STC Series 7 Progress Exam 4A 2025
With 100% Correct Answers
A confirmation must be sent to a customer no later than:
A. The trade date
B. The business day after the settlement date
C. The completion of the trade
D. Two business days after the settlement date - CORRECT ANSWER✔✔C. The completion of the
trade
A broker-dealer must send a confirmation to a customer at or before the completion of the
transaction, which is usually the settlement date.
Which of the following statements is TRUE concerning the reporting of riskless principal and net
basis transactions?
A. A riskless principal transaction may be reported to FINRA as one transaction, but net basis
transactions require two separate reports.
B. Net basis transactions may be reported as one transaction, but a riskless principal transaction
requires two separate reports.
C. Both riskless principal and net basis transactions may be reported as one transaction.
D. Both riskless principal and net basis transactions require two separate trade reports. -
CORRECT ANSWER✔✔A. A riskless principal transaction may be reported to FINRA as one
transaction, but net basis transactions require two separate reports.
A riskless principal transaction is a trade in which a broker-dealer executes a customer's order
that it's holding by buying (or selling) a security and then simultaneously selling (or buying) that
security for the customer at the same price (plus a markup, which must be disclosed to the
customer). A securities transaction for a riskless principal trade is reported under a single
report. A net basis transaction involves a broker-dealer filling a customer's order that it's holding
by buying (or selling) a security at one price and selling (or buying) that security for a customer
at a different price. (Only the net price is disclosed to the customer.) A net basis trade requires
, two separate reports. There are specific consent requirements for a broker-dealer to engage in
net basis trading with customers. Customer consent varies depending on whether the customer
is institutional or retail.
The market price of XYZ Company's stock is $60. The price-earnings ratio is 10 and earnings per
share is $6.00. If the stock were to split 2-for-1, which of the following statements are TRUE?
1. The price-earnings ratio will be reduced to 5
2. The price-earnings ratio will remain at 10
3. The earnings per share will be reduced to $3.00
4. The earnings per share will remain at $6.00
A. I and III
B. I and IV
C. II and III
D. II and IV - CORRECT ANSWER✔✔C. II and III
A stock split will increase the number of shares outstanding while decreasing the market price
of the stock. The split will also have the effect of reducing earnings per share since the number
of shares outstanding will increase. The 2-for-1 split will reduce the market price to $30 ($60 x
1/2) and the earnings per share to $3.00 ($6.00 EPS x 1/2). However, the price-earnings ratio
(market price/EPS), which was 10 before the split, will remain the same since both the market
price and the earnings per share are reduced by the same percentage ($30/$3.00 EPS = 10).
A registration statement has been filed for an upcoming IPO. Your client has expressed interest
in purchasing shares when the issue becomes effective. The client has stated that he would like
to see projections for at least three years, in addition to the current financials. As an investment
banking representative, you could send the client:
A. The preliminary prospectus that contains revenue forecasts for the upcoming three years
B. A sales memo that is marked "for internal use only," provided a preliminary prospectus is
included
C. The preliminary prospectus and an invitation to attend a road show where the company's
management is expected to address business plans
With 100% Correct Answers
A confirmation must be sent to a customer no later than:
A. The trade date
B. The business day after the settlement date
C. The completion of the trade
D. Two business days after the settlement date - CORRECT ANSWER✔✔C. The completion of the
trade
A broker-dealer must send a confirmation to a customer at or before the completion of the
transaction, which is usually the settlement date.
Which of the following statements is TRUE concerning the reporting of riskless principal and net
basis transactions?
A. A riskless principal transaction may be reported to FINRA as one transaction, but net basis
transactions require two separate reports.
B. Net basis transactions may be reported as one transaction, but a riskless principal transaction
requires two separate reports.
C. Both riskless principal and net basis transactions may be reported as one transaction.
D. Both riskless principal and net basis transactions require two separate trade reports. -
CORRECT ANSWER✔✔A. A riskless principal transaction may be reported to FINRA as one
transaction, but net basis transactions require two separate reports.
A riskless principal transaction is a trade in which a broker-dealer executes a customer's order
that it's holding by buying (or selling) a security and then simultaneously selling (or buying) that
security for the customer at the same price (plus a markup, which must be disclosed to the
customer). A securities transaction for a riskless principal trade is reported under a single
report. A net basis transaction involves a broker-dealer filling a customer's order that it's holding
by buying (or selling) a security at one price and selling (or buying) that security for a customer
at a different price. (Only the net price is disclosed to the customer.) A net basis trade requires
, two separate reports. There are specific consent requirements for a broker-dealer to engage in
net basis trading with customers. Customer consent varies depending on whether the customer
is institutional or retail.
The market price of XYZ Company's stock is $60. The price-earnings ratio is 10 and earnings per
share is $6.00. If the stock were to split 2-for-1, which of the following statements are TRUE?
1. The price-earnings ratio will be reduced to 5
2. The price-earnings ratio will remain at 10
3. The earnings per share will be reduced to $3.00
4. The earnings per share will remain at $6.00
A. I and III
B. I and IV
C. II and III
D. II and IV - CORRECT ANSWER✔✔C. II and III
A stock split will increase the number of shares outstanding while decreasing the market price
of the stock. The split will also have the effect of reducing earnings per share since the number
of shares outstanding will increase. The 2-for-1 split will reduce the market price to $30 ($60 x
1/2) and the earnings per share to $3.00 ($6.00 EPS x 1/2). However, the price-earnings ratio
(market price/EPS), which was 10 before the split, will remain the same since both the market
price and the earnings per share are reduced by the same percentage ($30/$3.00 EPS = 10).
A registration statement has been filed for an upcoming IPO. Your client has expressed interest
in purchasing shares when the issue becomes effective. The client has stated that he would like
to see projections for at least three years, in addition to the current financials. As an investment
banking representative, you could send the client:
A. The preliminary prospectus that contains revenue forecasts for the upcoming three years
B. A sales memo that is marked "for internal use only," provided a preliminary prospectus is
included
C. The preliminary prospectus and an invitation to attend a road show where the company's
management is expected to address business plans
