STC Series 7 Progress Exam 5A 2025
With 100% Correct Answers
In a margin account, an investor bought 1,000 shares of RST at $60 and, as a hedge, she also
purchased 10 RST July 60 puts which each had a premium of 5. Based on these transactions,
what is the customer's required deposit?
A. $30,000
B. $35,000
C. $32,500
D. $65,000 - CORRECT ANSWER✔✔B. $35,000
The key to this question is to recognize that the margin requirement on the shares is different
than the margin requirement on the options. Since the $60,000 stock purchase is being made in
a margin account, Regulation T requires the customer to deposit 50% of the purchase, which is
$30,000 ($60,000 x 50%). However, since options cannot be purchased on margin, the contracts
must be paid for in full. Therefore, the full $5,000 option premium payment is required. When
the two requirements are added together the customer's required deposit is $35,000.
A written customer complaint that's received by a member firm must be:
A. Reviewed and initialed by a principal
B. Handled by the registered representative to whom it's directed
C. Forwarded to FINRA
D. Reviewed and initialed by the registered representative to whom it's directed - CORRECT
ANSWER✔✔A. Reviewed and initialed by a principal
The original complaint must be reviewed and initialed by a principal. Thereafter, the complaint
may be forwarded to the registered representative to whom it's directed, but the RR is not
required to initial it. Only certain events trigger the need to forward a complaint to FINRA.
An individual who is bearish or wants protection against a decline in the market will likely:
, A. Buy a put option
B. Sell a put option
C. Buy a call option
D. Write an uncovered call - CORRECT ANSWER✔✔A. Buy a put option
An individual who is bearish will buy a put option. If the market declines and the investor
decides to exercise the put, she can purchase the security in the market and then put (sell) it to
the writer at the higher agreed-upon strike price.
A customer owns 2,000 shares of TBDR. She expects a decline in the market and instructs her
registered representative to sell 1,500 shares of the stock. The order ticket would be marked:
A. Sell short
B. Sell short against the box
C. Sell long
D. This transaction cannot be executed - CORRECT ANSWER✔✔C. Sell long
Since the customer owns shares equal to or greater than the amount she plans to sell, the order
ticket would be marked sell long. Sell short is used if the client does not own the security and
will deliver borrowed securities. Selling short against the box is used when a customer with a
long position sells the same security but borrows the stock to effect delivery rather than
delivering the long position. The ticket to sell must still be marked short.
A registered person's FINRA registration has become inactive because her firm is no longer in
business. Unless she becomes employed by another member firm, she will be required to
requalify by examination after:
A. 30 days
B. One year
C. Two years
D. Three years - CORRECT ANSWER✔✔C. Two years
If an individual's registration becomes inactive, she can avoid being required to requalify by
examination if she becomes employed with another member firm within two years. For this
question, the fact that the firm is no longer in business is irrelevant.
With 100% Correct Answers
In a margin account, an investor bought 1,000 shares of RST at $60 and, as a hedge, she also
purchased 10 RST July 60 puts which each had a premium of 5. Based on these transactions,
what is the customer's required deposit?
A. $30,000
B. $35,000
C. $32,500
D. $65,000 - CORRECT ANSWER✔✔B. $35,000
The key to this question is to recognize that the margin requirement on the shares is different
than the margin requirement on the options. Since the $60,000 stock purchase is being made in
a margin account, Regulation T requires the customer to deposit 50% of the purchase, which is
$30,000 ($60,000 x 50%). However, since options cannot be purchased on margin, the contracts
must be paid for in full. Therefore, the full $5,000 option premium payment is required. When
the two requirements are added together the customer's required deposit is $35,000.
A written customer complaint that's received by a member firm must be:
A. Reviewed and initialed by a principal
B. Handled by the registered representative to whom it's directed
C. Forwarded to FINRA
D. Reviewed and initialed by the registered representative to whom it's directed - CORRECT
ANSWER✔✔A. Reviewed and initialed by a principal
The original complaint must be reviewed and initialed by a principal. Thereafter, the complaint
may be forwarded to the registered representative to whom it's directed, but the RR is not
required to initial it. Only certain events trigger the need to forward a complaint to FINRA.
An individual who is bearish or wants protection against a decline in the market will likely:
, A. Buy a put option
B. Sell a put option
C. Buy a call option
D. Write an uncovered call - CORRECT ANSWER✔✔A. Buy a put option
An individual who is bearish will buy a put option. If the market declines and the investor
decides to exercise the put, she can purchase the security in the market and then put (sell) it to
the writer at the higher agreed-upon strike price.
A customer owns 2,000 shares of TBDR. She expects a decline in the market and instructs her
registered representative to sell 1,500 shares of the stock. The order ticket would be marked:
A. Sell short
B. Sell short against the box
C. Sell long
D. This transaction cannot be executed - CORRECT ANSWER✔✔C. Sell long
Since the customer owns shares equal to or greater than the amount she plans to sell, the order
ticket would be marked sell long. Sell short is used if the client does not own the security and
will deliver borrowed securities. Selling short against the box is used when a customer with a
long position sells the same security but borrows the stock to effect delivery rather than
delivering the long position. The ticket to sell must still be marked short.
A registered person's FINRA registration has become inactive because her firm is no longer in
business. Unless she becomes employed by another member firm, she will be required to
requalify by examination after:
A. 30 days
B. One year
C. Two years
D. Three years - CORRECT ANSWER✔✔C. Two years
If an individual's registration becomes inactive, she can avoid being required to requalify by
examination if she becomes employed with another member firm within two years. For this
question, the fact that the firm is no longer in business is irrelevant.
