STC SERIES 7 FINAL EXAM #3 2025/2026
QUESTIONS AND ANSWERS WITH
VERIFIED EXPLANATIONS || ALREADY
GRADED A+ | GUARANTEED PASS | LATEST
VERSION!!!
Which of the following is a measure of non-systematic risk? - CORRECT
ANSWER - Alpha
Alpha is a way to measure risk that's association with a single investment, which is
better known as non-systematic risk. On the other hand, systematic risk is
associated with all investments and is measured by beta. Gamma and theta are both
risk measurements, but they're specific to option contracts.
Which of the following is TRUE of a Qualified Domestic Relations Order
(QDRO)? - CORRECT ANSWER - A QDRO is a court order that provides an
alternative payee the right to receive all or a portion of the benefits that are payable
to a participant under a qualified retirement plan
A QDRO is a court order that is entered as a part of a property division in a divorce
or legal separation that splits a qualified retirement plan or pension plan by
recognizing joint marital ownership in the plan. The court may award all or a
portion of the plan participant's benefit to an alternative payee, such as a spouse,
child, or other dependent of the plan participant.
The Dow Jones Industrial Average is considered an index of: - CORRECT
ANSWER - Large-capitalized stocks
The Dow Jones Industrial Average (DJIA) is considered one of the most widely
quoted measurements of the U.S. equity market. The 30 stocks that comprise the
Index are among the largest and most widely held companies in the U.S. The DJIA
as well as the S&P 500 Index include companies that are referred to as large-cap.
Most, but not all of the stocks, are listed on the NYSE
1|Page
,After examining a broker-dealer, the Administrator sanctioned the firm for keeping
stock owned by customers and stock owned by the broker-dealer together in a way
that did not clearly indicate who owned which shares. This prohibited practice is
called: - CORRECT ANSWER - Commingling
Commingling refers to the practice of intermixing securities belonging to
customers with securities belonging to the broker-dealer. This is prohibited in an
attempt to assure that customer securities are not misused.
Which of the following choices would be considered a person under the USA?
A customer
A broker-dealer
An estate
An issuer - CORRECT ANSWER - I, II, III, IV
Under the USA, a person is defined as a legal entity, which would include
individuals (natural persons) and business entities such as corporations, broker-
dealers, partnerships, and investment advisers.
A corporation has the following financial information:
$3 million in cash
$5 million in accounts receivable
$8 million of inventory
$7 million of equipment
$2 million in short-term debt
$40 million in long-term debt
$4 million accounts payable
What's the corporation's current ratio? - CORRECT ANSWER - 8:3
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, The current ratio is found by dividing the current assets by the current liabilities. In
this question, current assets include cash, accounts receivables, and inventory,
totaling $16 million ($3 million cash + $5 million accounts receivable + $8 million
inventory). Current liabilities include short-term debt and accounts payable,
totaling $6 million ($2 million short-term debt + $4 million accounts payable).
Therefore, the current ratio is 8:3 ($16 million ÷ $6 million, which reduces to 8/3
or 8:3). For anyone who's not comfortable reducing fractions, use the decimal
method. Since the current ratio can also be stated as 2.6 ($16 million ÷ $6 million),
simply calculate the decimal version of the answer choices to determine which
answer matches this number (e.g., 8 ÷ 3 = 2.6, which is the correct response, while
4 ÷ 3 = 1.33 and is incorrect).
According to modern portfolio theory, a diversified portfolio should be comprised
of assets that are: - CORRECT ANSWER - Largely uncorrelated
Ideally, a diversified portfolio should be composed of assets that are largely
uncorrelated--i.e., do not move in the same direction.
Which of the following statements regarding the differences between an annual
rebalancing strategy and a buy-and-hold strategy over a 30-year period is FALSE?
- CORRECT ANSWER - The risk in a buy and hold strategy portfolio will match
the investor's risk tolerance
The risk levels in a buy and hold portfolio will rise and fall, while a rebalanced
portfolio will be adjusted periodically to meet the investor's risk tolerance.
Rebalanced portfolios will also attempt to maintain the percentage of equity and
debt in the portfolio, while buy and hold portfolios will allow the percentages to
drift. One of the advantages of a buy and hold strategy is that transaction and tax
expenses are minimized since there is generally no continuous buying and selling.
Who is responsible for filing estate income tax returns and making sure that the
payments are made on the estate's behalf? - CORRECT ANSWER - The
administrator or executor
An executor or administrator is responsible for managing the estate's assets and
distributing the property to the heirs. These responsibilities include paying any
3|Page
QUESTIONS AND ANSWERS WITH
VERIFIED EXPLANATIONS || ALREADY
GRADED A+ | GUARANTEED PASS | LATEST
VERSION!!!
