STC Series 7 Final Exam 2025 With
100% Correct Answers
Which TWO of the following statements are TRUE regarding Eurodollar bonds?
I. They are denominated in U.S. dollars only
II. They are denominated in foreign currencies only
III. They are only traded outside of the U.S.
IV. They are traded in the U.S. and international markets
A. I and III
B. I and IV
C. II and III
D. II and IV - CORRECT ANSWER✔✔B. I and IV
Eurodollar bonds are issued by both U.S. and foreign companies and are denominated in U.S.
dollars. Eurodollar bonds are actively traded in the U.S. after a seasoning period of 40 days.
Eurodollar bonds are issued outside the U.S. to foreign investors and are exempt from SEC
registration. Since they are not registered, they cannot be purchased as new issues in the U.S.
When may a new issue become marginable?
A. 3 days from the effective date
B. 5 days from the effective date
C. 30 days from the effective date
D. 40 days from the effective date - CORRECT ANSWER✔✔C. 30 days from the effective date
When approved for margin trading by the FRB, a new issue becomes marginable 30 days from
the effective date of the offering.
,A corporation is issuing 5,000,000 shares of stock at a public offering price of $13 per share. The
manager of the underwriting syndicate receives $0.15 per share. The syndicate members'
compensation is $0.65 per share for each share they sell. The selling group's concession is $0.40
per share for each share they sell. The syndicate is allocated 4,000,000 shares and the selling
group is allocated 1,000,000 shares. When the issue is completely sold, the managing
underwriter's fee will total:
A. $150,000
B. $600,000
C. $750,000
D. $2,600,000 - CORRECT ANSWER✔✔C. $750,000
The syndicate manager receives $0.15 for every share. The manager will receive, in total,
$750,000 (5,000,000 shares x $0.15 per share).
Which of the following statements concerning ETFs is TRUE?
A. These funds are priced once per day.
B. These funds' values may fluctuate throughout the trading day.
C. Managers of these funds tend to trade individual portfolio positions frequently.
D. These funds tend to have very high portfolio turnover. - CORRECT ANSWER✔✔B. These
funds' values may fluctuate throughout the trading day.
Exchange-traded funds (ETFs) are investments that resemble unit investment trusts (UITs). A
fixed portfolio is constructed either to track a specific index (such as the S&P 500) or a given
market segment (such as gold or semiconductors). An ETF's portfolio typically remains constant
unless there is a change to the underlying index or one of the individual investments within the
fund is affected by a corporate action such as a sale or spin-off. ETFs are normally listed on
NASDAQ or a traditional exchange and may fluctuate in price throughout the day as a regular
stock would. They have a bid and ask as opposed to the NAV and POP found in mutual funds
investments. Commissions are paid when trading ETFs as opposed to sales charges when
purchasing mutual funds.
TUV Sep 5.00 puts trade on the CBOE. With the approval of its shareholders, TUV Corporation
will reduce its outstanding shares by a factor of 20, which has the effect of increasing its market
price 20-fold. What effect will this have on the TUV Sep 5.00 put?
,A. The TUV option will be closed out
B. Investors who previously owned 1 TUV Sep 5.00 put will now own 1 TUV Sep 100 put
C. Investors who previously owned 20 TUV Sep 5.00 puts will now own 1 TUV Sep 100 put
D. Investors who previously owned 1 TUV Sep 5.00 put contract will now own 20 TUV Sep 5.00
puts - CORRECT ANSWER✔✔C. Investors who previously owned 20 TUV Sep 5.00 puts will now
own 1 TUV Sep 100 put
TUV Corporation has executed a reverse stock split. When a corporation's stock has a reverse or
forward stock split, all associated options contracts are adjusted. When a reverse stock split
occurs, the number of shares underlying each option will be reduced and the strike price will
increase. In the case of a 1-for-20 reverse split, the number of shares underlying the contracts
will be reduced to 5 (), and the strike price will be increased by the inverse of the split
($5 x 20 = $100). The contract's aggregate exercise price will remain the same after the
adjustment. The number of contracts does not change with a reverse split.
Which of the following securities are quoted and traded at a discount?
