns 200 shares and thus receives the same number of rights.

amount of the transaction. The other choices are not FINRA considerations. The dollar amount of the transaction is one of the factors considered in markup fairness. Other factors include the type of security, the amount of service rendered, the unit price of the security, and general availability of the security.

a guaranteed corporate bond. All of the other securities are obligations of the US government, which is considered to have minimal or no risk.

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.

6.49%. Divide the discount from par value of $150 ($1,000 - $850) by the number of years to maturity (15) to determine the annual discount. Add the result of $10 to the annual interest ($50) to determine the total annual return. Divide the result of $60 by the average of the current price (85) and par (100). The result is 60 divided by 92.5, which equals 6.49%.

open-end investment companies. The term is generally applied to open-end investment companies.

gift tax. By definition, gift tax is a progressive tax. All of the others are a level percentage.