Free SERIES-7 Practice Test Questions and Answers (2026)

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 Income in the plan is tax-free until withdrawn.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.