Series 7 Exam Practice Test 21

1. Investing in real-estate DPP programs can provide which of the following advantages?

I. Depreciation

II. Appreciation

III. Depletion

IV. Cash flow

2. A client owns a large amount of Treasury bonds and long-term investment grade corporate bonds. Their main risk concern should be

3. If LMN common stock has a $2.20 dividend, a current yield of 5.0%, a PE ratio of 6, and is trading at $44, its approximate earnings per share is

4. PE ratio equals

5. An investor owns the following investments:

I. 50 New York 5 percent general obligation bonds maturing in 2030 and rated AA

II. 50 Florida University 6.25 percent revenue bonds maturing in 2031 and rated AA

III. 50 Nevada Turnpike 5.75 percent revenue bonds maturing in 2030 and rated AA

IV. What type of diversification does this represent?

6. A customer buys 1 DUD Jun 55 put at 4.50 when DUD is trading at 53.40. Just prior to expiration, the option is trading at 4.55 bid-4.65 asked. If the customer closes their position with a market order, what is the gain or loss?

7. An investor has shorted XYZ common stock at 55. XYZ common stock has recently dropped to 30, and the investor expects that the price will continue to decrease over the long term. If the investor would like to hedge against a possible increase in the price, the investor should

8. Grant Goldbarr purchased 1 ABC 60 put at 3.50 and purchased 100 shares of ABC at 62. Six months later, with ABC trading at 64, Grant closes his put for 0.75 and sells his stock at the market price. What is Grant's gain or loss as a result of these transactions?

9. If an investor buys a three-year LEAPS contract on issuance, which expires unexercised, what is the investor's tax consequence at expiration?

10. A customer, without giving written authorization, may permit a registered representative to exercise their judgment as to

11. Which of the following are nonexempt securities?

I. Municipal unit investment trust shares

II. U.S. government bond fund shares

III. Variable annuity accumulation units

IV. Fixed annuities

12. If Buddy Seagull has a limited amount of funds and wants to invest in the pharmaceutical industry but does not want to limit his investments to only one or two companies, which type of fund would be MOST suitable?

13. What is the principal tax benefit for investing as a limited partner in an exploratory oil and gas drilling program?

14. One of your 60-year-old clients has a portfolio that consists of 60% invested in stocks, 30% in bonds, and 10% in cash equivalents. Using a standard strategic asset allocation model, they should:

15. Ginny Gemms purchased 2 LMN 50 calls and paid a premium of 3 for each option. Ginny also purchased 2 LMN 50 puts and paid a premium of 2 for each option. At the time of purchase, LMN was trading at $50.25. Just prior to expiration, LMN was trading at $44.50, and Ginny decided to close her options for their intrinsic value. Excluding commission, Ginny had a