STC Series 7 Greenlight Exam 2025
With 100% Correct Answers
Which of the following choices is Moody's lowest rating for a municipal note?
A. MIG 1
B. MIG 3
C. Aaa
D. C - CORRECT ANSWER✔✔B. MIG 3
MIG stands for Moody's Investment Grade and is used to rate municipal notes. There are three
MIG ratings, with the best rating being MIG 1 and the lowest rating being MIG 3. Aaa is Moody's
best rating for bonds, and C is its lowest rating for bonds.
An investor purchases 10 two-year ABC puts @ 12.25. The dollar amount the investor will pay is:
A. $122.50
B. $1,225.00
C. $12,250.00
D. $122,500.00 - CORRECT ANSWER✔✔C. $12,250.00
The cost of a long-term equity option is found by multiplying the premium quote by $100. The
cost of 10 puts quoted at 12.25 is, therefore, $12,250 (12.25 x $100 x 10 = $12,250).
According to Regulation T, when purchasing an option contract the transaction must be paid for
within:
A. 1 business day
B. 3 business days
C. 4 business days
D. 7 business days - CORRECT ANSWER✔✔C. 4 business days
,According to Regulation T, securities must be paid for within 2 business days of the standard
(regular-way) settlement date. Since regular-way settlement is two business days, payment is
required within four business days from the trade date. Although option transactions settle next
day, the customer has four business days to pay for a purchase.
If an issuer is seeking an exemption from the registration provisions of the Securities Act of 1933
under Regulation D (the private placement exemption), which TWO of the following statements
are TRUE?
I. The purchasers must sign an investment letter attesting to the fact that resales of the
securities are restricted
II. The size of the offering must be limited
III. The number of accredited buyers is unlimited
IV. The issuer must file a registration statement with the SEC
A. I and III
B. I and IV
C. II and III
D. II and IV - CORRECT ANSWER✔✔A. I and III
According to the Regulation D private placement exemption, certain conditions must be met for
the securities to be exempt from the registration provisions of the Securities Act of 1933. The
offering must be restricted to persons who are knowledgeable and experienced in business and
financial matters and who are able to afford the economic risks involved. The issuer must
provide the buyer with detailed financial information (this offering document is not required to
be filed with the SEC). In a private placement, the number of non-accredited buyers must be
limited to 35 and the offering must be directly negotiated between the issuer and the buyer or
his purchaser representative. Also, the buyer must sign an investment letter which states that
the purchase is being made for investment purposes and not for a short-term resale. To answer
this question correctly, it is important to note that the size of the offering is unlimited and that
there is no limit to the number of accredited buyers that are involved.
Which method of calculating taxes on an investment typically offers an investor the lowest
amount of tax on a capital gain when shares of stock are sold?
A. Specific identification
,B. First in, first out (FIFO)
C. Last in, first out (LIFO)
D. Average cost - CORRECT ANSWER✔✔A. Specific identification
The IRS only recognizes two methods for calculating gains or losses on stock transactions—FIFO
and specific identification (versus the purchase of). Many brokerage firms may allow alternative
methods, such as LIFO, which is a variation of specific identification. Average cost may only be
used for sales of mutual fund shares. Although LIFO could offer a lower gain if the price of a
security was rising, that gain may be considered short-term and taxed at a higher rate.
Therefore, the specific identification method is the best choice for an investor who's seeking the
lowest amount of tax.
Which of the following ratios would be used by an analyst examining the capital structure of an
industrial corporation?
A. The current ratio
B. The dividend payout ratio
C. The price/earnings ratio
D. The debt-to-equity ratio - CORRECT ANSWER✔✔D. The debt-to-equity ratio
The capital structure of a corporation is the dollar amount of the corporation's capitalization
(equity and debt securities). An analyst will, therefore, be interested in the debt-to-equity ratio.
This is actually the ratio of those securities creating fixed charges (bonds plus preferred stock) to
common stock.
Which of the following Moody's rated bonds are considered speculative?
