STC Series 7 Final Exam 2025 With
100% Correct Answers
Which of the following research reports is NOT required to be approved by a principal of a
broker-dealer that's distributing the report? - CORRECT ANSWER✔✔Independent third-party
research
Which of the following calculations describes the payout on a variable annuity? - CORRECT
ANSWER✔✔A fixed number of annuity units multiplied by a variable dollar amount
In order to be eligible for portfolio margin, a client must: - CORRECT ANSWER✔✔Be approved
for uncovered writing
A direct participation program in undeveloped land is considered: - CORRECT
ANSWER✔✔Speculative
A customer is short 100 ABC at $120. The market is moving up sharply and the customer
decides to cover her short position. The customer instructs her registered representative to
cover the short position at the market on the close. The order: - CORRECT ANSWER✔✔Will be
executed as close as possible to the closing price
A convertible preferred stock is convertible at $10, pays a 4% annual dividend, is callable at
$110, and is trading at a current market price of $116. Based on these details, what is the parity
price of the common stock? - CORRECT ANSWER✔✔$11.60
An investor shorted stock at $55 and the stock is now trading at $30. It's currently March and
the investor is concerned that the stock may rise over the next six months and then decline
again thereafter. What should the investor do? - CORRECT ANSWER✔✔Buy an October 30 call
,A client is interested in obtaining the expense ratio of a mutual fund recommended by the RR.
Which of the following actions would be BEST for the RR to take? - CORRECT
ANSWER✔✔Inform the client that this information may be obtained by reviewing the front of
the fund's prospectus
A customer who's in his late 20s wants capital appreciation and tax-deferred growth. He's
willing to take a moderate degree of risk in his initial investment, but is concerned about the
inflationary risk to his portfolio. Which of the following investments is MOST suitable? -
CORRECT ANSWER✔✔Variable annuities
Define CAPM. - CORRECT ANSWER✔✔CAPM is the capital asset pricing model, and it is a model
designed to find the expected return on an investment and therefore the appropriate discount
rate for a company's cash flows. It provides the required rate of return given the riskiness of the
asset.
During an inflationary period when interest rates are rising, the market value of existing bonds
would: - CORRECT ANSWER✔✔Decrease
The record date of a company's cash dividend is Thursday, October 7. Before what date must a
customer purchase this company's stock to be entitled to receive the dividend? - CORRECT
ANSWER✔✔Wednesday, October 6
An investor owns 12,000 shares of restricted stock. There are 1,000,000 shares outstanding and
the stock's average weekly trading volume over the previous four weeks is 4,000 shares. After
filing Form 144, if the client had sold 2,000 shares one month ago, how many shares could be
sold today? - CORRECT ANSWER✔✔8,000
When a margin requirement is designed to consider that the risk of one position is offset by
another position, i.e., having a long S&P 400 position offset by a short S&P 100 position, this
approach to calculating a margin requirement is considered: - CORRECT ANSWER✔✔Portfolio-
based
, An equity security that is distributed under the provisions of Regulation S may be resold in U.S.
markets: - CORRECT ANSWER✔✔After a one-year waiting period is satisfied
A customer has a restricted margin account with a debit balance of $7,500. The account is
credited with $1,600 in cash dividends and debited with interest charges of $50. The debit
balance after the adjustments is: - CORRECT ANSWER✔✔$5,950
A municipal bond is currently trading at 92 and is callable in 10 years at par. What is the
effective yield that must be disclosed on a customer's confirmation? - CORRECT
ANSWER✔✔Yield to maturity
For how long must an account record be maintained after a joint owner's death and the account
is moved to the survivor? - CORRECT ANSWER✔✔Six years after the move
Which of the following statements is TRUE concerning a fund of hedge funds? - CORRECT
ANSWER✔✔A fund of hedge funds may charge a fee in addition to the fees charged by the
hedge fund managers
Cash dividends declared by a corporation: - CORRECT ANSWER✔✔Are a current liability to the
corporation when declared
A client has inherited stock from a relative. The relative had originally purchased the stock at
$11 per share, which had a current market value of $46 per share at the time of the inheritance.
If the client sells that stock at some later date for $50 per share, what cost basis will be used to
determine the gain or loss? - CORRECT ANSWER✔✔$46
When securities are inherited, the cost basis is stepped up to the current market value at the
time of death. In this case, it is $46. In addition, the inherited security will be considered to be
held long term regardless of the holding period of the recipient.
