STC Series 7 - Examination 2025 With
100% Correct Answers
1. A director of a company owns 180,000 shares of BDG stock which were purchased in the
secondary market. If the director wants to sell 17,000 shares of BDG that she has owned for
nine months, which of the following statements is TRUE?
a. The director is permitted to sell the shares if the trade is reported.
b. The director is permitted to sell the shares only if they are held for three additional months
and the trade is reported.
c. The director is permitted to sell the shares and no report is required.
d. The director is only permitted to sell the shares if the transaction would result in a loss. - (A)
An insider, as defined by the Securities Exchange Act of 1934, is a director, officer, or owner of
more than 10% of the voting stock of a corporation. Immediate family members of the insider
are also subject to the same limitations. An officer or director is required to register with the
SEC regardless of their ownership levels in the company. The director as an insider is required to
report the transaction to the SEC within two business days. Insiders are not permitted to make
short-swing profits (based on ownership of six months or less in their own company's stock).
Since the director owned the shares for nine months there is no violation. Since the shares were
purchased by the director in the secondary market, the shares are considered control, not
restricted stock and are not subject to the six month holding period. (11-5)
2. The underwriting spread in a new corporate stock issue depends upon:
a. The dollar amount of the issue
b. The business and financial history of the corporation
c. The type of corporation and the kind of industiy it is in
d. All of the above - (D) The underwriting spread (the underwriter's compensation) depends
upon all of the items listed since they help to determine the amount of risk that the
underwriters take. (9-3)
,3. All of the following are features of GNMA pass-through certificates EXCEPT:
a. They are backed by the U.S. government
b. Interest is subject to federal tax but is exempt from state tax
c. Interest and principal payments are made on a monthly basis
d. Pools consist of fixed-rate residential mortgages - (B) The Government National Mortgage
Association (Ginnie Mae) is an agency of the United States government. It guarantees a pool of
mortgages purchased by investors through Ginnie Mae pass-through certificates. These
instruments pay interest and principal monthly at a stated rate on the remaining principal. The
repayment of principal and interest is guaranteed by the United States government. Ginnie Mae
pass-through certificates are purchased in $25,000 minimums. Interest received from Ginnie
Mae pass-through certificates is subject to federal, state, and local taxes. (7-13)
4. Which two of the following are prohibited activities of an apprentice until she becomes a
qualified municipal securities representative?
I. Selling municipal securities to another municipal securities dealer
II. Selling municipal securities and receiving commissions
III. Discussing the purchase and sale of municipal securities with the investing public
IV. Discussing the purchase and sale of municipal securities with broker-dealers
a. I and III
b. I and IV
c. II and III
d. II and IV - (C) During the 90-day apprenticeship period, the apprentice is not permitted to
discuss the
purchase or sale of municipal securities with the investing public. However, the apprentice may
discuss the purchase or sale of municipal securities with other municipal securities dealers. The
apprentice may sell municipal securities but, again, only to other municipal securities dealers
and may not receive commissions or compensation based on sales. Regular salary or bonuses
are the only compensation permitted. (10-10)
,5. Which of the following will not affect the SMA in a long margin account?
a. Cash dividends paid on securities in a margin account
b. Cash deposited in the account to reduce the debit balance
c. Stock dividends paid on securities held in the margin account
d. Appreciation in market value of the securities in a margin account - (C) Stock dividends paid
on securities held in a margin account will not increase the SMA. The market value of the stock
already in the account will be reduced by the amount of the stock dividend as the number of
shares of the stock increases. The total dollar value will remain the same. All of the other
choices will have an effect on the SMA. (4-8,13-8)
6. If a limited partnership were to liquidate the last party to receive a distribution of assets
would be the:
a. General creditors
b. Secured creditors
c. Limited partners
d. General partners - (D) As owners, the interests of the partners (general and limited) are
subordinate to that of
creditors. Of the two types of partners, the interests of the general partners come after that of
the limited partners in a liquidation. (20-4)
7. A NYSE-listed stock closed at $72. The next day the stock is ex-dividend 60 cents. That
morning, the stock should open at:
a. 71.40
b. 71.70
c. 72.60
d. 72 - (A) The stock will be reduced by 60 cents. The stock must be reduced in price to entirely
cover the dividend. Therefore, the stock will open at 71.40 (72 - .60 = 71.40). (4-8)
, 8. A single worker makes $43,000 per year and has no dependents. If she is eligible lor all lour of
the following plans, which one would you be LEAST likely to recommend?
a. An IRA
b. A 403(b)
c. A401(k)
d. A 457 - (A) Although all four retirement plans are advantageous to this worker, there are a
few advantages the three others have over an IRA. The 403(b), 401(k), and the 457 plans offer a
higher annual tax-deductible contribution and the possibility of an employer match. Even if the
worker decides not to contribute a larger sum of funds, the employer match would provide
additional funds to the worker to help fund her retirement. (17-10,17-11)
9. Which of the following would have a negative effect on the U.S. balance of payments?
a. Increase U.S. exports to foreign countries
b. Foreign purchases of U.S. securities
c. New U.S. investments abroad
d. New foreign investments in the U.S. - (C) New U.S. investments abroad would tend to
increase the basic deficit in the U.S. balance of payments because dollars are leaving the U.S.
and are being invested in foreign countries. (22-14)
10. An individual has received $500 from
dividends paid on common shares of Texas Oil Company. How much of this dividend income is
subject to taxation?
a. -0-
b. $350
c. $400
d. $500 - (D) Under the current tax law, all dividends received by individuals are fully taxable.