A. Aaa
B. Aa
C. Baa
D. Ba - CORRECT ANSWER✔✔D. Ba
The top-4 Moody's ratings, Aaa, Aa, A, and Baa, are termed investment-grade (basically
nonspeculative or high-grade). Ratings lower than Baa (such as Ba) are considered speculative
, or non-investment-grade. The investment-grade category in S&P ratings includes AAA, AA, A,
and BBB.
Which of the following statements is NOT TRUE for a bond trading at a premium?
A. The bond will trade with the current yield lower than the nominal yield.
B. The bond will trade at a basis below its coupon rate.
C. The bond will have a current yield that is higher than the yield basis.
D. The basis and coupon will be identical. - CORRECT ANSWER✔✔D. The basis and coupon will
be identical.
Basis is a different way of saying yield to maturity. In the case of a bond trading at a premium,
the nominal yield (coupon) will be higher than the current yield and the yield to maturity
(basis). Additionally, the current yield will be larger than the yield to maturity.
An investor purchasing a reverse convertible security would be MOST interested in:
A. Preservation of capital
B. High current income
C. Capital appreciation
D. Conservative income - CORRECT ANSWER✔✔B. High current income
An investor purchasing a reverse convertible security is seeking an above-market coupon rate.
Reverse convertible securities are short-term notes issued by banks and broker-dealers that
usually pay a coupon rate above prevailing market rates. They are considered structured
products because, in addition to the coupon rate, the investor may be required to purchase
shares of an underlying asset at a fixed price. The underlying asset may be an equity security
unrelated to the issuer, or a basket of stock, or an index. The issuer agrees to pay this higher
coupon rate since it has an option to sell a security to the investor if the price of the security
falls below a specified value known as the knock-in level. If the price of the underlying asset
stays above the knock-in level, the investor will receive the high coupon and the full return of
her principal (the most beneficial option). The investor will not be able to participate if the
underlying asset increased. If the underlying asset falls below the knock-in level, the investor
will be obligated to purchase shares of the underlying asset at a fixed price. The price of this
asset may have depreciated below the knock-in level and the investor may receive substantially
less than the original principal.
With 100% Correct Answers
Which of the following choices is Moody's lowest rating for a municipal note?
A. MIG 1
B. MIG 3
C. Aaa
D. C - CORRECT ANSWER✔✔B. MIG 3
MIG stands for Moody's Investment Grade and is used to rate municipal notes. There are three
MIG ratings, with the best rating being MIG 1 and the lowest rating being MIG 3. Aaa is Moody's
best rating for bonds, and C is its lowest rating for bonds.
An investor purchases 10 two-year ABC puts @ 12.25. The dollar amount the investor will pay is:
A. $122.50
B. $1,225.00
C. $12,250.00
D. $122,500.00 - CORRECT ANSWER✔✔C. $12,250.00
The cost of a long-term equity option is found by multiplying the premium quote by $100. The
cost of 10 puts quoted at 12.25 is, therefore, $12,250 (12.25 x $100 x 10 = $12,250).
According to Regulation T, when purchasing an option contract the transaction must be paid for
within:
A. 1 business day
B. 3 business days
C. 4 business days
D. 7 business days - CORRECT ANSWER✔✔C. 4 business days
,According to Regulation T, securities must be paid for within 2 business days of the standard
(regular-way) settlement date. Since regular-way settlement is two business days, payment is
required within four business days from the trade date. Although option transactions settle next
day, the customer has four business days to pay for a purchase.
If an issuer is seeking an exemption from the registration provisions of the Securities Act of 1933
under Regulation D (the private placement exemption), which TWO of the following statements
are TRUE?
