FINRA SERIES 7 EXAM 2026 FINAL
PAPER SOLVED QUESTIONS
VERIFIED ANSWERS 100 PERCENT
CORRECT STUDY SHEET
◉ Subordinated Debenture Bonds Answer: Unsecured bonds, secured
by the full faith and credit and no specific collateral of the corporation.
◉ Section 457 Plan Answer: Retirement plan used by public sector
workers. Similar to 401(k), have similar tax and contribution features.
Used by some local government workers as well.
◉ ETNs (Exchange-traded notes) Answer: Carry issuer risk tied to the
creditworthiness of the institution backing the note. They typically do
not pay interest. Returns are linked to the performance of an index,
currency, or commodity and suitable for investors looking to speculate
on an index.
◉ CD (Certificate of Deposit) Answer: Issued by banks, they have a fixed
maturity date and interest rate that is paid. Early withdrawal from a CD
will typically result in a penalty. Short term money-market security.
◉ What is typically associated with an expanding economy?
(expansion). Answer: Rising interest rates, increased costs along with
lower unemployment. An increasing demand for goods. Inflation begins
to occur as well.
,◉ Balance Sheet Answer: Consists of a company's Assets, liabilities, and
shareholder's equity. Equation: Total Assets= Total Liabilities +
Shareholders Equity.
◉ How long does a customer have to return the options agreement?
Answer: Within 15 days of the approval of the account. After these 15
days, the customer is only permitted to close out existing options
positions. A customer may enter options transactions before the
options agreement is returned, but after those 15 days they cannot.
◉ How are Treasury Bonds quoted? Answer: Treasury Bonds are
quoted in 32nds of a point, and are then calculated as a percentage of
their par value. Ex. The difference between 98.4 and 98.8 is 4/32. Since
one point equals $10, 4/32 or 1/8 equals $1.25.
◉ How do you find the ask price (also known as POP or public offering
price) of a open-end investment company? Answer: Divide the net
asset value by the complement of the sales charge. NAV/(100%-sales
charge)= ask price.
◉ Variable life insurance policy characteristics Answer: Value of the
policy increases or decreases in relation to the performance of the
separate account. Poor performance could cause the cash value to
decline to zero. Death benefit can increase or decrease, but cannot fall
below a separate amount. Premiums are fixed for the lifetime of the
,policy. The expense guarantee clause prevents insurance companies
from raising expense charges for the administration of the policy.
◉ How do you calculate Accrued Interest? Answer: Accrued interest =
(Principal x Rate x Days of Interest) / 360. Ex. Monday, June 15, investor
purchases $20,000 face value of 8% municipal bonds that mature on
November 1, 2035. November 1 is one maturity date, May 1 the other
(because 6 months). 30 days for May, 17 for June. So calculation would
be Accrued Interest = (20,000 x 8% x 47) / 360.
◉ How the premium of an option calculated? Answer: Premium =
Intrinsic Value + Time Value
◉ Credit Spread Answer: A spread in which the premium of the option
being sold is higher. In a credit spread, the customer will profit if the
spread narrows.
◉ Defined Benefit Plan Answer: A type of pension fund. It is tax-
differed, therefore it would not benefit from the tax exemption of
municipal bonds. Plan promises to pay employees a specified amount
of money each year once the employee retires. Payment based on age,
years of service, salary history. Actuarial calculations are used to
determine the amount an employer must deposit each year.
◉ Sales Breakpoint (Mutual Fund) Answer: The minimum dollar
amount (not share amount) of a purchase of a mutual fund where a
volume discount is given.
, ◉ Penny Stock Answer: According to SEC rules, a stock that sells for less
than $5.00, is not listed on Nasdaq or NYSE. A stock quoted on the OTC
Bulletin Board or OTC Pink Market that has a bid price less than $5.00 is
a penny stock.
◉ When don't penny stock rules apply? Answer: The customer is
defined as an existing customer, as in someone who has had an account
with a broker-dealer for more than one year and who has previously
engaged in 3 penny stock transactions. In transactions by an
institutional accredited investor, in transactions nonrecommended, in
transactions by a broker-dealer that is not a market maker in that
security.
◉ What is the maintenance requirement on stocks sold short? Answer:
If the security is less than $5 per share, a minimum maintenance
requirement of $2.50 per share or 100% market value, whichever is
greater, applies. Otherwise, it's 50% of market value.
◉ Eurodollars Answer: U.S. dollars on deposit in foreign banks. Doesn't
have to be Europe.
◉ Registered Options Principal (ROP) Answer: Responsible for firm's
compliance program with options. Duties include establishing
guidelines for options retail communication, reviewing this material,
reviewing the method of allocation of exercise notices.