(21-3)
11. The third market is concerned with:
100% Correct Answers
1. A director of a company owns 180,000 shares of BDG stock which were purchased in the
secondary market. If the director wants to sell 17,000 shares of BDG that she has owned for
nine months, which of the following statements is TRUE?
a. The director is permitted to sell the shares if the trade is reported.
b. The director is permitted to sell the shares only if they are held for three additional months
and the trade is reported.
c. The director is permitted to sell the shares and no report is required.
d. The director is only permitted to sell the shares if the transaction would result in a loss. - (A)
An insider, as defined by the Securities Exchange Act of 1934, is a director, officer, or owner of
more than 10% of the voting stock of a corporation. Immediate family members of the insider
are also subject to the same limitations. An officer or director is required to register with the
SEC regardless of their ownership levels in the company. The director as an insider is required to
report the transaction to the SEC within two business days. Insiders are not permitted to make
short-swing profits (based on ownership of six months or less in their own company's stock).
Since the director owned the shares for nine months there is no violation. Since the shares were
purchased by the director in the secondary market, the shares are considered control, not
restricted stock and are not subject to the six month holding period. (11-5)
2. The underwriting spread in a new corporate stock issue depends upon:
a. The dollar amount of the issue
b. The business and financial history of the corporation
c. The type of corporation and the kind of industiy it is in
d. All of the above - (D) The underwriting spread (the underwriter's compensation) depends
upon all of the items listed since they help to determine the amount of risk that the
underwriters take. (9-3)
,3. All of the following are features of GNMA pass-through certificates EXCEPT:
a. They are backed by the U.S. government
b. Interest is subject to federal tax but is exempt from state tax
c. Interest and principal payments are made on a monthly basis
d. Pools consist of fixed-rate residential mortgages - (B) The Government National Mortgage
Association (Ginnie Mae) is an agency of the United States government. It guarantees a pool of
mortgages purchased by investors through Ginnie Mae pass-through certificates. These
instruments pay interest and principal monthly at a stated rate on the remaining principal. The
repayment of principal and interest is guaranteed by the United States government. Ginnie Mae
pass-through certificates are purchased in $25,000 minimums. Interest received from Ginnie
Mae pass-through certificates is subject to federal, state, and local taxes. (7-13)
4. Which two of the following are prohibited activities of an apprentice until she becomes a
qualified municipal securities representative?
I. Selling municipal securities to another municipal securities dealer
II. Selling municipal securities and receiving commissions
III. Discussing the purchase and sale of municipal securities with the investing public
IV. Discussing the purchase and sale of municipal securities with broker-dealers
a. I and III
b. I and IV
c. II and III
d. II and IV - (C) During the 90-day apprenticeship period, the apprentice is not permitted to
discuss the
purchase or sale of municipal securities with the investing public. However, the apprentice may
discuss the purchase or sale of municipal securities with other municipal securities dealers. The
apprentice may sell municipal securities but, again, only to other municipal securities dealers
and may not receive commissions or compensation based on sales. Regular salary or bonuses
are the only compensation permitted. (10-10)
,5. Which of the following will not affect the SMA in a long margin account?
a. Cash dividends paid on securities in a margin account
b. Cash deposited in the account to reduce the debit balance
c. Stock dividends paid on securities held in the margin account
d. Appreciation in market value of the securities in a margin account - (C) Stock dividends paid
on securities held in a margin account will not increase the SMA. The market value of the stock
already in the account will be reduced by the amount of the stock dividend as the number of
shares of the stock increases. The total dollar value will remain the same. All of the other
choices will have an effect on the SMA. (4-8,13-8)
6. If a limited partnership were to liquidate the last party to receive a distribution of assets
would be the:
a. General creditors
b. Secured creditors
c. Limited partners
d. General partners - (D) As owners, the interests of the partners (general and limited) are
subordinate to that of
creditors. Of the two types of partners, the interests of the general partners come after that of
the limited partners in a liquidation. (20-4)
7. A NYSE-listed stock closed at $72. The next day the stock is ex-dividend 60 cents. That
morning, the stock should open at:
a. 71.40
b. 71.70
c. 72.60
d. 72 - (A) The stock will be reduced by 60 cents. The stock must be reduced in price to entirely
cover the dividend. Therefore, the stock will open at 71.40 (72 - .60 = 71.40). (4-8)
, 8. A single worker makes $43,000 per year and has no dependents. If she is eligible lor all lour of
the following plans, which one would you be LEAST likely to recommend?
a. An IRA
b. A 403(b)
c. A401(k)
d. A 457 - (A) Although all four retirement plans are advantageous to this worker, there are a
few advantages the three others have over an IRA. The 403(b), 401(k), and the 457 plans offer a
higher annual tax-deductible contribution and the possibility of an employer match. Even if the
worker decides not to contribute a larger sum of funds, the employer match would provide
additional funds to the worker to help fund her retirement. (17-10,17-11)
9. Which of the following would have a negative effect on the U.S. balance of payments?
a. Increase U.S. exports to foreign countries
b. Foreign purchases of U.S. securities
c. New U.S. investments abroad
d. New foreign investments in the U.S. - (C) New U.S. investments abroad would tend to
increase the basic deficit in the U.S. balance of payments because dollars are leaving the U.S.
and are being invested in foreign countries. (22-14)
10. An individual has received $500 from
dividends paid on common shares of Texas Oil Company. How much of this dividend income is
subject to taxation?
a. -0-
b. $350
c. $400
d. $500 - (D) Under the current tax law, all dividends received by individuals are fully taxable.
(21-3)
11. The third market is concerned with:
