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Series-7
Series 7 General Securities Representative Qualification Examination (GS) Questions and Answers

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Viewing questions 91-100 out of questions

Questions # 91:

When an index option is exercised, settlement is made by:

Options:

delivery of the underlying securities

delivery of a futures contract

cash

any of the above

Answer

Explanation

cash. Index options are settled by payment of cash.

Questions # 92:

In considering the fairness of a firm’s markup, the FINRA considers:

Options:

dealer cost for the security

financial condition of the client

profitability of the member firm

amount of the transaction

Answer

Explanation

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.

Questions # 93:

The term “secondary market” refers to:

Options:

trading in issues of low quality

trading in outstanding issues

issues that banks are not permitted to underwrite

private placements

Answer

Explanation

trading in outstanding issues. Secondary market transactions involve trading in securities after the original issue is made. When an issuer offers new securities to the public it is a “primary offering”.

Questions # 94:

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:

Options:

public offering

tombstone ad

sales directive

syndicate announcement

Answer

Explanation

tombstone ad. Tombstone ads are used to announce new issues. They do not offer to buy or sell securities. They are informational only.

Questions # 95:

The price an investor pays for a listed option is called the

Options:

strike price

spread

premium

exercise price

Answer

Explanation

premium. That’s the term for the option cost.

Questions # 96:

Bubba Corporation has a profit sharing plan. The company president, Bubba, is receiving the maximum plan contribution amount. The corporation has one other employee, who is eligible for the plan.

If this person earns $12,000 per year, how much must be deposited in the plan for the employee?

Options:

$6,000

$3,000

$1,800

$12,000

Answer

Explanation

$3,000. The maximum contribution is 25% of compensation. That percentage of $12,000 is $3,000.

Questions # 97:

Crossover is best defined as:

Options:

the point at which the program becomes profitable

the point at which income exceeds deductions

the fact that there are more general partners than limited partners

the profit of limited partners exceeding profit of general partners

Answer

Explanation

the point at which income exceeds deductions. This is the definition of “crossover”.

Questions # 98:

Bubba is long spot Canadian dollars at 0.7400. If he wants to buy one put option on Canadian dollars with a strike price of 74 and a cost of $0.35, what is Bubba’s breakeven price for Canadian dollars?

Options:

0.4900

0.7365

0.7400

0.7435

Answer

Explanation

0.7435. The put protects against a decline in the exchange rate for Canadian dollars. However, the cost of the put raises the breakeven point to 0.7435 (0.7400 + 0.0035).

Questions # 99:

On which of the following is depreciation permitted?

Options:

rental property whose value is declining

residential property not used for business

property whose maintenance exceeds the investment credit

equipment subject to recapture

Answer

Explanation

residential property not used for business. Depreciation is only permitted on income-producing property.

Questions # 100:

Bubba and his wife, Bubbette, maintain a joint account with a brokerage firm as “joint tenants in common”. Bubbette calls a registered representative at the brokerage and places an order to sell 100 shares of XYZ, which is long in the account.

Which of the following statements is correct about this order?