Are Series 7 practice exams harder than the actual exam?

Yes. Series 7 practice exams are harder than the actual exam to better prepare candidates for the actual exam. The goal is to understand the questions and ensure you know what makes the answer correct. Work on the concepts to have a broader view of each topic.

How difficult is the Series 7 exam?

The Series 7 exam is regarded as the most challenging FINRA qualification exam. The exam has a pass rate of 65% for first-time test-takers. And to pass, you must score 72%. Make the most of Series 7 exam prep courses to have any chance of passing the exam.

How long should I study for Series 7?

It depends. Candidates with experience or education in finance, accounting, or economics take 80-100 hours. Those without experience take around 150 hours. To make the most of your study time, review FINRA's Series 7 content outline. Create a study plan to put in the hours.

How much does the Series 7 exam cost?

The Series 7 exam costs $245. Previously, it was $305. If you fail the exam on the first attempt, you'll be required to pay the same amount for a retake. All the subsequent retakes still cost $245. Your best bet is to ensure you pass in the first trial.

What are the passing scores for the Series 7 exam?

To pass the Series 7 exam, you must score 72%. That means you get 90 questions correct out of the 125 scored questions in the test. The best indicator that you are ready is consistently scoring 80% and above in the practice exams.

What is the best way to study for Series 7?

- Create or download a Series 7 study plan - Have a routine and stick to it throughout your studies - Use Series 7 flashcards and cheat sheets - Use practice questions at the end of each chapter to reinforce the information learned. - Take full-length practice exams - Revise the practice exams

FREE Series 7 Practice Exams 2023 - 900 practice questions

Greetings, our dear reader!

Welcome to an informative guide to Series 7 practice exam.

This is our fourth article in the Series 7 study hub articles.

In this article, we give you access to five full-length free Series 7 practice exams.

We also have practice questions for each of the four functions of the Series 7 exam.

In total, you’ll have 900 practice questions.

By the end of this read, you’ll have tips on how to make the most of the practice exams, what the actual Series 7 exam entails, and why you should consider taking the exam.

In short, we’ll discuss:

Series 7 practice exam
Getting the most of Series 7 practice exam and quizzes
Series 7 exam overview
Why take the Series 7 exam

Let’s get started right away.

Other free series 7 study materials:

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Table of Contents

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Series 7 Practice Exam
Series 7 Practice Quizzes by Domains
Domain 1: Seeking business for the broker-dealer from customers and potential customers
Domain 2: Opening accounts after obtaining and evaluating customers’ financial profiles and investment objections
Domain 3: Providing customers with information about investments, making suitable recommendations, transferring assets, and maintaining appropriate records
Domain 4: Obtaining and verifying customers’ purchase and sales instructions and agreements; processing, completing, and confirming transactions
Getting the Most of Series 7 Practice Exam and Quizzes
Series 7 Exam Overview
Why Take the Series 7 Exam
Conclusion
Series 7 Practice Exam Frequently Asked Questions

Series 7 Practice Exam

The practice exams simulate the structure and format of the actual exam.

You’ll test your understanding and have a feel of how the actual exam is structured.

Our goal is to help you find out your areas of weakness and strengths using the practice exams.

We’ve also put together Series 7 practice questions by domain.

Once you’ve established where you need to put more effort, you can take the practice tests in the individual domains to polish your knowledge.

Series 7 Practice Exam 1

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Welcome to your Series 7 Practice Exam 1

This test is designed to prepare you mentally for the actual Series 7 Exam with the same number of (125 questions) and the same time allowed (225 minutes) as the actual exam.

The Series 7 Exam is breakdown into four (4) Parts.

Here are the Four (4) Domains of the Series 7 Exam with the weightage and number of questions in this practice exam:

1. Seeks Business for the Broker Dealer from Customers and Potential Customers [09 Questions] - 07%

2. Opens Accounts after Obtaining and Evaluating Customers' Financial Profile and Investment Objectives [11 Questions] - 09%

3. Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records [91 Questions] - 73%

4. Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes, and Confirms Transactions [14 Questions] - 11%

Please click NEXT to start your Free Series 7 PRACTICE EXAM right away.

Best of Luck!

Each of the following is a category of communication with the public designated by FINRA except

A) market letters.

B) institutional.

C) retail.

D) correspondence.

