Series 7 – General Securities Representative
Exam practice test Verified Questions, Correct
Answers, and Detailed Explanations for
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1. A customer purchases 100 shares of XYZ at $40 on margin.
Regulation T requires an initial deposit of:
A. $1,000
B. $2,000
C. $2,000 or 50% of the purchase price, whichever is greater
D. 50% of market value
Answer: C
Reg T minimum is 50%, but FINRA also requires a $2,000 minimum—
whichever is greater.
2. A municipal bond trading at a discount will have a yield-to-
maturity that is:
A. Lower than the nominal yield
B. The same as the nominal yield
C. Higher than the nominal yield
D. Always lower than the yield-to-call
Answer: C
For discount bonds: YTC < CY < YTM < NY.
3. A customer wishes to buy stock and wants the order to be
executed only at a specific price or better. The order is:
,A. Market order
B. Stop order
C. Stop-limit order
D. Limit order
Answer: D
Limit orders specify a maximum buy or minimum sell price.
4. Which product exposes an investor to the risk of long-term
inflation most directly?
A. T-bills
B. Money market funds
C. Fixed annuities
D. Growth stocks
Answer: C
Fixed annuities have fixed payouts that lose purchasing power during
inflation.
5. The SIPC protects customers against:
A. Market losses
B. Broker-dealer insolvency
C. Fraud by investment advisers
D. Issuer bankruptcy
Answer: B
SIPC covers firm failure, not investment losses.
6. A customer writes a call option and is assigned. The writer must:
A. Deposit margin
B. Sell the stock at the strike price
,C. Deliver cash
D. Buy the stock in the market
Answer: B
Assignment obligates the call writer to sell the stock at the strike.
7. A UIT primarily invests in:
A. Managed portfolios
B. Fixed, unmanaged portfolios
C. Hedge funds
D. Actively managed stocks
Answer: B
UITs issue redeemable units and normally hold a static portfolio.
8. A client age 50 withdraws from a traditional IRA. Tax result?
A. No tax
B. Ordinary income tax + 10% penalty
C. Capital gains tax only
D. Penalty only
Answer: B
Under age 59½ = ordinary income + early withdrawal penalty.
9. A bond selling at a premium must have:
A. YTM > NY
B. CY > YTM
C. NY > CY > YTM
D. CY = NY
Answer: C
Premium bonds have yields decreasing in that order.
, 10. Mutual fund Class A shares typically charge:
A. Deferred sales charge
B. Front-end sales charge
C. 12b-1 fees only
D. No fees
Answer: B
Class A = front-end load.
11. Which account is NOT covered by SIPC?
A. Individual account
B. Joint account
C. Commodities account
D. IRA
Answer: C
SIPC covers securities, not commodities or futures.
12. An order that becomes a market order once triggered is a:
A. Stop order
B. Limit
C. Stop-limit
D. Not-held
Answer: A
Stop orders convert to market orders when triggered.
13. A corporation’s capitalization includes:
Exam practice test Verified Questions, Correct
Answers, and Detailed Explanations for
Computer Science Students||Already Graded
A+
1. A customer purchases 100 shares of XYZ at $40 on margin.
Regulation T requires an initial deposit of:
A. $1,000
B. $2,000
C. $2,000 or 50% of the purchase price, whichever is greater
D. 50% of market value
Answer: C
Reg T minimum is 50%, but FINRA also requires a $2,000 minimum—
whichever is greater.
2. A municipal bond trading at a discount will have a yield-to-
maturity that is:
A. Lower than the nominal yield
B. The same as the nominal yield
C. Higher than the nominal yield
D. Always lower than the yield-to-call
Answer: C
For discount bonds: YTC < CY < YTM < NY.
3. A customer wishes to buy stock and wants the order to be
executed only at a specific price or better. The order is:
,A. Market order
B. Stop order
C. Stop-limit order
D. Limit order
Answer: D
Limit orders specify a maximum buy or minimum sell price.
4. Which product exposes an investor to the risk of long-term
inflation most directly?
A. T-bills
B. Money market funds
C. Fixed annuities
D. Growth stocks
Answer: C
Fixed annuities have fixed payouts that lose purchasing power during
inflation.
5. The SIPC protects customers against:
A. Market losses
B. Broker-dealer insolvency
C. Fraud by investment advisers
D. Issuer bankruptcy
Answer: B
SIPC covers firm failure, not investment losses.
6. A customer writes a call option and is assigned. The writer must:
A. Deposit margin
B. Sell the stock at the strike price
,C. Deliver cash
D. Buy the stock in the market
Answer: B
Assignment obligates the call writer to sell the stock at the strike.
7. A UIT primarily invests in:
A. Managed portfolios
B. Fixed, unmanaged portfolios
C. Hedge funds
D. Actively managed stocks
Answer: B
UITs issue redeemable units and normally hold a static portfolio.
8. A client age 50 withdraws from a traditional IRA. Tax result?
A. No tax
B. Ordinary income tax + 10% penalty
C. Capital gains tax only
D. Penalty only
Answer: B
Under age 59½ = ordinary income + early withdrawal penalty.
9. A bond selling at a premium must have:
A. YTM > NY
B. CY > YTM
C. NY > CY > YTM
D. CY = NY
Answer: C
Premium bonds have yields decreasing in that order.
, 10. Mutual fund Class A shares typically charge:
A. Deferred sales charge
B. Front-end sales charge
C. 12b-1 fees only
D. No fees
Answer: B
Class A = front-end load.
11. Which account is NOT covered by SIPC?
A. Individual account
B. Joint account
C. Commodities account
D. IRA
Answer: C
SIPC covers securities, not commodities or futures.
12. An order that becomes a market order once triggered is a:
A. Stop order
B. Limit
C. Stop-limit
D. Not-held
Answer: A
Stop orders convert to market orders when triggered.
13. A corporation’s capitalization includes:
