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

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Viewing page 6 out of 12 pages

Viewing questions 51-60 out of questions

Questions # 51:

The market theory stating that the small investor is usually wrong is called the:

Options:

advance-decline theory

odd-lot theory

Dow theory

short interest theory

Answer

Explanation

The market theory stating that the small investor is usually wrong is called the odd-lot theory. The concept behind this theory is that when small lot sales are high, it is a good time to buy, as a high ratio of small business sales is a contrary indicator of market direction.

Questions # 52:

Upon opening a new account for a customer, a registered representative should:

Options:

inquire about age

investigate the customer’s credit rating

determine what is suitable for the customer based upon his financial background

all of the above

Answer

Explanation

all of the above. These are required I Rule 405 of the NYSE and under suitability requirements in the Rules of Fair Practice of the FINRA.

Questions # 53:

A company may pay a declared dividend in which of the following ways:

Options:

with stock in a subsidiary company

with property

with cash

all of the above

Answer

Explanation

all of the above. Dividends can be paid in all of these ways. They can also be paid with treasury stock or authorized but unissued stock.

Questions # 54:

Bubba buys municipal bonds with a $100,000 principal amount at 89 on margin. His account has no cash or securities.

What is his minimum required deposit?

Options:

$5,080

$13,350

$22,500

$50,000

Answer

Explanation

$13,350. Munis are not subject to Reg T. The NYSE maintenance requirement on munis is the greater of 15% of the market value or 7% of the principal amount.

Questions # 55:

Which of the following is a right for shareholders of common stock?

Options:

the right to have the stock price increase

the right to vote about important matters of the company

the right to dividends

both B and C

Answer

Explanation

the right to vote about important matters of the company. Shareholders have no expectation of stock price increase or dividends. They are entitled to receive dividends only if the board of directors declares them.

Questions # 56:

Which of the following sets out the details for the management board of condominiums, including the board’s powers and limitations?

Options:

master deed

bylaws

rental agreement

loan agreement

Answer

Explanation

bylaws. The bylaws of a condominium association provide general details about management.

Questions # 57:

CMOs are sold and priced based upon which of the following:

Options:

expected average life

stated maturity

current yield

par value

Answer

Explanation

expected average life. The average life of a CMO is the length of time that each dollar of invested principal is expected to remain outstanding. Pricing of CMOs is based upon this factor.

Questions # 58:

Which of the following is not a marketable security?

Options:

tax anticipation bonds

municipal bonds

treasury bonds

Series EE bonds

Answer

Explanation

Series EE bonds. All the other securities may be traded. Series EE bonds are purchased and held to maturity. They are not tradable.

Questions # 59:

Reinvestment of dividends and distributions from investment company shares:

Options:

results in compounding of shares, which can be an important factor for investment growth

permits deferment of all federal income taxes on dividends and distributions until the investment is liquidated

makes possible the purchase of fund shares at a price below net asset value

all of the above

Answer

Explanation

results in compounding of shares, which can be an important factor for investment growth. Reinvesting dividends and capital gains increases the number of shares owned. Occasionally, these programs permit purchases at net asset value, but never below that price. Shareholders do not avoid current tax liability on the amount of dividends and capital gains reinvested.

Questions # 60:

Which of the following option positions is indicative of the same class of option?