A registered representative has been doing some research on his own. He would like to share the information with some of his clients and sends an email to 15 of them. He also has some prospects he's been working on and sends the email to 12 of them during the same week. Under the FINRA rule on communications with the public, this would be considered

A) retail communication.

B) exempt from the principal approval requirements.

C) correspondence.

D) an electronic communication.

A registered representative of a FINRA member firm is going to present a seminar on retirement planning. It will be a slide show, and no specific advice will be given. The expected attendance is approximately 50 people. Under the FINRA rule on communications with the public,

A) the slides are considered a retail communication and need principal approval before first use.

B) a registered principal is required to attend to ensure that the standards of ethical conduct are maintained.

C) this seminar can take place only if the recommendations are tailored to the specific needs of the audience.

D) this is a public appearance and no approvals are necessary.

FINRA Rule 2210, communications with the public, describes several different categories of communications. One of those categories is called

A) email.

B) public appearances.

C) social media.

D) correspondence.

A registered representative is reading an article in a popular magazine about the advantages of tax deferral in retirement planning. There is a note that reprints of the article are available. In order to send these reprints to existing and prospective customers,

A) member alterations to the contents are only to make it consistent with applicable regulatory standards or to correct factual errors.

B) approval by a principal is required within 10 days after first use.

C) the name of the underwriter who commissioned the article must be prominently displayed.

D) filing a copy with FINRA is required.

The latest issue of a newsletter your firm subscribes to is especially relevant to one of your firm's investment products. If you decide to send it to clients and prospects, you must disclose that

A) future articles sent will provide similar discussions and information.

B) the newsletter discusses only those products that you have available through your firm.

C) the newsletter's purpose is to provide clients with a choice of products that are suitable for everyone's portfolios.

D) the newsletter is written and produced by a third party.

After a mutual fund's 10th year, performance statistics must show results for each of the following periods except

A) 5 years.

B) 10 years.

C) 1 year.

D) 3 years.

FINRA Rule 2210 deals with communications with the public. The rule classifies these communications into three different categories. Which of the following is not one of those categories?

A) Advertisements

B) Retail communications

C) Institutional communications

D) Correspondence.

An increasing percentage of registered representatives of FINRA member firms are using social media to increase their business. When using social media to reach out to clients and prospects, compliance with FINRA rules requires

A) member firm supervision over social media communication with prospects only.

B) that social media not be used to prospect for clients.

C) member firm supervision over social media communication with clients only.

D) member firm supervision over social media communication with clients and prospects.

10.

The term churning refers to

A) repeatedly purchasing stock to keep the price up.

B) purchasing calls on a particular stock for your own account before entering a large customer order for the stock.

C) entering more transactions than necessary, solely for the purpose of generating commissions.

D) repeatedly selling a stock short to prevent a price rise.

11.

One of your clients is an active investor using a tactical asset allocation strategy. As such, the client engages in numerous transactions every month. With each transaction, the client pays a separate transaction fee. Your firm has just begun offering an account to its clients whereby the client can pay one flat fee to cover all the trades in that account. You immediately bring this news to the client and suggest making the change. What type of account is this?

A) A pattern day trading account

B) A margin account

C) A fee-based account

D) A wrap-fee account

12.

Which of the following accounts are billed a single fee annually for a group of services?

A) Margin account

B) Cash account

C) Wrap account

D) Option account

13.

All of the following are the advantages of a margin account except

A) less cash is needed.

B) money is borrowed.

C) leveraging is possible.

D) losses are minimized.

14.

A large institution dealing with several different broker-dealers would probably find it beneficial to open

A) a combined cash and margin account.

B) a prime brokerage account.

C) an institutional brokerage account.

D) an accredited investor account.

15.

To be defined as a pattern day trader, the customer must execute at least

A) four day trades on a single business day.

B) five day trades in five business days.

C) four day trades in five business days.

D) four day trades in the same week.

16.

A margin account may not be used

A) to purchase corporate bonds.

B) when opening a fee-based account.

C) for retirement accounts.

D) to purchase listed stocks.

17.

Which of the following statements best describes the term churning?

A) Manipulation of market prices by a firm

B) Purchasing the same security in more than one customer account at a time

C) Trading in a customer's account considered excessive and for which no discernible investment purpose is detected

D) Making false or misleading statements to a customer for the purpose of inducing the customer to purchase or sell a security

18.

