Free SERIES-7 Practice Questions – 2026 Updated

a $600 loss. The strike price and Bubba’s purchase price are the same. He has a $600 loss on the

option for the premium he paid.

$100,000. This was a considerable amount of money in 1940.

execute sell orders but do not accept buy orders or distribute assets from the account until a new

partnership agreement is provided to the brokerage. Sell orders may be accepted but not buy orders

or distributions.

US treasury notes. Savings bank deposits have no risk. The short duration of treasury bills and

certificates embodies less market risk than longer-term treasury notes.

takedown. The takedown is an additional allowance on bonds sold by a member.

adjustment bonds. These bonds are also known as income bonds. Interest is paid only if there is

income.

the buyer is given one-day notice in writing. A contract made on a “seller’s option” may be

terminated by the seller at an earlier date, provided that he gives the buyer one-day notice.

specialists. This description defines the function of the specialists.

convertible preferred. Because of the conversion feature, convertibles are more closely linked to the

price of the common stock. In addition, since the dividend rate on convertible preferred is usually

lower than other preferred issues, the convertibles are more sensitive to interest rate fluctuations.

it turns potential capital gains into current taxable income. Recapture is taxed as ordinary income,

not capital gain. The other choices are not true.

when the new issue of securities is purchased pursuant to a best effort basis. All the other choices

are allowable under the rule “except” this one.

the current market for the stock. FINRA rules require the markup to be based upon the current

market price.

the syndicate manager. The reallowance as well as the selling concession given to selling group

members are determined by the managing underwriters.

it may be entered. In a joint account any tenant is empowered to enter orders, which is specified in

the account agreement.

a private placement. Normally, private placements are conducted with an investment letter.

there is a 14-day owner usage provision. This provision is unrelated to qualification as a security.

all of the above. A profit sharing plan has tax deductible contributions and is designed to provide a

retirement plan for participants. Income in the plan is tax-free until withdrawn.

income. With an income program, the well is already producing. The risk is associated with the

commodity price.

syndicate account letter. This letter is sent by the manager of a competitive bid syndicate to the

other members. The priority and other procedures, including allocation amounts, are specified in the

letter. Members signify acceptance by signing the letter and returning it to the manger.

a shareholder may not redeem any shares for 13 months. Redemptions are permissible at any time.

However, since escrowed shares are set aside to cover the difference in sales loads based on terms of

the letter, redemptions prior to 13 months may liquidate the escrow account and thus return to the

investor 100% of net asset value.

trademarks. Intangible assets are those whose true value cannot be determined, but there is some

supposed market value.

10. If a customer fails to deliver securities within ten days after settlement, the broker must

repurchase the securities.

commercial paper. The sizes of secondary markets for these securities are listed in order with

treasuries first, then banker’s acceptances, followed by certificates of deposit. There is only a very

small secondary market for commercial paper.

closed-end funds. Mutual funds are purchased at NAV (when no-load) or NAV plus a sales charge.

The pricing of closed-end funds is determined by market activity and has no direct link to NAV.

a requirement for shareholders to always accept the call price when called. All of the other

statements are true “except” this one. Convertible preferred shareholders have a n opportunity to

convert to common stock. There is no forced call price.

70½. This the age at which IRA withdrawals are required.

the right to vote about important matters of the company. Shareholders have no expectation of stock

price increase or dividends. They are entitled to receive dividends only if the board of directors

declares them.

90 days. To avoid a forced sale, stock many be sold under Rule 144 over a 90-day period.

it is somewhat below the standard minimum. The standard minimum current ratio for a

manufacturing company is 2 to 1. The current ratio for this company is 1.92 (9,400,000 divided by

4,900,000).

cash. Index options are settled by payment of cash.

permission granted to the general partner to act outside the partnership agreement. The limited

partners may approve of the general partner pursuing an act that is contrary to the partnership

agreement.

It does not imply SEC approval of the issue. The SEC does not approval an issue. It only attempts to

see that sufficient information has been provided from which a proper investment determination

may be made.

reclamation. In a reclamation a dealer requests that another dealer reclaim an improper delivery.

a pension fund. Since the pension fund does not pay income tax, the tax benefits of the municipal

bonds are not realized.

regulated. Investment companies regulated by the Internal Revenue Code Subchapter M are

required to pay out a minimum of 90% of their net income annually to their shareholders.