S7 (Assessment Exam) QUESTIONS WITH
ANSWERS
Sales Proceeds per share as a result of exercise of a put: -
CORRECT ANSWERS ✔✔the sales proceeds upon
exercise of a put option is found by subtracting the
premium from the strike price of the put.
**If you own the put contract you have the ability to sell
at the strike if exercised, but you paid a certain amount to
do that. (premium). So subtract the cost of what you paid
(premium) from the money you made made selling the
put at strike
Credit Spread - CORRECT ANSWERS ✔✔a credit spread
involved the purchase and sale of two option contracts,
both of the same class (put, put OR call, call). The
contract which is sold has a higher premium than the
contract purchased (gives you the credit). In this
question, the Nov 60 put will have a higher premium than
the Nov 50 Put, creating a credit spread.
**A credit spread involves selling, or writing, a high-
premium option and simultaneously buying a lower
premium option. The premium received from the written
,option is greater than the premium paid for the long
option, resulting in a premium credited into the trader or
investor's account when the position is opened. When
traders or investors use a credit spread strategy, the
maximum profit they receive is the net premium.
Debit spread - CORRECT ANSWERS ✔✔used to offset
the maximum loss. Occurs when you buy option with
higher premium and sell one with a lower premium and
the loss is debited to trader's account
**trader buys one May put option with a strike price of
$20 for $5 and simultaneously sells one May put option
with a strike price of $10 for $1. Therefore, he paid $4, or
$400 for the trade. If the trade is out of the money, his
max loss is reduced to $400, as opposed to $500 if he
only bought the put option.
A customer has placed a market order to purchase EMD
with a broker-dealer, and requests that the order be
directed to a specific exchange which is not currently
posting the best national price for the stock. The broker-
dealer must: - CORRECT ANSWERS ✔✔execute the
order in the venue as directed by the customer
**Regulation NMS requires that a broker-dealer route a
customer order to that exchange currently POSTING the
, MOST FAVORABLE PRICE. However, a customer may
request that their order be directed to a specific venue
and the firm must comply with this request
Text messaging may be used between clients and RRs for
business matters if: - CORRECT ANSWERS ✔✔the
broker-dealer can supervise and preserve the text
messages
**Text messaging is a permitted form of communication
between clients and RRs only if the messages can be
supervised and retained in the firm's files
A registered representative has a CPA who is in a position
to introduce new clients to the RR's broker-dealer and
asks for a fee based on commissions generated by the
accounts introduced. Which of the following statements is
true? - CORRECT ANSWERS ✔✔Finder's fees for
introducing new clients to the firm may be paid to
UNREGISTERED persons, provided they are hourly or flat
fees, and NOT BASED on any commissions generated by
these accounts
A complaint has been received from a long-standing
customer of the firm, and the matter has been escalated
to the compliance department of the firm. The complain
must be kept on file for: - CORRECT ANSWERS ✔✔four
ANSWERS
Sales Proceeds per share as a result of exercise of a put: -
CORRECT ANSWERS ✔✔the sales proceeds upon
exercise of a put option is found by subtracting the
premium from the strike price of the put.
**If you own the put contract you have the ability to sell
at the strike if exercised, but you paid a certain amount to
do that. (premium). So subtract the cost of what you paid
(premium) from the money you made made selling the
put at strike
Credit Spread - CORRECT ANSWERS ✔✔a credit spread
involved the purchase and sale of two option contracts,
both of the same class (put, put OR call, call). The
contract which is sold has a higher premium than the
contract purchased (gives you the credit). In this
question, the Nov 60 put will have a higher premium than
the Nov 50 Put, creating a credit spread.
**A credit spread involves selling, or writing, a high-
premium option and simultaneously buying a lower
premium option. The premium received from the written
,option is greater than the premium paid for the long
option, resulting in a premium credited into the trader or
investor's account when the position is opened. When
traders or investors use a credit spread strategy, the
maximum profit they receive is the net premium.
Debit spread - CORRECT ANSWERS ✔✔used to offset
the maximum loss. Occurs when you buy option with
higher premium and sell one with a lower premium and
the loss is debited to trader's account
**trader buys one May put option with a strike price of
$20 for $5 and simultaneously sells one May put option
with a strike price of $10 for $1. Therefore, he paid $4, or
$400 for the trade. If the trade is out of the money, his
max loss is reduced to $400, as opposed to $500 if he
only bought the put option.
A customer has placed a market order to purchase EMD
with a broker-dealer, and requests that the order be
directed to a specific exchange which is not currently
posting the best national price for the stock. The broker-
dealer must: - CORRECT ANSWERS ✔✔execute the
order in the venue as directed by the customer
**Regulation NMS requires that a broker-dealer route a
customer order to that exchange currently POSTING the
, MOST FAVORABLE PRICE. However, a customer may
request that their order be directed to a specific venue
and the firm must comply with this request
Text messaging may be used between clients and RRs for
business matters if: - CORRECT ANSWERS ✔✔the
broker-dealer can supervise and preserve the text
messages
**Text messaging is a permitted form of communication
between clients and RRs only if the messages can be
supervised and retained in the firm's files
A registered representative has a CPA who is in a position
to introduce new clients to the RR's broker-dealer and
asks for a fee based on commissions generated by the
accounts introduced. Which of the following statements is
true? - CORRECT ANSWERS ✔✔Finder's fees for
introducing new clients to the firm may be paid to
UNREGISTERED persons, provided they are hourly or flat
fees, and NOT BASED on any commissions generated by
these accounts
A complaint has been received from a long-standing
customer of the firm, and the matter has been escalated
to the compliance department of the firm. The complain
must be kept on file for: - CORRECT ANSWERS ✔✔four