When a customer instructs a registered representative to transfer and ship, the representative instructs the margin department to transfer ownership into

A) the customer's name and deliver the securities to the customer's bank for safekeeping.

B) the brokerage firm's name and deliver the securities to the customer.

C) the customer's name and deliver the securities to the customer.

D) the brokerage firm's name and deliver the securities to the brokerage firm's commercial bank for safekeeping.

19.

A customer opens an account, and payment and delivery instructions are established. Beyond the opening of the account, these instructions may

A) not be changed unless a new account is established.

B) be changed for individual transactions only.

C) be changed for individual transactions, or going forward, for all transactions.

D) be changed at any time for all transactions going forward.

20.

You have a client who is an active trader in his margin account. Wishing to take advantage of the tax benefits of the Roth IRA, he asks for the form to open the Roth. While attempting to complete the form, he calls to ask, "How do I indicate margin trading on this form." You would respond,

A) ""Let me check with our operations department for that information.""

B) ""Because our minimum for margin accounts is $20,000 is above the IRA maximum contribution, you will have to open it in a cash account.""

C) ""IRAs, traditional or Roth, can only be opened as cash accounts.""

D) ""Only traditional IRAs can be opened as margin accounts.""

21.

If a customer wishes to change a day order to a good-til-canceled (GTC) order in the middle of the day, the registered representative should

A) enter the new order as GTC and immediately cancel the day order.

B) enter the new GTC order immediately and do nothing about the day order.

C) enter a change notice immediately.

D) allow the day order to expire at the end of the day and put in the GTC order before the next day's opening.

22.

At 2:00 pm ET, a customer enters an order to buy GGZ at the close on the NYSE. GGZ traded between 70 and 71 all day. Then, after a last-minute rally, it closed up 4 points at 74. The customer should expect to pay

A) the price as near to the close as possible, at the floor broker's discretion.

B) the closing price.

C) the average price calculated for the entire day.

D) the opening price the next morning.

23.

An investor submits an immediate-or-cancel order to sell 800 shares of stock at 32.15. When the order reaches the trading floor, the quote is 32.18 – 32.26, 6 × 8. The investor

A) sold 600 shares at 32.18.

B) sold 600 shares at 32.15.

C) did not sell any shares.

D) sold 600 shares at 32.26.

24.

All of the following statements regarding a market not-held order are true except

A) the order ticket must be marked, not held.

B) it is given to a specialist (designated market maker).

C) it gives the floor broker discretion over the price or time of execution.

D) a small portion may be filled at a time.

25.

Which of the following would accelerate a decline in a bear market?

A) Sell stop

B) Sell limit

C) Buy limit

D) Buy stop

26.

A customer tells a broker to buy 1,500 shares of ABC at 33.60 immediately for the full 1,500 shares. This is

A) a good-til-canceled order.

B) an all-or-none (AON) order.

C) a fill-or-kill (FOK) order.

D) an immediate-or-cancel (IOC) order.

27.

A customer has sold short 100 GM at 70. GM is selling for 81. The customer had previously placed a good-til canceled buy stop order at 83. GM announces a stock split and an increase in the dividend. The stock starts to move up and the customer decides to cover the short sale at a loss and instructs his broker to buy 100 shares of GM at the market. The registered representative will

A) buy 100 GM at the market.

B) sell 100 GM at the market.

C) sell 100 GM at 83.

D) buy 100 GM at the market and cancel the order to buy 100 GM at 83 stop good til canceled.

28.

Which of the following orders on the order book would be reduced for a cash dividend on the ex-date?

A) Buy 100 XYZ at 50 DNR

B) Sell 100 XYZ at 50 stop

C) Sell 100 XYZ at 60

D) Buy 100 XYZ at 60 stop

29.

A customer enters an order to buy 1,000 ABC at 50, good for the week only. How will this order appear on the order book?

A) Buy 1,000 ABC 50 Day

B) Buy 1,000 ABC 50 GTC

C) Buy 1,000 ABC 50 GTW

D) Buy 1,000 ABC 50 GTM

30.

The writer of an in-the-money put will receive the upcoming dividend from the underlying issuer if the contract is exercised

A) after the ex-date.

B) on or after the ex-date.

C) on the ex-date.

D) before the ex-date.

31.