A. Common stocks
B. Corporate bonds
C. U.S. Treasury notes
D. U.S. Treasury bills - CORRECT ANSWER✔✔D. U.S. Treasury bills
Of the choices given, the only securities that are quoted and traded at a discount are U.S.
Treasury bills.
Which of the following entities does not pass through both income and losses?
A. A limited liability company (LLC)
B. A limited partnership
C. A Subchapter S Corporation
D. A real estate investment trust (REIT) - CORRECT ANSWER✔✔D. A real estate investment trust
(REIT)
, A REIT is required to pass through a minimum of 90% of its income to its shareholders, but it is
NOT permitted to pass through losses. LLCs, limited partnerships, and Subchapter S
Corporations are all permitted to pass through both income and losses.
If a municipal bond has a basis of 4.33 and a coupon rate of 5.77%, the bond is selling at:
A. A price that cannot be determined from the information given
B. Par value
C. A discount
D. A premium - CORRECT ANSWER✔✔C. A discount
Municipal bonds may be quoted on a yield to maturity basis, which in this example is a 4.33
basis. This means the bond has a yield to maturity of 4.33%. If the nominal yield (coupon rate) is
5.77%, this means that the bond is selling at a premium, above the par value ($1,000). If the
yield to maturity (4.33%) is less than the nominal yield (5.77%), the bond is selling at a
premium.
A type of security that is issued in the U.S. by foreign governments and corporations, trades in
U.S. markets, and is denominated in U.S. dollars is called a:
A. Global mutual fund
B. Eurodollar bond
C. Yankee bond
D. Repurchase agreement - CORRECT ANSWER✔✔C. Yankee bond
Yankee bonds are issued in the U.S. by foreign corporations and governments, are dollar-
denominated securities, and trade in U.S. markets. Yankee bonds are normally issued by foreign
entities when conditions in the U.S. are better than in the foreign country. Eurodollar bonds are
issued by U.S. companies and sold to investors overseas and pay their interest in Eurodollars
(dollars on deposit in banks outside the U.S.). Since Eurodollar bonds are not initially offered to
investors in the U.S., they are exempt from SEC registration.
A Treasury bond with a par value of $1,000 has a quote of 95.15. The dollar value of this T-bond
is:
100% Correct Answers
Which TWO of the following statements are TRUE regarding Eurodollar bonds?
I. They are denominated in U.S. dollars only
II. They are denominated in foreign currencies only
III. They are only traded outside of the U.S.
IV. They are traded in the U.S. and international markets
A. I and III
B. I and IV
C. II and III
D. II and IV - CORRECT ANSWER✔✔B. I and IV
Eurodollar bonds are issued by both U.S. and foreign companies and are denominated in U.S.
dollars. Eurodollar bonds are actively traded in the U.S. after a seasoning period of 40 days.
Eurodollar bonds are issued outside the U.S. to foreign investors and are exempt from SEC
registration. Since they are not registered, they cannot be purchased as new issues in the U.S.
When may a new issue become marginable?
A. 3 days from the effective date
B. 5 days from the effective date
C. 30 days from the effective date
D. 40 days from the effective date - CORRECT ANSWER✔✔C. 30 days from the effective date
When approved for margin trading by the FRB, a new issue becomes marginable 30 days from
the effective date of the offering.
,A corporation is issuing 5,000,000 shares of stock at a public offering price of $13 per share. The
manager of the underwriting syndicate receives $0.15 per share. The syndicate members'
compensation is $0.65 per share for each share they sell. The selling group's concession is $0.40
per share for each share they sell. The syndicate is allocated 4,000,000 shares and the selling
group is allocated 1,000,000 shares. When the issue is completely sold, the managing
underwriter's fee will total:
A. $150,000
B. $600,000
C. $750,000
D. $2,600,000 - CORRECT ANSWER✔✔C. $750,000
The syndicate manager receives $0.15 for every share. The manager will receive, in total,
$750,000 (5,000,000 shares x $0.15 per share).
Which of the following statements concerning ETFs is TRUE?
A. These funds are priced once per day.
B. These funds' values may fluctuate throughout the trading day.
C. Managers of these funds tend to trade individual portfolio positions frequently.
D. These funds tend to have very high portfolio turnover. - CORRECT ANSWER✔✔B. These
funds' values may fluctuate throughout the trading day.
