STC SERIES 7 FINAL #1 EXAM
2025/2026 QUESTIONS AND ANSWERS WITH
VERIFIED EXPLANATIONS || ALREADY
GRADED A+ | GUARANTEED PASS | LATEST
VERSION!!!
Which of the following would be considered the most volatile mutual fund?
A. A balanced fund
B. A municipal bond fund
C. An emerging markets fund
D. A U.S. government securities fund - CORRECT ANSWER - C. An emerging
markets fund
Emerging markets funds invest in securities issued by countries with unsure
economic, political, and social climates. This leads to significant volatility in
share prices.
Compared to selling short, buying a put option:
A. Requires a larger capital commitment
B. Has a larger loss potential
C. Does not require the client to arrange to borrow the stock
D. Requires a margin account - CORRECT ANSWER - C. Does not require the
client to arrange to borrow the stock
Short selling requires the deposit of margin, whereas the premium on a put is
usually substantially less than the Regulation T margin requirement. On a
short sale, the seller's risk is unlimited, whereas on a put purchase, the risk is
limited to the premium. Although a short sale may be effected only if the stock
can be borrowed under Regulation SHO, a put may be purchased at any time.
Puts can be purchased in a cash account, while selling short requires a margin
account.
1|Page
,The tranche with the longest maturity and, therefore, the last to receive interest and
principal payments within a CMO, is known as the:
A. PAC tranche
B. Z-tranche
C. Supersinker
D. Companion tranche - CORRECT ANSWER - B. Z-tranche
The separate classes of a CMO are known as tranches. The longest maturity is
frequently called the Z-tranche or the accrual bond, and does not receive
interest or principal payments until the shorter maturing tranches have been
retired.
Which of the following is included on an income statement?
A. Current liabilities
B. Stockholders' equity
C. Current assets
D. Gross revenues - CORRECT ANSWER - D. Gross revenues
Gross revenues (also referred to as gross sales) is found on an income
statement. On the other hand, current assets, current liabilities, and
stockholders' equity are all found on a balance sheet
What type of bond would MOST likely be secured by an excise tax, cigarette tax,
or gasoline tax?
A. GO bond
B. Special tax bond
C. Special assessment bond
D. Double-barreled bond - CORRECT ANSWER - B. Special tax bond
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,A special tax bond is a type of revenue bond and is usually financed by a tax
on certain items such as cigarettes, liquor, or gasoline (excise taxes).
A customer sells 500 shares of stock to a broker-dealer, a registered market maker
in this stock. The broker-dealer acted in a(n):
A. Principal capacity and charged the customer a commission
B. Agency capacity and charged the customer a markup
C. Principal capacity and charged the customer a markdown
D. Agency capacity and charged the customer a commission - CORRECT
ANSWER - C. Principal capacity and charged the customer a markdown
A broker-dealer that is always willing to buy and/or sell shares of stock is
considered a market maker. A market maker will normally act in a principal
capacity and charge the customer a markdown when buying stock from a
customer and a markup when selling stock to a customer. When acting in an
agency capacity, the broker-dealer will normally charge the customer a
commission.
An employee of a broker-dealer owns shares of XYZ in his personal account. His
spouse is a director of XYZ Corporation. If XYZ is engaged in a secondary
offering of stock, can shares be purchased in a joint account that's owned by the
employee and his spouse?
A. No, unless there are unsold portions of the secondary offering.
B. Yes, but only in the personal account of the spouse who's not a director of the
issuer.
C. No, because both are considered associated persons of the firm.
D. Yes, because secondary offerings are permitted to be sold to restricted persons.
- CORRECT ANSWER - D. Yes, because secondary offerings are permitted to be
sold to restricted persons.
Only the sale of initial public offerings (IPOs) of equity securities are
prohibited to restricted persons. Since secondary offerings are not considered
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, new issues, they can be sold to associated persons of broker-dealers. Since the
spouse is a director of the issuer, the sale would be permitted even if it was an
IPO.
A research analyst at a broker-dealer is preparing a research report recommending
ABC common stock. Which of the following situations need not be disclosed?
A. ABC Corp is an investment banking client of the broker-dealer
B. The broker-dealer has a 1% or greater beneficial ownership in ABC
nonconvertible bonds
C. The broker-dealer has a 1% or greater beneficial ownership in ABC common
stock
D. The broker-dealer makes a market in ABC common stock - CORRECT
ANSWER - B. The broker-dealer has a 1% or greater beneficial ownership in ABC
nonconvertible bonds
The broker-dealer is required to make certain disclosures in its research
reports, such as whether the firm has an investment banking relationship or
makes a market in the common stock of ABC. It must also disclose its
ownership in a subject security if the ownership is equal to or greater than
1% beneficial ownership in common equity. Since nonconvertible debt is not
considered common equity, disclosure is not required.
A fundamental analyst is NOT interested in which TWO of the following metrics?
I. Short interest
II. The P/E ratio
III. Trading volume
IV. EPS
A. II and IV
B. II and III
C. I and IV
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2025/2026 QUESTIONS AND ANSWERS WITH
VERIFIED EXPLANATIONS || ALREADY
GRADED A+ | GUARANTEED PASS | LATEST
VERSION!!!
Which of the following would be considered the most volatile mutual fund?
A. A balanced fund
B. A municipal bond fund
C. An emerging markets fund
D. A U.S. government securities fund - CORRECT ANSWER - C. An emerging
markets fund
Emerging markets funds invest in securities issued by countries with unsure
economic, political, and social climates. This leads to significant volatility in
share prices.
Compared to selling short, buying a put option:
A. Requires a larger capital commitment
B. Has a larger loss potential
C. Does not require the client to arrange to borrow the stock
D. Requires a margin account - CORRECT ANSWER - C. Does not require the
client to arrange to borrow the stock
Short selling requires the deposit of margin, whereas the premium on a put is
usually substantially less than the Regulation T margin requirement. On a
short sale, the seller's risk is unlimited, whereas on a put purchase, the risk is
limited to the premium. Although a short sale may be effected only if the stock
can be borrowed under Regulation SHO, a put may be purchased at any time.
Puts can be purchased in a cash account, while selling short requires a margin
account.
1|Page
,The tranche with the longest maturity and, therefore, the last to receive interest and
principal payments within a CMO, is known as the:
A. PAC tranche
B. Z-tranche
C. Supersinker
D. Companion tranche - CORRECT ANSWER - B. Z-tranche
The separate classes of a CMO are known as tranches. The longest maturity is
frequently called the Z-tranche or the accrual bond, and does not receive
interest or principal payments until the shorter maturing tranches have been
retired.
Which of the following is included on an income statement?
A. Current liabilities
B. Stockholders' equity
C. Current assets
D. Gross revenues - CORRECT ANSWER - D. Gross revenues
Gross revenues (also referred to as gross sales) is found on an income
statement. On the other hand, current assets, current liabilities, and
stockholders' equity are all found on a balance sheet
What type of bond would MOST likely be secured by an excise tax, cigarette tax,
or gasoline tax?
A. GO bond
B. Special tax bond
C. Special assessment bond
D. Double-barreled bond - CORRECT ANSWER - B. Special tax bond
2|Page
,A special tax bond is a type of revenue bond and is usually financed by a tax
on certain items such as cigarettes, liquor, or gasoline (excise taxes).
A customer sells 500 shares of stock to a broker-dealer, a registered market maker
in this stock. The broker-dealer acted in a(n):
A. Principal capacity and charged the customer a commission
B. Agency capacity and charged the customer a markup
C. Principal capacity and charged the customer a markdown
D. Agency capacity and charged the customer a commission - CORRECT
ANSWER - C. Principal capacity and charged the customer a markdown
A broker-dealer that is always willing to buy and/or sell shares of stock is
considered a market maker. A market maker will normally act in a principal
capacity and charge the customer a markdown when buying stock from a
customer and a markup when selling stock to a customer. When acting in an
agency capacity, the broker-dealer will normally charge the customer a
commission.
An employee of a broker-dealer owns shares of XYZ in his personal account. His
spouse is a director of XYZ Corporation. If XYZ is engaged in a secondary
offering of stock, can shares be purchased in a joint account that's owned by the
employee and his spouse?
A. No, unless there are unsold portions of the secondary offering.
B. Yes, but only in the personal account of the spouse who's not a director of the
issuer.
C. No, because both are considered associated persons of the firm.
D. Yes, because secondary offerings are permitted to be sold to restricted persons.
- CORRECT ANSWER - D. Yes, because secondary offerings are permitted to be
sold to restricted persons.
Only the sale of initial public offerings (IPOs) of equity securities are
prohibited to restricted persons. Since secondary offerings are not considered
3|Page
, new issues, they can be sold to associated persons of broker-dealers. Since the
spouse is a director of the issuer, the sale would be permitted even if it was an
IPO.
A research analyst at a broker-dealer is preparing a research report recommending
ABC common stock. Which of the following situations need not be disclosed?
A. ABC Corp is an investment banking client of the broker-dealer
B. The broker-dealer has a 1% or greater beneficial ownership in ABC
nonconvertible bonds
C. The broker-dealer has a 1% or greater beneficial ownership in ABC common
stock
D. The broker-dealer makes a market in ABC common stock - CORRECT
ANSWER - B. The broker-dealer has a 1% or greater beneficial ownership in ABC
nonconvertible bonds
The broker-dealer is required to make certain disclosures in its research
reports, such as whether the firm has an investment banking relationship or
makes a market in the common stock of ABC. It must also disclose its
ownership in a subject security if the ownership is equal to or greater than
1% beneficial ownership in common equity. Since nonconvertible debt is not
considered common equity, disclosure is not required.
A fundamental analyst is NOT interested in which TWO of the following metrics?
I. Short interest
II. The P/E ratio
III. Trading volume
IV. EPS
A. II and IV
B. II and III
C. I and IV
4|Page
