Series 7 Exam Practice Test 27

1. All the following securities may pay a dividend EXCEPT

2. Marty Martinez wants to create a short combination using his existing option. If Marty is short 1 DEF Aug 60 call, which of the following option positions should Marty purchase or sell?

3. Which of the following is/are true of a REIT?

I. It must invest at least 75 percent of its assets in real-estate-related activities.

II. It must be organized as a trust.

III. It must distribute at least 90 percent of its net investment income.

IV. It must pass along losses to shareholders.

4. An investor purchases 300 shares of DUD Corp. at $45 per share and purchases 3 DUD Oct 40 puts at 6. What is the customer's break-even point?

5. Under the Securities Act of 1933, which of the following securities are exempt from registration and disclosure provisions?

6. One of your customers is interested in investing in an oil and gas limited partnership. As their registered rep, which of the following steps are you required to take?

I. Prescreen the customer.

II. Determine the economic soundness of the program.

III. Explain the risks of investing in limited partnerships.

IV. Have your customer fill out a partnership agreement.

7. Which of the following funds changes its balance to hold more fixed-income securities and less equity securities as the years pass?

8. For investors interested in purchasing CMOs, which of the following tranches is considered the safest?

9. The first time a company ever issues securities is called a(n)

10. A saucer formation is an indication that a security is

11. Broker-dealers may charge a

I. commission

II. markup

III. markdown

12. Use the following exhibit to answer this question:


(p - put, a - not traded)

If an investor buys a TUV Nov 60 put and writes a TUV Nov 50 put, what is the maximum gain?

13. Which of the following features of a corporation would be examined by a fundamental analyst?

14. Mr. Smith has an inactive account with stocks and bonds at a broker-dealer. How often is the firm required to send Mr. Smith an account statement?

15. Which of the following DOES NOT describe Treasury stock?

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