Your client has entered a limit order to buy 600 shares of DMF at $50 per share. DMF declares a 10% stock dividend. How would this order be adjusted on the ex-date?

A) 600 shares at $50

B) 660 shares at $46.50

C) 600 shares at $45.45

D) 660 shares at $46.37

32.

One of your clients has a profit in STV common stock. The purchase price was $40 per share and is now $60 per share. The client is concerned that the stock might backtrack and some of the profit might be lost. One way to protect that profit would be to

A) enter a sell limit order at $55.

B) enter a sell limit order at $62.

C) enter a sell stop order at $62.

D) enter a sell stop order at $55.

33.

An order to sell at 38.65 stop limit is entered before the opening. The subsequent trades are 38.85, 38.50, and 38.35. The order

A) has not yet been executed.

B) was executed at 38.50.

C) was executed at 38.85.

D) was executed at 38.65.

34.

If a customer gives his broker-dealer an order to sell his stock if it falls to or below 69 and will not accept a price below 69, the order is

A) a stop limit order.

B) a sell limit order.

C) a stop order.

D) a buy limit order.

35.

Due to a sudden drop in earnings, the board of directors of Amalgamated Metal Industries (AMI) has voted to suspend all dividend payments this year. This would have the least effect on holders of AMI's

A) cumulative preferred stock.

B) common stock.

C) adjustable-rate preferred stock.

D) callable preferred stock.

36.

An investment banker purchasing what is left unsold from a rights offering is engaging in

A) firm commitment underwriting.

B) preemptive rights underwriting.

C) standby underwriting.

D) all or none underwriting.

37.

The rate on an adjustable preferred stock may be indexed to

A) the Consumer Price Index.

B) the Dow Jones Industrial Average.

C) the Treasury bill rate.

D) the Producer Price Index.

38.

An investor purchasing an ADR for a company domiciled in South Korea should understand that

A) any Korean taxes on dividends will be added to U.S. tax on those dividends.

B) the investor will be subject to currency risk.

C) the investor will not be able to receive a stock certificate for that company.

D) the ADR has greater market risk than the stock itself.

39.

Nickelplate Manufacturing Corporation (NMC) is capitalized with 1 million shares of a 6% $50 par callable, cumulative preferred stock and 10 million shares of $1 par common stock. NMC has not paid any dividends at all for the past five quarters. The current quarter's earnings are excellent and the company would like to pay a dividend to its common shareholders. Doing so would require

A) an affirmative vote of the common shareholders.

B) paying the preferred shareholders a dividend of $3.75 per share.

C) paying the preferred shareholders a dividend of $0.75 per share.

D) paying the preferred shareholders a dividend of $4.50 per share.

40.

Which of the following are characteristics of both stock rights and warrants?

A) One must be a current stockholder to receive them.

B) They are frequently used as a sweetener to attract purchasers to another security.

C) They offer the holder an opportunity to purchase stock at a fixed price.

D) When initially offered, neither one has intrinsic value.

41.

Investors should always be aware of taxes applicable to investments they own. Which of the following taxes might be associated with income derived from American depositary receipts (ADRs) but not income from other investments?

A) Federal income tax

B) State income tax

C) Excise tax

D) Foreign income tax

42.

Which of the following statements regarding warrants is true?

A) Warrants are safer than corporate bonds.

B) Warrants give the holder a perpetual interest in the issuer's stock.

C) Warrants' terms are generally shorter than rights' terms.

D) Warrants are often issued with other securities to make the offering more attractive.

43.

Cement Mixer Corporation has 1 million shares of convertible preferred stock and 2 million shares of common outstanding. Each share of preferred can be converted into half a share of common. The preferred stock is selling at $17.50, and the common stock is selling at $35.75. If all preferred shares were converted, how many shares of common stock would be outstanding after conversion?

A) 3,000,000

B) 2,000,000

C) 2,500,000

D) 500,000

44.

The term plain vanilla describes which of the following preferred stock issues?

A) Straight

B) Convertible

C) Callable

D) Cumulative

45.

When comparing preemptive rights and warrants, one similarity is

A) the method by which the issuer distributes them to shareholders.

B) their exercise price relative to the market price of the underlying stock.

C) the length of time before they expire.

D) their voting privilege.

46.

Which of the following securities typically carries the highest dividend rate?

