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

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Viewing questions 21-30 out of questions

Questions # 21:

Which of the following securities provides the longest term of option privilege?

Options:

puts

calls

warrants

rights

Answer

Explanation

warrants. All of the others always have fixed maturity dates. Warrants often have no finite life and, if they do, it is a very long time.

Questions # 22:

A mutual fund with an 8% load and a 1% redemption fee carries a current quote of $6.25 - $6.79. If an investor has tendered his shares for redemption on that basis, the per share price he will receive is approximately:

Options:

$6.79

$6.72

$6.25

$6.19

Answer

Explanation

$6.19. The fund has a redemption fee of 1%. This is about 6 cents based upon the bid price. Subtracting that from the $6.25 bid results in $6.19.

Questions # 23:

Approval for a registered investment company to change is investment objective from income to growth is required from which of the following?

Options:

the FINRA

the SEC

a majority of the shareholders

all of the above

Answer

Explanation

a majority of the shareholders. Any factors that materially affect the interests of shareholders must be approved by a majority vote of the shareholders.

Questions # 24:

Which of the following municipal bonds may be grouped under the classification of “revenue bonds”?

Options:

special tax

new housing authority

general obligation

limited tax

Answer

Explanation

special tax. The other categories are not revenue bonds. Special tax is the only type that fits the general grouping.

Questions # 25:

Bubba buys an OTC stock from a firm that is a market -maker in the stock.

What may be said about the price he pays?

Options:

it does not include a markup

it includes a markup

it includes a commission and a markup

it includes a special fee

Answer

Explanation

it includes a markup. A market-maker acts as principal. Therefore, Bubba pays a markup but not a commission.

Questions # 26:

Which of the following does not appear in a municipal syndicate letter to underwriters?

Options:

the specific bid and offering terms of the issue

the amount of each member’s participation

the extent of the manager’s authority in directing the offering

the duration of the syndicate account

Answer

Explanation

the specific bid and offering terms of the issue. The bid and offering terms are determined after the syndicate letter to underwriters.

Questions # 27:

A bank or trust company that is acting as custodian for a mutual fund does which of the following?

Options:

guarantees investor losses on investments

provides investment advice to the fund’s managers

redeem and issues fund shares

physically protects the fund’s assets

Answer

Explanation

physically protects the fund’s assets. The custodian holds the assets of the fund. The transfer agent redeems and issues fund shares.

Questions # 28:

Which of the following is true of treasury stock?

Options:

it has voting rights

it is entitled to receive dividends

it is stock that has not been issued

it is stock that has been reacquired by the issuer

Answer

Explanation

it is stock that has been reacquired by the issuer. Treasury stock has no voting rights and is not entitled to receive dividends. The shares have been issued but are no longer outstanding in the market.

Questions # 29:

The principal underwriter of an open-end investment company is frequently called:

Options:

participating investment advisor

sponsor

selling group member

investment counselor

Answer

Explanation

sponsor. Also called the “distributor”, these terms are interchangeable for an open -end investment company.

Questions # 30:

Which of the following receives the highest priority of a municipal bond trustee when applying income and revenue derived from a financed toll facility?