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

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Viewing questions 41-50 out of questions

Questions # 41:

According to FINRA Conduct Rules, a party judged guilty of a rule infraction by the District Business Conduct Committee may then appeal to:

Options:

the SEC

the FINRA Board of Governors

the public court system

the FINRA Board of Arbitration

Answer

Explanation

the FINRA Board of Governors. The first appeal is to the Board of Governors, then to the SEC, and then to the federal courts.

Questions # 42:

Bubba buys one XYZ October 80 put and sells one XYZ October 70 put.

What is his position called?

Options:

calendar spread

money spread

straddle

combination

Answer

Explanation

money spread. Since the strike prices are different, but not the expiration date, this is a money spread (sometimes called a “price spread” or a “vertical spread”).

Questions # 43:

The return by the receiving party of securities previously accepted for delivery or a demand by the delivering party for return of securities that have been delivered is called:

Options:

rejection

close-out

reclamation

re-delivery

Answer

Explanation

reclamation. In a reclamation a dealer requests that another dealer reclaim an improper delivery.

Questions # 44:

Which of the following is not usually an additional function of a mutual fund’s custodial bank?

Options:

transfer agent

investment advisor

registrar

dividend disbursing agent

Answer

Explanation

investment advisor. The custodial bank is usually also selected for other functions, but not as investment advisor. That assignment is generally performed by a special advisory firm or the mutual fund management company.

Questions # 45:

A provision under which an underwriter can cancel a proposed public offering due to some unforeseen occurrence is known as a:

Options:

blue sky provision

contra-market clause

fill or kill provision

market-out clause

Answer

Explanation

market-out clause. This is used only in the case of some unusual occurrence.

Questions # 46:

Revenue bonds are least likely to provide constructions funds for:

Options:

a toll highway

an airport

a public school

a pollution control facility

Answer

Explanation

a public school. Schools are typically financed by general obligation bonds. The other choices are examples of revenue bonds.

Questions # 47:

Bubba buys a US treasury bond. The interest he earns is:

Options:

subject to federal and state income tax

exempt from federal and state income tax

subject to state income tax but exempt from federal income tax

subject to federal income tax but exempt from state income tax

Answer

Explanation

subject to federal income tax but exempt from state income tax. The interest on US government securities is taxed by the US government but not by state governments. The opposite is true of bonds issued by a state, which are exempt from federal tax but subject to state taxes -except for taxes of the state that issues them.

Questions # 48:

In a monthly review of customer statements, Bubba notices that one of his firm’s clients has paid for seven purchases five days late.

What does he do?

Options:

decides this situation is acceptable provided payment was received before any securities were sold

ascertains whether the client had a sufficient bank balance on settlement date

nothing because this is not a violation provided the securities were not listed on the NYSE

ascertains that extensions had been obtained under Reg T

Answer

Explanation

ascertains that extensions had been obtained under Reg T. If valid reasons exist, extension of time for payment may be obtained.

Questions # 49:

A wealth investor gives Bubba discretion to invest $50,000 for him in any way Bubba sees fit. Therefore, Bubba must:

Options:

a registered representative with the SEC under the Investment Advisors Act of 1940

conform to the prudent man requirements in that state

furnish written documents of authority to the brokerage firm executing the orders

be registered with the NYSE and FINRA as a representative

Answer

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.

Questions # 50:

When pricing callable municipal bonds, the “price to call” is based upon which of the following?

Options:

in-whole calls

partial calls

sinking fund calls

catastrophe calls

Answer

Explanation

in-whole calls. Price to call computations are based upon in-whole calls only. These calls will result in all bondholders being called simultaneously, thus guaranteeing a minimum yield to all.

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