A) Straight preferred

B) Convertible preferred

C) Participating preferred

D) Callable preferred stock.

47.

Many investors diversify by adding foreign securities to their portfolios. Those who do so with ADRs are least likely to be concerned with

A) currency risk.

B) market risk.

C) political risk.

D) liquidity risk.

48.

If a corporation attaches warrants to a new issue of debt securities, which of the following would be a resulting benefit to the corporation?

A) Reduction of the debt securities' interest rate

B) Increase in earnings per share

C) Reduction of the number of shares outstanding

D) Dilution of shareholders' equity

49.

Your customer wishes to invest in a security that will pay a specific level of dividends, but may also receive additional dividend amounts, should the underlying company have outstanding performance. Which of the following securities would best match this customer's objectives?

A) Class A common stock

B) Cumulative preferred stock

C) Convertible preferred stock.

D) Participating preferred stockholders.

50.

Corporations issue equity securities. One category of equity is preferred stock. A number of different adjectives can apply to preferred stock issues. Which of the following preferred stock issues would likely offer the greatest protection against interest rate risk?

A) Participating

B) Cumulative

C) Callable

D) Convertible

51.

A similarity between common and preferred stock is

A) the dividend must be declared by the board of directors.

B) both are evidence of corporate indebtedness.

C) the dividend is fixed.

D) they have an equal vote.

52.

It would be correct to describe a warrant in all of the following ways except

A) warrants do not have voting rights.

B) it has a longer life than a stock right.

C) it may be used as a sweetener for a bond issue.

D) the exercise price is generally slightly below the current market price.

53.

One of the primary differences between rights and warrants is

A) rights may be sold in the secondary market.

B) warrants have a life before expiration that is much longer than rights.

C) warrants provide the ability to purchase shares of common stock at a specified price.

D) the exercise of rights will result in a decline in the issuer's earnings per share.

54.

When an issuer of a preferred stock exercises the call, it is usually at a price somewhat above the stock's par value. This excess over par is

A) the call privilege.

B) the yield to call.

C) the call premium.

D) the call price.

55.

Which of the following is not an advantage of purchasing American depositary receipts (ADRs)?

A) They eliminate exchange rate risk.

B) They allow U.S. investors to buy foreign country stock denominated in dollars.

C) Foreign taxes withheld can be claimed as a credit to offset income taxes on dividends received.

D) Transactions are done on an organized exchange in the U.S.

56.

A company that has issued cumulative preferred stock

A) pays the current dividends on the preferred, but not the past dividends on the preferred, before paying a dividend on the common.

B) pays past and current preferred dividends before paying dividends on common stock.

C) pays the preferred dividend before paying the coupons due on its outstanding bonds.

D) forces conversion of the preferred that is trading at a discount to par, thereby eliminating the need to pay past-due dividends.

57.

Which of the following statements regarding preferred stock is not true?

A) Unlike debt, preferred stock has no set maturity date.

B) Because there is no set maturity value or redemption date, the holder of preferred stock has to sell her shares in the open market to close out her position.

C) Voting rights of preferred shareholders take precedence over those of common shareholders.

D) The dividend is fixed except in the case of adjustable preferred.

58.

American depositary receipts (ADRs) are used to facilitate

A) the foreign trading of domestic securities.

B) the domestic trading of foreign securities.

C) the domestic trading of U.S. government securities.

D) the foreign trading of U.S. government securities.

59.

A corporation is having a rights offering. The terms of the offering require four rights plus $40 to purchase one share. With the stock's current market price at $50 per share, the theoretical value of one right before the ex-rights date is

A) $2.50.

B) $0.25.

C) $2.00.

D) $0.20.

60.

A customer owns cumulative preferred stock (par value of $100) that pays an 8% dividend. The dividend has not been paid this year or for the previous two years. How much must the company pay the customer per share before it may pay dividends to the common stockholders?

A) 0

B) 8

C) 24

D) 16

61.

GIN Corporation is offering shareholders the right to subscribe to a new issue of stock at $30 per share. The current market price of the GIN stock is $44 per share, and it takes 20 rights plus the subscription price to purchase one share. The theoretical value of a single right, prior to the ex-rights date, is approximately

A) $0.73.

B) $0.70.

C) $0.67.

D) $1.50.

62.

