FINRA PRACTICE EXAM QUESTIONS AND
DETAILED SOLUTIONS 2026
▶ UTMA accounts are opened under the tax ID number of the:
minor
donor
parent
custodian. Answer: minor
▶ Under FINRA rules, noncash compensation connected with the sale of
variable contracts includes all of the following items EXCEPT:
gifts
meals
lodging
commissions. Answer: commissions
▶ Describe the difference between primary distribution and secondary
distribution.. Answer: a primary distribution involves a sale of newly issued
shares by the issuer while a secondary distribution involves the sale of
already issued and outstanding shares
▶ If a market maker posts a quotes of 10.00 - 10.10 (25x10), which of the
following actions is the market maker willing to take?
sell 1,000 shares at $10 and buy 2,500 shares at $10.10
buy 2,500 shares at $10 and sell 1,000 shares at $10.10
sell 100 shares at $10 and buy 250 shares at $10.10
buy 250 shares at $10 and sell 100 shares at $10.10. Answer: buy 2,500
shares at $10 and sell 1,000 shares at $10.10
▶ All of the following risks apply to both foreign and domestic debt
instruments EXCEPT:
political
exchange
repayment
interest rate. Answer: exchange
, ▶ A married couple who earned income that exceeded $300k in each of
the prior two years and reasonably expects the same for this current year
is:
a qualified investor
an accredited investor
an institutional investor
a qualified institutional buyer. Answer: an accredited investor
▶ The owner of which of the following products is MOST exposed to
inflationary risks?
utility stocks
treasury bills
treasury bonds
blue chip industrials. Answer: treasury bonds
▶ What is the concept of an annuity contract?. Answer: the kind of annuity
selected partly determines the payment amounts to the annuitant
▶ Which of the following statement is true about all US Gov agency
issues?
they are exempt from federal taxes
they are exempt from registration under the Securities Act of 1933
they are issued in bearer form only
they are general obligations of the fed gov. Answer: they are exempt from
registration under the Securities Act of 1933
▶ Direct participation programs (DPP's) provide:
liquidity and transparency
exposure to non-correlated assets with steady returns
market-related correlations with higher average returns
investors with direct purchases of stock from public companies. Answer:
exposure to non-correlated assets with steady returns
▶ Which of the following outcomes are possible for the writer of a covered
call option?
profit limited and loss limited
profit limited and loss unlimited
profit unlimited and loss limited
profit unlimited and loss unlimited. Answer: profit limited and loss limited
DETAILED SOLUTIONS 2026
▶ UTMA accounts are opened under the tax ID number of the:
minor
donor
parent
custodian. Answer: minor
▶ Under FINRA rules, noncash compensation connected with the sale of
variable contracts includes all of the following items EXCEPT:
gifts
meals
lodging
commissions. Answer: commissions
▶ Describe the difference between primary distribution and secondary
distribution.. Answer: a primary distribution involves a sale of newly issued
shares by the issuer while a secondary distribution involves the sale of
already issued and outstanding shares
▶ If a market maker posts a quotes of 10.00 - 10.10 (25x10), which of the
following actions is the market maker willing to take?
sell 1,000 shares at $10 and buy 2,500 shares at $10.10
buy 2,500 shares at $10 and sell 1,000 shares at $10.10
sell 100 shares at $10 and buy 250 shares at $10.10
buy 250 shares at $10 and sell 100 shares at $10.10. Answer: buy 2,500
shares at $10 and sell 1,000 shares at $10.10
▶ All of the following risks apply to both foreign and domestic debt
instruments EXCEPT:
political
exchange
repayment
interest rate. Answer: exchange
, ▶ A married couple who earned income that exceeded $300k in each of
the prior two years and reasonably expects the same for this current year
is:
a qualified investor
an accredited investor
an institutional investor
a qualified institutional buyer. Answer: an accredited investor
▶ The owner of which of the following products is MOST exposed to
inflationary risks?
utility stocks
treasury bills
treasury bonds
blue chip industrials. Answer: treasury bonds
▶ What is the concept of an annuity contract?. Answer: the kind of annuity
selected partly determines the payment amounts to the annuitant
▶ Which of the following statement is true about all US Gov agency
issues?
they are exempt from federal taxes
they are exempt from registration under the Securities Act of 1933
they are issued in bearer form only
they are general obligations of the fed gov. Answer: they are exempt from
registration under the Securities Act of 1933
▶ Direct participation programs (DPP's) provide:
liquidity and transparency
exposure to non-correlated assets with steady returns
market-related correlations with higher average returns
investors with direct purchases of stock from public companies. Answer:
exposure to non-correlated assets with steady returns
▶ Which of the following outcomes are possible for the writer of a covered
call option?
profit limited and loss limited
profit limited and loss unlimited
profit unlimited and loss limited
profit unlimited and loss unlimited. Answer: profit limited and loss limited