I. The purchasers must sign an investment letter attesting to the fact that resales of the
securities are restricted
II. The size of the offering must be limited
III. The number of accredited buyers is unlimited
IV. The issuer must file a registration statement with the SEC
A. I and III
B. I and IV
C. II and III
D. II and IV - CORRECT ANSWER✔✔A. I and III
According to the Regulation D private placement exemption, certain conditions must be met for
the securities to be exempt from the registration provisions of the Securities Act of 1933. The
offering must be restricted to persons who are knowledgeable and experienced in business and
financial matters and who are able to afford the economic risks involved. The issuer must
provide the buyer with detailed financial information (this offering document is not required to
be filed with the SEC). In a private placement, the number of non-accredited buyers must be
limited to 35 and the offering must be directly negotiated between the issuer and the buyer or
his purchaser representative. Also, the buyer must sign an investment letter which states that
the purchase is being made for investment purposes and not for a short-term resale. To answer
this question correctly, it is important to note that the size of the offering is unlimited and that
there is no limit to the number of accredited buyers that are involved.
Which method of calculating taxes on an investment typically offers an investor the lowest
amount of tax on a capital gain when shares of stock are sold?
A. Specific identification
,B. First in, first out (FIFO)
C. Last in, first out (LIFO)
D. Average cost - CORRECT ANSWER✔✔A. Specific identification
The IRS only recognizes two methods for calculating gains or losses on stock transactions—FIFO
and specific identification (versus the purchase of). Many brokerage firms may allow alternative
methods, such as LIFO, which is a variation of specific identification. Average cost may only be
used for sales of mutual fund shares. Although LIFO could offer a lower gain if the price of a
security was rising, that gain may be considered short-term and taxed at a higher rate.
Therefore, the specific identification method is the best choice for an investor who's seeking the
lowest amount of tax.
Which of the following ratios would be used by an analyst examining the capital structure of an
industrial corporation?
A. The current ratio
B. The dividend payout ratio
C. The price/earnings ratio
D. The debt-to-equity ratio - CORRECT ANSWER✔✔D. The debt-to-equity ratio
The capital structure of a corporation is the dollar amount of the corporation's capitalization
(equity and debt securities). An analyst will, therefore, be interested in the debt-to-equity ratio.
This is actually the ratio of those securities creating fixed charges (bonds plus preferred stock) to
common stock.
Which of the following Moody's rated bonds are considered speculative?
A. Aaa
B. Aa
C. Baa
D. Ba - CORRECT ANSWER✔✔D. Ba
The top-4 Moody's ratings, Aaa, Aa, A, and Baa, are termed investment-grade (basically
nonspeculative or high-grade). Ratings lower than Baa (such as Ba) are considered speculative
, or non-investment-grade. The investment-grade category in S&P ratings includes AAA, AA, A,
and BBB.
Which of the following statements is NOT TRUE for a bond trading at a premium?
A. The bond will trade with the current yield lower than the nominal yield.
B. The bond will trade at a basis below its coupon rate.
C. The bond will have a current yield that is higher than the yield basis.
D. The basis and coupon will be identical. - CORRECT ANSWER✔✔D. The basis and coupon will
be identical.
Basis is a different way of saying yield to maturity. In the case of a bond trading at a premium,
the nominal yield (coupon) will be higher than the current yield and the yield to maturity
(basis). Additionally, the current yield will be larger than the yield to maturity.
An investor purchasing a reverse convertible security would be MOST interested in:
A. Preservation of capital
B. High current income
C. Capital appreciation
D. Conservative income - CORRECT ANSWER✔✔B. High current income
An investor purchasing a reverse convertible security is seeking an above-market coupon rate.
Reverse convertible securities are short-term notes issued by banks and broker-dealers that
usually pay a coupon rate above prevailing market rates. They are considered structured
products because, in addition to the coupon rate, the investor may be required to purchase
shares of an underlying asset at a fixed price. The underlying asset may be an equity security
unrelated to the issuer, or a basket of stock, or an index. The issuer agrees to pay this higher
coupon rate since it has an option to sell a security to the investor if the price of the security
falls below a specified value known as the knock-in level. If the price of the underlying asset
stays above the knock-in level, the investor will receive the high coupon and the full return of
her principal (the most beneficial option). The investor will not be able to participate if the
underlying asset increased. If the underlying asset falls below the knock-in level, the investor
will be obligated to purchase shares of the underlying asset at a fixed price. The price of this
asset may have depreciated below the knock-in level and the investor may receive substantially
less than the original principal.