Exchange-traded funds (ETFs) are investments that resemble unit investment trusts (UITs). A
fixed portfolio is constructed either to track a specific index (such as the S&P 500) or a given
market segment (such as gold or semiconductors). An ETF's portfolio typically remains constant
unless there is a change to the underlying index or one of the individual investments within the
fund is affected by a corporate action such as a sale or spin-off. ETFs are normally listed on
NASDAQ or a traditional exchange and may fluctuate in price throughout the day as a regular
stock would. They have a bid and ask as opposed to the NAV and POP found in mutual funds
investments. Commissions are paid when trading ETFs as opposed to sales charges when
purchasing mutual funds.
TUV Sep 5.00 puts trade on the CBOE. With the approval of its shareholders, TUV Corporation
will reduce its outstanding shares by a factor of 20, which has the effect of increasing its market
price 20-fold. What effect will this have on the TUV Sep 5.00 put?
,A. The TUV option will be closed out
B. Investors who previously owned 1 TUV Sep 5.00 put will now own 1 TUV Sep 100 put
C. Investors who previously owned 20 TUV Sep 5.00 puts will now own 1 TUV Sep 100 put
D. Investors who previously owned 1 TUV Sep 5.00 put contract will now own 20 TUV Sep 5.00
puts - CORRECT ANSWER✔✔C. Investors who previously owned 20 TUV Sep 5.00 puts will now
own 1 TUV Sep 100 put
TUV Corporation has executed a reverse stock split. When a corporation's stock has a reverse or
forward stock split, all associated options contracts are adjusted. When a reverse stock split
occurs, the number of shares underlying each option will be reduced and the strike price will
increase. In the case of a 1-for-20 reverse split, the number of shares underlying the contracts
will be reduced to 5 (), and the strike price will be increased by the inverse of the split
($5 x 20 = $100). The contract's aggregate exercise price will remain the same after the
adjustment. The number of contracts does not change with a reverse split.
Which of the following securities are quoted and traded at a discount?
A. Common stocks
B. Corporate bonds
C. U.S. Treasury notes
D. U.S. Treasury bills - CORRECT ANSWER✔✔D. U.S. Treasury bills
Of the choices given, the only securities that are quoted and traded at a discount are U.S.
Treasury bills.
Which of the following entities does not pass through both income and losses?
A. A limited liability company (LLC)
B. A limited partnership
C. A Subchapter S Corporation
D. A real estate investment trust (REIT) - CORRECT ANSWER✔✔D. A real estate investment trust
(REIT)
, A REIT is required to pass through a minimum of 90% of its income to its shareholders, but it is
NOT permitted to pass through losses. LLCs, limited partnerships, and Subchapter S
Corporations are all permitted to pass through both income and losses.
If a municipal bond has a basis of 4.33 and a coupon rate of 5.77%, the bond is selling at:
A. A price that cannot be determined from the information given
B. Par value
C. A discount
D. A premium - CORRECT ANSWER✔✔C. A discount
Municipal bonds may be quoted on a yield to maturity basis, which in this example is a 4.33
basis. This means the bond has a yield to maturity of 4.33%. If the nominal yield (coupon rate) is
5.77%, this means that the bond is selling at a premium, above the par value ($1,000). If the
yield to maturity (4.33%) is less than the nominal yield (5.77%), the bond is selling at a
premium.
A type of security that is issued in the U.S. by foreign governments and corporations, trades in
U.S. markets, and is denominated in U.S. dollars is called a:
A. Global mutual fund
B. Eurodollar bond
C. Yankee bond
D. Repurchase agreement - CORRECT ANSWER✔✔C. Yankee bond
Yankee bonds are issued in the U.S. by foreign corporations and governments, are dollar-
denominated securities, and trade in U.S. markets. Yankee bonds are normally issued by foreign
entities when conditions in the U.S. are better than in the foreign country. Eurodollar bonds are
issued by U.S. companies and sold to investors overseas and pay their interest in Eurodollars
(dollars on deposit in banks outside the U.S.). Since Eurodollar bonds are not initially offered to
investors in the U.S., they are exempt from SEC registration.
A Treasury bond with a par value of $1,000 has a quote of 95.15. The dollar value of this T-bond
is:
