STC Series 7 Final Exam 2025 With
100% Correct Answers
A registered representative has sent a preliminary prospectus to various clients who have
indicated an interest in a new issue his firm is underwriting. The registered representative is
notified that he has been allocated 500 shares of the new issue. The registered representative
should:
A. Allocate the 500 shares to his most active client
B. Allocate 100 shares each to his best clients
C. Contact all clients who have received a prospectus asking them if they have made a decision
to purchase the new issue that is now available
D. Keep the 500 shares for himself - CORRECT ANSWER✔✔C. Contact all clients who have
received a prospectus asking them if they have made a decision to purchase the new issue that
is now available
The most appropriate action for the registered representative to take is to contact all clients
who have received a prospectus and ask them if they have made a decision to purchase the new
issue that is now available.
Taxable income normally includes:
A. The interest on municipal bonds issued in the state in which the taxpayer lives
B. The taxpayer's annual 401(k) contributions
C. Reinvested dividends paid on a mutual fund investment
D. Any unrealized capital appreciation on stocks that the taxpayer owns - CORRECT
ANSWER✔✔C. Reinvested dividends paid on a mutual fund investment
Taxable income includes income from all sources after all applicable deductions and
adjustments are made. Reinvested dividends must be declared as income and are thus taxable.
Interest on municipal bonds issued in the state in which the owner resides is usually exempt
from both federal and state income taxes. 401(k) contributions are made on a pretax basis and
,are not included in taxable income until the taxpayer begins taking distributions. Unrealized
capital gains on stocks are not included in taxable income.
List from last to first the order of payments if a limited partnership declares bankruptcy.
Secured creditors
General partners
Limited partners
General creditors
A. I, II, III, IV
B. IV, III, II, I
C. II, III, IV, I
D. I, IV, III, II - CORRECT ANSWER✔✔C. II, III, IV, I
If a limited partnership declares bankruptcy, state law provides a priority for settling accounts.
The order for settling accounts is secured creditors, general or unsecured creditors, limited
partners, and last, general partners. Remember that this question is asking for the order from
last to first.
An investor is long 200 shares of ABC stock at $58 and short 1 ABC May 60 call at 2. What is his
breakeven point?
A. $60
B. $62
C. $57
D. $56 - CORRECT ANSWER✔✔C. $57
Since this is a position that involves a stock position PLUS an option position, using the phrase
"call up and put down" will not work to calculate breakeven. For positions like this, the first step
in determining the breakeven point is to calculate the investor's net investment amount. In this
question, the investor paid out a total of $11,600 (200 shares x $58 per share), but received
$200 in premium on the sale of the call. Therefore, the investor's net investment amount is
$11,400. The second step is to recognize that since the investor has a 200 share position, the
$11,400 must be divided by 200 to determine the breakeven point of $57. Theoretically, if ABC
,stock is trading at $57, the investor would lose 1-point per share for each 100 share position
($200 total loss); however, since the call option is out-of-the-money and expires worthless, the
investor would keep the $200 premium. The $200 loss in the stock is offset by the $200 received
in option premium and the investor will break even.
A customer owns stock of a corporation that has declared a $1 dividend to holders of record
Monday, December 22. If the customer wants to sell the stock, but still be entitled to the
dividend, he should sell the stock on:
I. Wednesday, December 17, regular-way settlement
II. Friday, December 19, regular-way settlement
III. Monday, December 22, cash settlement
IV. Tuesday, December 23, cash settlement
A. I or III
B. I or IV
C. II or III
D. II or IV - CORRECT ANSWER✔✔D. II or IV
The customer should sell the stock on Friday, December 19 on a regular-way settlement basis or
on Tuesday, December 23 on a cash settlement basis. Since the record date is Monday,
December 22, the ex-dividend date is Friday, December 19 (i.e., one business day before the
record date). This means that a person who sells the stock on the ex-dividend date will receive
the dividend because, as of this date, the stock is selling without the dividend. Additionally, if
the stock is sold on December 23 on a cash contract basis (which requires a same-day payment
and same-day delivery), the seller will be entitled to receive the dividend. The reason that the
buyer will not receive the dividend in this case is because the last day that a buyer can receive
the dividend on a cash contract basis is on the record date of Monday, December 22.
A municipal offering in which two or more issues of bonds have the same priority of claim
against pledged revenues is referred to as:
A. A double-barreled bond
B. A parity bond
C. A taxable bond
, D. An alternative minimum tax bond - CORRECT ANSWER✔✔B. A parity bond
A parity bond is defined as a revenue bond in which two or more issues have the same claim to
the pledged revenues. A double-barreled bond is one that is backed by a source of revenue as
well as the full faith and credit of an issuer that has taxing power [i.e., a general obligation (GO)
bond issuer].
Structured products may:
I. Offer returns linked to equity securities
II. Not offer returns linked to commodities
III. Not offer returns linked to interest rates
IV. Be formulated to provide principal protection
A. I and III
B. I and IV
C. II and III
D. II and IV - CORRECT ANSWER✔✔B. I and IV
Structured products are prepackaged securities that often combine securities, such as a bond
with a derivative. The structured security may be linked to equity securities, commodities, or
interest rates. The products may also be structured to provide principal protection. Structured
products are not bank deposits and are not insured by the Federal Deposit Insurance
Corporation (FDIC). This fact should be disclosed by an RR when offering this product to clients.