Which of the following is a measure of non-systematic risk? - CORRECT
ANSWER - Alpha
Alpha is a way to measure risk that's association with a single investment, which is
better known as non-systematic risk. On the other hand, systematic risk is
associated with all investments and is measured by beta. Gamma and theta are both
risk measurements, but they're specific to option contracts.
Which of the following is TRUE of a Qualified Domestic Relations Order
(QDRO)? - CORRECT ANSWER - A QDRO is a court order that provides an
alternative payee the right to receive all or a portion of the benefits that are payable
to a participant under a qualified retirement plan
A QDRO is a court order that is entered as a part of a property division in a divorce
or legal separation that splits a qualified retirement plan or pension plan by
recognizing joint marital ownership in the plan. The court may award all or a
portion of the plan participant's benefit to an alternative payee, such as a spouse,
child, or other dependent of the plan participant.
The Dow Jones Industrial Average is considered an index of: - CORRECT
ANSWER - Large-capitalized stocks
The Dow Jones Industrial Average (DJIA) is considered one of the most widely
quoted measurements of the U.S. equity market. The 30 stocks that comprise the
Index are among the largest and most widely held companies in the U.S. The DJIA
as well as the S&P 500 Index include companies that are referred to as large-cap.
Most, but not all of the stocks, are listed on the NYSE
1|Page
,After examining a broker-dealer, the Administrator sanctioned the firm for keeping
stock owned by customers and stock owned by the broker-dealer together in a way
that did not clearly indicate who owned which shares. This prohibited practice is
called: - CORRECT ANSWER - Commingling
Commingling refers to the practice of intermixing securities belonging to
customers with securities belonging to the broker-dealer. This is prohibited in an
attempt to assure that customer securities are not misused.
Which of the following choices would be considered a person under the USA?
A customer
A broker-dealer
An estate
An issuer - CORRECT ANSWER - I, II, III, IV
Under the USA, a person is defined as a legal entity, which would include
individuals (natural persons) and business entities such as corporations, broker-
dealers, partnerships, and investment advisers.
A corporation has the following financial information:
$3 million in cash
$5 million in accounts receivable
$8 million of inventory
$7 million of equipment
$2 million in short-term debt
$40 million in long-term debt
$4 million accounts payable
What's the corporation's current ratio? - CORRECT ANSWER - 8:3
2|Page
, The current ratio is found by dividing the current assets by the current liabilities. In
this question, current assets include cash, accounts receivables, and inventory,
totaling $16 million ($3 million cash + $5 million accounts receivable + $8 million
inventory). Current liabilities include short-term debt and accounts payable,
totaling $6 million ($2 million short-term debt + $4 million accounts payable).
Therefore, the current ratio is 8:3 ($16 million ÷ $6 million, which reduces to 8/3
or 8:3). For anyone who's not comfortable reducing fractions, use the decimal
method. Since the current ratio can also be stated as 2.6 ($16 million ÷ $6 million),
simply calculate the decimal version of the answer choices to determine which
answer matches this number (e.g., 8 ÷ 3 = 2.6, which is the correct response, while
4 ÷ 3 = 1.33 and is incorrect).
According to modern portfolio theory, a diversified portfolio should be comprised
of assets that are: - CORRECT ANSWER - Largely uncorrelated
Ideally, a diversified portfolio should be composed of assets that are largely
uncorrelated--i.e., do not move in the same direction.
Which of the following statements regarding the differences between an annual
rebalancing strategy and a buy-and-hold strategy over a 30-year period is FALSE?
- CORRECT ANSWER - The risk in a buy and hold strategy portfolio will match
the investor's risk tolerance
The risk levels in a buy and hold portfolio will rise and fall, while a rebalanced
portfolio will be adjusted periodically to meet the investor's risk tolerance.
Rebalanced portfolios will also attempt to maintain the percentage of equity and
debt in the portfolio, while buy and hold portfolios will allow the percentages to
drift. One of the advantages of a buy and hold strategy is that transaction and tax
expenses are minimized since there is generally no continuous buying and selling.
Who is responsible for filing estate income tax returns and making sure that the
payments are made on the estate's behalf? - CORRECT ANSWER - The
administrator or executor
An executor or administrator is responsible for managing the estate's assets and
distributing the property to the heirs. These responsibilities include paying any
3|Page
