STC Series 7 Final Exam 2025 With
100% Correct Answers
A registered representative is reviewing a corporation's financial statements. Which TWO of the
following statements are TRUE concerning an issuer's bond interest expense?
I. The annual interest payments are found on the balance sheet
II. The annual interest payments are found on the income statement
III. The interest payment is deducted from net income
IV. The interest payment is deducted from EBIT
A. I and III
B. I and IV
C. II and III
D. II and IV - CORRECT ANSWER✔✔D. II and IV
A customer is willing to accept a partial execution on an order to buy up to 800 shares of XYZ
stock at 30. If the client does not want the unexecuted portion to be left open, this order should
be entered as:
A. A fund of hedge funds may charge a fee in addition to the fees charged by the hedge fund
managers
B. A fund of hedge funds must allocate assets to a minimum of 35 different hedge fund manager
C. Since assets are diversified, the fund of hedge funds is suitable for all investors
D. A fund of hedge funds must restrict hedge fund managers to investing only in securities listed
on U.S. exchanges - CORRECT ANSWER✔✔A. A fund of hedge funds may charge a fee in
addition to the fees charged by the hedge fund managers
A fund of hedge funds pools investors' money and allocates it to hedge fund managers. The
fund of hedge funds may charge a fee in addition to the fee charged by the hedge fund
managers. There is no requirement that it use a specific number of managers. Hedge fund
managers are not limited to investing in securities listed on U.S. exchanges. They may use a
,broad range of investment strategies that include different asset classes, selling short,
derivatives, and the use of leverage. A fund of hedge funds may not be suitable for all investors.
A customer is willing to accept a partial execution on an order to buy up to 800 shares of XYZ
stock at 30. If the client does not want the unexecuted portion to be left open, this order should
be entered as:
A. Buy 800 XYZ NH
B. Buy 800 XYZ at 30 IOC
C. Buy 800 XYZ at 30 Day Order
D. Buy 800 XYZ at 30 GTC - CORRECT ANSWER✔✔B. Buy 800 XYZ at 30 IOC
An immediate-or-cancel (IOC) order must be executed immediately but does not need to be
executed in its entirety. Part of the order may be executed. The unexecuted portion of a day
order or a GTC order is placed on the designated market maker's book. A not-held (NH) order
gives the floor broker discretion as to when to execute the order.
An investor purchases 200 shares of STC at $35 and subsequently purchases 2 STC Jan 35 puts at
2. At what market price must STC trade for the investor to have a profit?
A. 32
B. 34
C. 36
D. 38 - CORRECT ANSWER✔✔D. 38
If an investor is long stock and long a put, he will have a profit if the market price exceeds the
cost of his stock plus the premium for the option. The stock must trade above 37 (35 cost + 2
premium).
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?
A. $10.00
B. $11.60
, C. $11.00
D. $12.00 - CORRECT ANSWER✔✔B. $11.60
The first step in determining the parity price for a convertible security is to find the conversion
ratio (i.e., the number of common shares to be received if the preferred stock is converted). The
conversion ratio is calculated by dividing the par value of the preferred stock ($100) by the
conversion price ($10). As a result, the stock is convertible into 10 shares of common stock
($100 ÷ $10). To find the parity price of the common stock, the current market price of the
preferred stock ($116) is divided by the conversion ratio (10 shares). Therefore, the parity price
is $11.60 per share.
An individual has annuitized her variable annuity contract and has begun receiving payments.
She decides she would rather start a withdrawal program, no longer annuitizing the contract. As
her registered representative, you may inform her that:
A. She may make this change without restriction
B. Once annuitized, she may no longer make a change
C. Once annuitized, she may change only the settlement option
D. She is limitied to a 1035 exchange - CORRECT ANSWER✔✔B. Once annuitized, she may no
longer make a change
Once a variable annuity has been annuitized, changes are not permitted. A 1035 exchange is
switching from one annuity to another during the accumulation period.
If a customer places an order to buy bonds at 104 net, it indicates that the customer:
A. Is short the bonds and is placing a stop order
B. Will buy at 104 plus be charged a commission
C. Will buy at 104 plus be charged a markup
D. Wants to pay a maximum of 104 including any markup or commission - CORRECT
ANSWER✔✔B. Will buy at 104 plus be charged a commission
An order to buy at 104 net indicates the customer wants to pay a total of 104 including any
markup or commission.
