Series 7 Exam Question 332: Answer and Explanation

Question: 332

All the following securities are typically sold short EXCEPT

• A. over-the-counter common stock
• B. preferred stock
• C. exchange listed stock
• D. municipal bonds

Correct Answer: D

Explanation:

D. Although municipal bonds may be sold short, they typically aren't. The reason is that the security must be borrowed and later found to cover the short position. Because municipal bonds are usually thin issues, they are not very liquid and, therefore, not good candidates for selling short.