100% Correct Answers
Which of the following research reports is NOT required to be approved by a principal of a
broker-dealer that's distributing the report? - CORRECT ANSWER✔✔Independent third-party
research
Which of the following calculations describes the payout on a variable annuity? - CORRECT
ANSWER✔✔A fixed number of annuity units multiplied by a variable dollar amount
In order to be eligible for portfolio margin, a client must: - CORRECT ANSWER✔✔Be approved
for uncovered writing
A direct participation program in undeveloped land is considered: - CORRECT
ANSWER✔✔Speculative
A customer is short 100 ABC at $120. The market is moving up sharply and the customer
decides to cover her short position. The customer instructs her registered representative to
cover the short position at the market on the close. The order: - CORRECT ANSWER✔✔Will be
executed as close as possible to the closing price
A convertible preferred stock is convertible at $10, pays a 4% annual dividend, is callable at
$110, and is trading at a current market price of $116. Based on these details, what is the parity
price of the common stock? - CORRECT ANSWER✔✔$11.60
An investor shorted stock at $55 and the stock is now trading at $30. It's currently March and
the investor is concerned that the stock may rise over the next six months and then decline
again thereafter. What should the investor do? - CORRECT ANSWER✔✔Buy an October 30 call
,A client is interested in obtaining the expense ratio of a mutual fund recommended by the RR.
Which of the following actions would be BEST for the RR to take? - CORRECT
ANSWER✔✔Inform the client that this information may be obtained by reviewing the front of
the fund's prospectus
A customer who's in his late 20s wants capital appreciation and tax-deferred growth. He's
willing to take a moderate degree of risk in his initial investment, but is concerned about the
inflationary risk to his portfolio. Which of the following investments is MOST suitable? -
CORRECT ANSWER✔✔Variable annuities
Define CAPM. - CORRECT ANSWER✔✔CAPM is the capital asset pricing model, and it is a model
designed to find the expected return on an investment and therefore the appropriate discount
rate for a company's cash flows. It provides the required rate of return given the riskiness of the
asset.
During an inflationary period when interest rates are rising, the market value of existing bonds
would: - CORRECT ANSWER✔✔Decrease
The record date of a company's cash dividend is Thursday, October 7. Before what date must a
customer purchase this company's stock to be entitled to receive the dividend? - CORRECT
ANSWER✔✔Wednesday, October 6
An investor owns 12,000 shares of restricted stock. There are 1,000,000 shares outstanding and
the stock's average weekly trading volume over the previous four weeks is 4,000 shares. After
filing Form 144, if the client had sold 2,000 shares one month ago, how many shares could be
sold today? - CORRECT ANSWER✔✔8,000
When a margin requirement is designed to consider that the risk of one position is offset by
another position, i.e., having a long S&P 400 position offset by a short S&P 100 position, this
approach to calculating a margin requirement is considered: - CORRECT ANSWER✔✔Portfolio-
based
, An equity security that is distributed under the provisions of Regulation S may be resold in U.S.
markets: - CORRECT ANSWER✔✔After a one-year waiting period is satisfied
A customer has a restricted margin account with a debit balance of $7,500. The account is
credited with $1,600 in cash dividends and debited with interest charges of $50. The debit
balance after the adjustments is: - CORRECT ANSWER✔✔$5,950
A municipal bond is currently trading at 92 and is callable in 10 years at par. What is the
effective yield that must be disclosed on a customer's confirmation? - CORRECT
ANSWER✔✔Yield to maturity
For how long must an account record be maintained after a joint owner's death and the account
is moved to the survivor? - CORRECT ANSWER✔✔Six years after the move
Which of the following statements is TRUE concerning a fund of hedge funds? - CORRECT
ANSWER✔✔A fund of hedge funds may charge a fee in addition to the fees charged by the
hedge fund managers
Cash dividends declared by a corporation: - CORRECT ANSWER✔✔Are a current liability to the
corporation when declared
A client has inherited stock from a relative. The relative had originally purchased the stock at
$11 per share, which had a current market value of $46 per share at the time of the inheritance.
If the client sells that stock at some later date for $50 per share, what cost basis will be used to
determine the gain or loss? - CORRECT ANSWER✔✔$46
When securities are inherited, the cost basis is stepped up to the current market value at the
time of death. In this case, it is $46. In addition, the inherited security will be considered to be
held long term regardless of the holding period of the recipient.