PAPER SOLVED QUESTIONS
VERIFIED ANSWERS 100 PERCENT
CORRECT STUDY SHEET
◉ Subordinated Debenture Bonds Answer: Unsecured bonds, secured
by the full faith and credit and no specific collateral of the corporation.
◉ Section 457 Plan Answer: Retirement plan used by public sector
workers. Similar to 401(k), have similar tax and contribution features.
Used by some local government workers as well.
◉ ETNs (Exchange-traded notes) Answer: Carry issuer risk tied to the
creditworthiness of the institution backing the note. They typically do
not pay interest. Returns are linked to the performance of an index,
currency, or commodity and suitable for investors looking to speculate
on an index.
◉ CD (Certificate of Deposit) Answer: Issued by banks, they have a fixed
maturity date and interest rate that is paid. Early withdrawal from a CD
will typically result in a penalty. Short term money-market security.
◉ What is typically associated with an expanding economy?
(expansion). Answer: Rising interest rates, increased costs along with
lower unemployment. An increasing demand for goods. Inflation begins
to occur as well.
,◉ Balance Sheet Answer: Consists of a company's Assets, liabilities, and
shareholder's equity. Equation: Total Assets= Total Liabilities +
Shareholders Equity.
◉ How long does a customer have to return the options agreement?
Answer: Within 15 days of the approval of the account. After these 15
days, the customer is only permitted to close out existing options
positions. A customer may enter options transactions before the
options agreement is returned, but after those 15 days they cannot.
◉ How are Treasury Bonds quoted? Answer: Treasury Bonds are
quoted in 32nds of a point, and are then calculated as a percentage of
their par value. Ex. The difference between 98.4 and 98.8 is 4/32. Since
one point equals $10, 4/32 or 1/8 equals $1.25.
◉ How do you find the ask price (also known as POP or public offering
price) of a open-end investment company? Answer: Divide the net
asset value by the complement of the sales charge. NAV/(100%-sales
charge)= ask price.
◉ Variable life insurance policy characteristics Answer: Value of the
policy increases or decreases in relation to the performance of the
separate account. Poor performance could cause the cash value to
decline to zero. Death benefit can increase or decrease, but cannot fall
below a separate amount. Premiums are fixed for the lifetime of the
,policy. The expense guarantee clause prevents insurance companies
from raising expense charges for the administration of the policy.
◉ How do you calculate Accrued Interest? Answer: Accrued interest =
(Principal x Rate x Days of Interest) / 360. Ex. Monday, June 15, investor
purchases $20,000 face value of 8% municipal bonds that mature on
November 1, 2035. November 1 is one maturity date, May 1 the other
(because 6 months). 30 days for May, 17 for June. So calculation would
be Accrued Interest = (20,000 x 8% x 47) / 360.
◉ How the premium of an option calculated? Answer: Premium =
Intrinsic Value + Time Value
◉ Credit Spread Answer: A spread in which the premium of the option
being sold is higher. In a credit spread, the customer will profit if the
spread narrows.
◉ Defined Benefit Plan Answer: A type of pension fund. It is tax-
differed, therefore it would not benefit from the tax exemption of
municipal bonds. Plan promises to pay employees a specified amount
of money each year once the employee retires. Payment based on age,
years of service, salary history. Actuarial calculations are used to
determine the amount an employer must deposit each year.
◉ Sales Breakpoint (Mutual Fund) Answer: The minimum dollar
amount (not share amount) of a purchase of a mutual fund where a
volume discount is given.
, ◉ Penny Stock Answer: According to SEC rules, a stock that sells for less
than $5.00, is not listed on Nasdaq or NYSE. A stock quoted on the OTC
Bulletin Board or OTC Pink Market that has a bid price less than $5.00 is
a penny stock.
◉ When don't penny stock rules apply? Answer: The customer is
defined as an existing customer, as in someone who has had an account
with a broker-dealer for more than one year and who has previously
engaged in 3 penny stock transactions. In transactions by an
institutional accredited investor, in transactions nonrecommended, in
transactions by a broker-dealer that is not a market maker in that
security.
◉ What is the maintenance requirement on stocks sold short? Answer:
If the security is less than $5 per share, a minimum maintenance
requirement of $2.50 per share or 100% market value, whichever is
greater, applies. Otherwise, it's 50% of market value.
◉ Eurodollars Answer: U.S. dollars on deposit in foreign banks. Doesn't
have to be Europe.
◉ Registered Options Principal (ROP) Answer: Responsible for firm's
compliance program with options. Duties include establishing
guidelines for options retail communication, reviewing this material,
reviewing the method of allocation of exercise notices.