Aenical Corporation issued $100 million of $100 par value preferred stock a number of years ago. The stock pays quarterly dividends of $1.25. Recent issues of comparable preferred stock carry a dividend yield of 10%. One could expect the market price of the Aenical preferred stock to be closest to

A) $100.

B) $50.

C) $25.

D) $75.

63.

Aenical Corporation issued $100 million of $100 par value preferred stock a number of years ago. The stock pays semiannual dividends of $1.25. Recent issues of comparable preferred stock carry a dividend yield of 10%. One could expect the market price of the Aenical preferred stock to be closest to

A) $25.

B) $50.

C) $75.

D) $100.

64.

Aenical Corporation issued $100 million of $100 par value preferred stock a number of years ago. The stock pays quarterly dividends of $1.25. Recent issues of comparable preferred stock carry a dividend yield of 4%. One could expect the market price of the Aenical preferred stock to be closest to

A) $75.

B) $120.

C) $125.

D) $80.

65.

Corporate stocks trade in all of the following locations except

A) the over-the-counter (OTC) market.

B) the commodities market.

C) the third market.

D) stock exchanges.

66.

Stock prices in the over-the-counter (OTC) market are determined by

A) the 5% markup policy.

B) buyers and sellers bidding directly against each other in a double auction market.

C) open outcry for the securities at a central marketplace.

D) negotiation between buyers and sellers.

67.

The over-the-counter (OTC) market could be characterized as what type of market?

A) Auction

B) Primary

C) Dealer

D) First

68.

A Nasdaq market maker buys 1,000 shares of stock from a customer at its bid to satisfy a customer order. This is an example of

A) a principal trade.

B) a riskless principal trade.

C) a block trade.

D) an agency trade.

69.

The KPL Corporation is considering having its stock listed on the New York Stock Exchange (NYSE). Who will make the final decision as to whether it will be listed?

A) The NYSE

B) FINRA

C) The SEC

D) The Board of Directors of KPL

70.

The Nasdaq Stock Market permits listing for all of the following except

A) common stock.

B) warrants.

C) convertible bonds.

D) nonconvertible debt securities.

71.

A key term in the SEC's lexicon is transparency. It is often said that "disclosure is the religion of the SEC." When investigating a security for a potential recommendation to a customer, it is likely that the least transparency exists when the stock trades in

A) the OTC market.

B) the grey market.

C) the secondary market.

D) the listed market.

72.

A portion of the OTC market where companies that have been delisted for regulatory reasons are usually traded is

A) the fourth market.

B) the grey market.

C) the ""pink"" market.

D) the third market.

73.

The over-the-counter (OTC) market is

A) the first market.

B) a negotiated market.

C) all of these.

D) an auction market.

74.

Stock prices in the over-the-counter (OTC) market are determined by

A) an auction.

B) a competitive bid.

C) the 5% markup policy.

D) negotiation.

75.

The Securities Exchange Act of 1934 deals with all of the following except

A) monitoring accounts for insider trading violations.

B) filing of financial statements by broker-dealers.

C) marking sales long or short on an order ticket.

D) filing an updated prospectus.

76.

A recommendation to purchase a security traded in which of the following venues would most likely result in the greatest scrutiny by your manager?

A) The Nasdaq Stock Market

B) The New York Stock Exchange

C) The OTC Bulletin Board

D) The grey market

77.

The Securities Exchange Act of 1934 applies to all of the following except

A) regulation of new issues.

B) the extension of credit on purchase of securities.

C) registration of broker-dealers.

D) secondary market trading.

78.

A network of market makers that offers to trade securities not listed on an exchange is called

A) the over-the-counter (OTC) market.

B) NYSE Arca.

C) National Daily Quotation Service.

D) National Association of Securities Dealers Automated Quotations.

79.

Stocks that are listed on the NYSE can also traded in all of the following except

A) the third market.

B) the fourth market.

C) the CBOE (Chicago Board Options Exchange).

D) an electronic communications network (ECN).

80.

For individual public investors, dark pools of liquidity

A) allow them to enter orders that are sent directly to the trading floors of stock exchanges.

B) lessen the transparency of the overall market as volume, quote and price information, and market participant identity is unknown.

C) prevent them from having their own orders entered on exchanges for execution.

D) allow them to give an order to their broker-dealer to buy or sell securities while only referencing an account known by a number and not their name.