100% Correct Answers
A registered representative is reviewing a corporation's financial statements. Which TWO of the
following statements are TRUE concerning an issuer's bond interest expense?
I. The annual interest payments are found on the balance sheet
II. The annual interest payments are found on the income statement
III. The interest payment is deducted from net income
IV. The interest payment is deducted from EBIT
A. I and III
B. I and IV
C. II and III
D. II and IV - CORRECT ANSWER✔✔D. II and IV
A customer is willing to accept a partial execution on an order to buy up to 800 shares of XYZ
stock at 30. If the client does not want the unexecuted portion to be left open, this order should
be entered as:
A. A fund of hedge funds may charge a fee in addition to the fees charged by the hedge fund
managers
B. A fund of hedge funds must allocate assets to a minimum of 35 different hedge fund manager
C. Since assets are diversified, the fund of hedge funds is suitable for all investors
D. A fund of hedge funds must restrict hedge fund managers to investing only in securities listed
on U.S. exchanges - CORRECT ANSWER✔✔A. A fund of hedge funds may charge a fee in
addition to the fees charged by the hedge fund managers
A fund of hedge funds pools investors' money and allocates it to hedge fund managers. The
fund of hedge funds may charge a fee in addition to the fee charged by the hedge fund
managers. There is no requirement that it use a specific number of managers. Hedge fund
managers are not limited to investing in securities listed on U.S. exchanges. They may use a
,broad range of investment strategies that include different asset classes, selling short,
derivatives, and the use of leverage. A fund of hedge funds may not be suitable for all investors.
A customer is willing to accept a partial execution on an order to buy up to 800 shares of XYZ
stock at 30. If the client does not want the unexecuted portion to be left open, this order should
be entered as:
A. Buy 800 XYZ NH
B. Buy 800 XYZ at 30 IOC
C. Buy 800 XYZ at 30 Day Order
D. Buy 800 XYZ at 30 GTC - CORRECT ANSWER✔✔B. Buy 800 XYZ at 30 IOC
An immediate-or-cancel (IOC) order must be executed immediately but does not need to be
executed in its entirety. Part of the order may be executed. The unexecuted portion of a day
order or a GTC order is placed on the designated market maker's book. A not-held (NH) order
gives the floor broker discretion as to when to execute the order.
An investor purchases 200 shares of STC at $35 and subsequently purchases 2 STC Jan 35 puts at
2. At what market price must STC trade for the investor to have a profit?
A. 32
B. 34
C. 36
D. 38 - CORRECT ANSWER✔✔D. 38
If an investor is long stock and long a put, he will have a profit if the market price exceeds the
cost of his stock plus the premium for the option. The stock must trade above 37 (35 cost + 2
premium).
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?
A. $10.00
B. $11.60
, C. $11.00
D. $12.00 - CORRECT ANSWER✔✔B. $11.60
The first step in determining the parity price for a convertible security is to find the conversion
ratio (i.e., the number of common shares to be received if the preferred stock is converted). The
conversion ratio is calculated by dividing the par value of the preferred stock ($100) by the
conversion price ($10). As a result, the stock is convertible into 10 shares of common stock
($100 ÷ $10). To find the parity price of the common stock, the current market price of the
preferred stock ($116) is divided by the conversion ratio (10 shares). Therefore, the parity price
is $11.60 per share.
An individual has annuitized her variable annuity contract and has begun receiving payments.
She decides she would rather start a withdrawal program, no longer annuitizing the contract. As
her registered representative, you may inform her that:
A. She may make this change without restriction
B. Once annuitized, she may no longer make a change
C. Once annuitized, she may change only the settlement option
D. She is limitied to a 1035 exchange - CORRECT ANSWER✔✔B. Once annuitized, she may no
longer make a change
Once a variable annuity has been annuitized, changes are not permitted. A 1035 exchange is
switching from one annuity to another during the accumulation period.
If a customer places an order to buy bonds at 104 net, it indicates that the customer:
A. Is short the bonds and is placing a stop order
B. Will buy at 104 plus be charged a commission
C. Will buy at 104 plus be charged a markup
D. Wants to pay a maximum of 104 including any markup or commission - CORRECT
ANSWER✔✔B. Will buy at 104 plus be charged a commission
An order to buy at 104 net indicates the customer wants to pay a total of 104 including any
markup or commission.
