STC Series 7 Progress Exam 3A 2025
With 100% Correct Answers
Which of the following municipal issues is MOST likely be brought to market as a negotiated
issue?
A. General obligation bond
B. Bonds issued by a city
C. School district bond
D. Industrial development revenue bond - CORRECT ANSWER✔✔Revenue issues are generally
brought to market as negotiated issues.
Which of the following statements are TRUE regarding a comparison of strategic versus tactical
asset allocation?
1. Strategic asset allocations are more passive and tactical asset allocations are more frequently
rebalanced.
2. Strategic asset allocation has a long-term outlook, while tactical asset allocation encompasses
short-term decisions.
3. Unlike strategic asset allocators, tactical asset allocators believe that investors can time the
market. - CORRECT ANSWER✔✔A. I and II only
B. I and III only
C. II and III only
D. I, II, and III****
Asset allocation based on a client's risk tolerance and investment objectives is called strategic
asset allocation. In theory, it is the best mix of assets given the client's goals and level of risk
aversion, giving it a long-term outlook. Strategic asset allocators tend to view the market as
efficient and market timing as ineffective. By contrast, those who believe securities markets are
not perfectly efficient may try to use an active strategy to alter the portfolio's asset mix, to take
advantage of anticipated economic events. This market timing approach is sometimes called
tactical asset allocation.
, A registered representative is taking over the business of another RR who is leaving the firm.
Upon examining the accounts, the RR notices that the variable annuities owned by many of the
clients have high expenses, mediocre performance, and few investment options. The RR decides
that her first action will be to recommend that these customers redeem the old annuities and
invest in the new Platinum One variable annuity that has substantially lower expenses, higher
long-term performance, and many more subaccounts with varying investment strategies. This
activity is:
A. Known as churning and is strictly prohibited
B. Called switching and is permitted only in those accounts that will not incur a deferred sales
charge
C. Potentially acceptable if the benefits of the new annuity outweigh the possible taxes and
additional sales charges the client might incur
D. Permitted only if the customer signs a switch waiver form - CORRECT ANSWER✔✔C.
Potentially acceptable if the benefits of the new annuity outweigh the possible taxes and
additional sales charges the client might incur
The practice of recommending that a client redeem one annuity or mutual fund and invest the
proceeds in another annuity (or fund) is called switching. When redeeming the first annuity, the
investor might incur deferred sales charges and a tax liability. (The tax liability can be avoided if
the switch is eligible to be treated as a Section 1035 exchange.) The reinvestment in another
annuity might also involve sales charges or might subject the investor to an additional period
when surrender charges could be imposed on redemptions. These disadvantages mean that
switching is frowned on by regulators, who suspect the RR involved is often motivated by the
prospect of additional commissions rather than the client's best interests. However, when the
new annuity is clearly superior to the old product, the additional benefits might outweigh the
disadvantages
A customer sells securities at $35 that she previously purchased at $29. The confirmation for
the sale includes:
A. The cost basis of $29
B. The sales proceeds of $35
C. Both the cost basis of $29 and the sales proceeds of $35
With 100% Correct Answers
Which of the following municipal issues is MOST likely be brought to market as a negotiated
issue?
A. General obligation bond
B. Bonds issued by a city
C. School district bond
D. Industrial development revenue bond - CORRECT ANSWER✔✔Revenue issues are generally
brought to market as negotiated issues.
Which of the following statements are TRUE regarding a comparison of strategic versus tactical
asset allocation?
1. Strategic asset allocations are more passive and tactical asset allocations are more frequently
rebalanced.
2. Strategic asset allocation has a long-term outlook, while tactical asset allocation encompasses
short-term decisions.
3. Unlike strategic asset allocators, tactical asset allocators believe that investors can time the
market. - CORRECT ANSWER✔✔A. I and II only
B. I and III only
C. II and III only
D. I, II, and III****
Asset allocation based on a client's risk tolerance and investment objectives is called strategic
asset allocation. In theory, it is the best mix of assets given the client's goals and level of risk
aversion, giving it a long-term outlook. Strategic asset allocators tend to view the market as
efficient and market timing as ineffective. By contrast, those who believe securities markets are
not perfectly efficient may try to use an active strategy to alter the portfolio's asset mix, to take
advantage of anticipated economic events. This market timing approach is sometimes called
tactical asset allocation.
, A registered representative is taking over the business of another RR who is leaving the firm.
Upon examining the accounts, the RR notices that the variable annuities owned by many of the
clients have high expenses, mediocre performance, and few investment options. The RR decides
that her first action will be to recommend that these customers redeem the old annuities and
invest in the new Platinum One variable annuity that has substantially lower expenses, higher
long-term performance, and many more subaccounts with varying investment strategies. This
activity is:
A. Known as churning and is strictly prohibited
B. Called switching and is permitted only in those accounts that will not incur a deferred sales
charge
C. Potentially acceptable if the benefits of the new annuity outweigh the possible taxes and
additional sales charges the client might incur
D. Permitted only if the customer signs a switch waiver form - CORRECT ANSWER✔✔C.
Potentially acceptable if the benefits of the new annuity outweigh the possible taxes and
additional sales charges the client might incur
The practice of recommending that a client redeem one annuity or mutual fund and invest the
proceeds in another annuity (or fund) is called switching. When redeeming the first annuity, the
investor might incur deferred sales charges and a tax liability. (The tax liability can be avoided if
the switch is eligible to be treated as a Section 1035 exchange.) The reinvestment in another
annuity might also involve sales charges or might subject the investor to an additional period
when surrender charges could be imposed on redemptions. These disadvantages mean that
switching is frowned on by regulators, who suspect the RR involved is often motivated by the
prospect of additional commissions rather than the client's best interests. However, when the
new annuity is clearly superior to the old product, the additional benefits might outweigh the
disadvantages
A customer sells securities at $35 that she previously purchased at $29. The confirmation for
the sale includes:
A. The cost basis of $29
B. The sales proceeds of $35
C. Both the cost basis of $29 and the sales proceeds of $35