81.

The Securities Exchange Act of 1934 regulates or mandates all of the following except

A) creation of the SEC.

B) extension of credit to customers.

C) full and fair disclosure on new offerings.

D) manipulation of the secondary market.

82.

When you hear your firm's traders talking about institutions trading with a lack of transparency, they are probably referring to

A) the over-the-counter market.

B) the OTC Bulletin Board.

C) the third market.

D) dark pools.

83.

All of the following securities trade in the over-the-counter (OTC) market except

A) government and agency securities.

B) open-end investment companies.

C) Nasdaq securities.

D) American depositary receipts.

84.

All of the following statements regarding the over-the-counter (OTC) market are true except

A) it trades listed securities.

B) more issues trade OTC than on the exchanges.

C) it trades unlisted securities.

D) it is an auction market.

85.

All of the following statements regarding over-the-counter (OTC) markets are true except

A) an offer is the lowest price a dealer will accept when selling.

B) a bid is the highest price a dealer will pay when buying.

C) the OTC market is an auction market.

D) securities traded OTC include American depositary receipts (ADRs) and municipal bonds.

86.

An investor who purchased 100 shares of REDP common stock on February 28, 2019, would receive long-term capital gain treatment if the stock is sold at a profit starting

A) March 1, 2020.

B) February 29, 2020.

C) March 2, 2020.

D) February 28, 2020.

87.

The RJN Corporation has issued warrants where each warrant offers the holder the right to purchase one share of RJN's common stock for $20 per share. The warrants are exercisable anytime within the next five years. Chelsea purchases 80 warrants for $2 each. If three years after the purchase, the market price of RJN common stock has risen to $25 per share and Chelsea sells the warrants for their intrinsic value, she has realized

A) a long-term capital gain of $400.

B) a long-term capital gain of $240.

C) a short-term capital gain of $240.

D) a short-term capital gain of $400.

88.

An investor has received a cash dividend on a stock that they have owned for over 10 years. It is the first dividend the company has paid. The cash dividend would be taxable to the investor as

A) a short-term capital gain in the year in which it is received.

B) a return of principal.

C) a long-term capital gain in the year in which it is received.

D) income in the year in which it is received.

89.

The RJN Corporation has issued warrants where each warrant offers the holder the right to purchase one share of RJN's common stock for $20 per share. The warrants are exercisable anytime within the next five years. Chelsea purchases 80 warrants for $2 each. Three years after the purchase, the market price of RJN common stock has risen to $25 per share. Chelsea exercises the warrants and immediately sells the RJN stock at the market price. The result of these transactions is that Chelsea has realized

A) a net short-term capital gain of $400.

B) a net long-term capital gain of $240.

C) a net long-term capital gain of $400.

D) a net short-term capital gain of $240.

90.

For tax-reporting purposes, qualified dividends are considered to be what type of income?

A) Earned

B) Phantom

C) Passive

D) Portfolio

91.

A corporation pays a 10% stock dividend to common stockholders. All the following are true regarding this dividend except

A) the beauty of stock dividends is that they are nontaxable.

B) the dividend is taxable in the year the sale of the shares takes place.

C) the total value of the position is unchanged when the dividend is paid.

D) the cost basis per share is adjusted based on the stock dividend.

92.

The DCAV corporation has declared a 10% stock dividend. Which of the following is true regarding the shareholders receiving the stock dividend?

A) The stock dividend would not be taxable upon receipt by the shareholder.

B) The stock dividend would increase the cost basis per share.

C) The stock dividend would decrease their percentage of ownership within the corporation.

D) The stock dividend would increase their percentage of ownership within the corporation.

93.

If a customer buys $28,000 of ABC stock in April 20XXand at year end, the stock is worth $23,000, how much may the customer deduct on his 20XX tax return?

A) $5,000

B) $2,000

C) $3,000

D) $0

94.

A customer has $12,000 of capital gains, $15,000 of capital losses, and $50,000 adjusted gross income. How much unused loss is carried forward to the following tax year?

A) $0

B) $3,000

C) $12,000

D) $15,000

95.

Which of the following is true with respect to excess capital losses realized by an individual taxpayer?

A) They may be carried back up to three years and carried forward indefinitely until exhausted.

B) They may be carried forward indefinitely until exhausted.

C) They may be carried forward with a time limit of five years.