The federal tax exemption for interest earned on an industrial revenue bond is NOT available if
the:
A. Holder of the bond is a substantial user of the facility
B. Issuer does not subscribe to equal opportunity employer standards
C. Bonds are not approved by the MSRB
D. Underwriter has a control relationship with the issuer - CORRECT ANSWER✔✔A. Holder of
the bond is a substantial user of the facility
100% Correct Answers
A registered representative has sent a preliminary prospectus to various clients who have
indicated an interest in a new issue his firm is underwriting. The registered representative is
notified that he has been allocated 500 shares of the new issue. The registered representative
should:
A. Allocate the 500 shares to his most active client
B. Allocate 100 shares each to his best clients
C. Contact all clients who have received a prospectus asking them if they have made a decision
to purchase the new issue that is now available
D. Keep the 500 shares for himself - CORRECT ANSWER✔✔C. Contact all clients who have
received a prospectus asking them if they have made a decision to purchase the new issue that
is now available
The most appropriate action for the registered representative to take is to contact all clients
who have received a prospectus and ask them if they have made a decision to purchase the new
issue that is now available.
Taxable income normally includes:
A. The interest on municipal bonds issued in the state in which the taxpayer lives
B. The taxpayer's annual 401(k) contributions
C. Reinvested dividends paid on a mutual fund investment
D. Any unrealized capital appreciation on stocks that the taxpayer owns - CORRECT
ANSWER✔✔C. Reinvested dividends paid on a mutual fund investment
Taxable income includes income from all sources after all applicable deductions and
adjustments are made. Reinvested dividends must be declared as income and are thus taxable.
Interest on municipal bonds issued in the state in which the owner resides is usually exempt
from both federal and state income taxes. 401(k) contributions are made on a pretax basis and
,are not included in taxable income until the taxpayer begins taking distributions. Unrealized
capital gains on stocks are not included in taxable income.
List from last to first the order of payments if a limited partnership declares bankruptcy.
Secured creditors
General partners
Limited partners
General creditors
A. I, II, III, IV
B. IV, III, II, I
C. II, III, IV, I
D. I, IV, III, II - CORRECT ANSWER✔✔C. II, III, IV, I
If a limited partnership declares bankruptcy, state law provides a priority for settling accounts.
The order for settling accounts is secured creditors, general or unsecured creditors, limited
partners, and last, general partners. Remember that this question is asking for the order from
last to first.
An investor is long 200 shares of ABC stock at $58 and short 1 ABC May 60 call at 2. What is his
breakeven point?
A. $60
B. $62
C. $57
D. $56 - CORRECT ANSWER✔✔C. $57
Since this is a position that involves a stock position PLUS an option position, using the phrase
"call up and put down" will not work to calculate breakeven. For positions like this, the first step
in determining the breakeven point is to calculate the investor's net investment amount. In this
question, the investor paid out a total of $11,600 (200 shares x $58 per share), but received
$200 in premium on the sale of the call. Therefore, the investor's net investment amount is
$11,400. The second step is to recognize that since the investor has a 200 share position, the
$11,400 must be divided by 200 to determine the breakeven point of $57. Theoretically, if ABC
,stock is trading at $57, the investor would lose 1-point per share for each 100 share position
($200 total loss); however, since the call option is out-of-the-money and expires worthless, the
investor would keep the $200 premium. The $200 loss in the stock is offset by the $200 received
in option premium and the investor will break even.
A customer owns stock of a corporation that has declared a $1 dividend to holders of record
Monday, December 22. If the customer wants to sell the stock, but still be entitled to the
dividend, he should sell the stock on:
I. Wednesday, December 17, regular-way settlement
II. Friday, December 19, regular-way settlement
III. Monday, December 22, cash settlement
IV. Tuesday, December 23, cash settlement
A. I or III
B. I or IV
C. II or III
D. II or IV - CORRECT ANSWER✔✔D. II or IV
The customer should sell the stock on Friday, December 19 on a regular-way settlement basis or
on Tuesday, December 23 on a cash settlement basis. Since the record date is Monday,
December 22, the ex-dividend date is Friday, December 19 (i.e., one business day before the
record date). This means that a person who sells the stock on the ex-dividend date will receive
the dividend because, as of this date, the stock is selling without the dividend. Additionally, if
the stock is sold on December 23 on a cash contract basis (which requires a same-day payment
and same-day delivery), the seller will be entitled to receive the dividend. The reason that the
buyer will not receive the dividend in this case is because the last day that a buyer can receive
the dividend on a cash contract basis is on the record date of Monday, December 22.
A municipal offering in which two or more issues of bonds have the same priority of claim
against pledged revenues is referred to as:
A. A double-barreled bond
B. A parity bond
C. A taxable bond
, D. An alternative minimum tax bond - CORRECT ANSWER✔✔B. A parity bond
A parity bond is defined as a revenue bond in which two or more issues have the same claim to
the pledged revenues. A double-barreled bond is one that is backed by a source of revenue as
well as the full faith and credit of an issuer that has taxing power [i.e., a general obligation (GO)
bond issuer].
Structured products may:
I. Offer returns linked to equity securities
II. Not offer returns linked to commodities
III. Not offer returns linked to interest rates
IV. Be formulated to provide principal protection
A. I and III
B. I and IV
C. II and III
D. II and IV - CORRECT ANSWER✔✔B. I and IV
Structured products are prepackaged securities that often combine securities, such as a bond
with a derivative. The structured security may be linked to equity securities, commodities, or
interest rates. The products may also be structured to provide principal protection. Structured
products are not bank deposits and are not insured by the Federal Deposit Insurance
Corporation (FDIC). This fact should be disclosed by an RR when offering this product to clients.
The federal tax exemption for interest earned on an industrial revenue bond is NOT available if
the:
A. Holder of the bond is a substantial user of the facility
B. Issuer does not subscribe to equal opportunity employer standards
C. Bonds are not approved by the MSRB
D. Underwriter has a control relationship with the issuer - CORRECT ANSWER✔✔A. Holder of
the bond is a substantial user of the facility