D) No more than $3,000 per year may be used against capital gains

96.

An investor who purchased 100 shares of PERD common stock on June 30, 2020, would receive long-term capital gain treatment if the stock is sold at a profit starting

A) July 1, 2021.

B) June 31, 2021.

C) December 31, 2021.

D) June 30, 2021.

97.

At year's end, your client reports $12,000 in capital gains and $20,000 in capital losses. The net effect of this on his taxes would be

A) a $4,000 deduction from ordinary income with a $4,000 loss carryforward.

B) an $8,000 deduction from ordinary income.

C) a $3,000 deduction from ordinary income with a $2,500 loss carryforward.

D) a $3,000 deduction from ordinary income with a $5,000 loss carryforward.

98.

An investor purchased 200 shares of Hightown National Bank (HNB) common stock at $120.06 per share. Thirteen months later, HNB pays a 15% stock dividend. Three months after that, the investor sells the shares received from the stock dividend at $112.57 per share. The tax consequence to the investor is

A) $245.10 short-term capital gain.

B) $245.10 long-term capital gain.

C) $122.55 short-term capital gain.

D) $$1,879.10 long-term capital gain.

99.

Your customer has experienced $7,500 in capital losses this year. He has realized $2,000 in capital gains and has $65,000 adjusted gross income. How much of his loss will he be able to carry forward to next year?

A) None of these.

B) $4,500

C) $2,500

D) $5,500

100.

Four years ago, you declared a net capital loss of $23,000 on your tax return. You have had no further capital gains or losses since then. For that year and the next two, you took the maximum allowable income deduction. How much may you deduct from your income this year, and how much loss will you have to carry forward?

A) $2,000/$11,000.

B) $3,000/$12,000.

C) $2,000/$12,000.

D) $3,000/$11,000.

101.

A married couple who files jointly has a $5,000 long-term capital loss with no offsetting capital gains. Regarding the tax treatment of this loss, all of the following statements are true except

A) the maximum they can deduct this year is $3,000.

B) capital losses can be deducted dollar for dollar against capital gains.

C) they can carry forward $2,000 to future years.

D) capital losses can be used to offset capital gains only.

102.

An investor establishes a $5,000 position by purchasing 100 shares at $50 per share. She then sells all the shares six months later at $60 per share. Her taxable consequences are

A) a $1,000 short-term capital gain.

B) a $1,000 short-term capital loss.

C) a $1,000 long-term capital gain.

D) a $6,000 short-term capital gain.

103.

An investor had a $20,000 capital loss, a $15,000 capital gain, and $50,000 in income for the year. How much of the income is taxable?

A) $20,000

B) $47,000

C) $50,000

D) $30,000

104.

All of the following corporate transactions are nontaxable to investors when received except

A) cash dividends.

B) reverse stock splits.

C) stock dividends.

D) stock splits.

105.

If your client has a $21,000 net capital loss this year, and he plans to apply the maximum deduction toward his ordinary income for the year, after this year, he may

A) not carry the loss forward.

B) deduct a maximum of $3,000 per year and carry the remaining loss forward indefinitely.

C) carry the loss forward indefinitely and offset capital gains only.

D) carry $3,000 of the loss forward.

106.

An investor in the 28% tax bracket has a $5,000 loss after netting all capital gains and losses realized. How much may the investor deduct from income that year?

A) $5,000

B) $3,000

C) $0

D) $2,500

107.

The following dividends were received by a husband, his spouse, and both of them jointly: husband, $160; spouse, $160; joint, $100. What amount of dividends that would be subject to taxation if they filed a joint tax return?

A) $420

B) $220

C) $0

D) $200

108.

If a customer has $9,000 of capital losses and $2,000 of capital gains in a tax year, that year's consequences are

A) a $9,000 loss deduction.

B) a $7,000 loss deduction with no carryforward.

C) a $3,000 loss deduction with no carryforward.

D) a $3,000 loss deduction with $4,000 carryforward.

109.

One of your customers owns 100 shares of GTS common stock. The purchase was made two years ago at a price of $51 per share. GTS has recently declared a 3:2 stock split. At the customer's request, as soon as the new shares are in the account, you sell them and $2,000 from the proceeds of the sale is credited to the customer's account. Based on this information, the tax impact of this transaction is

A) a long-term capital loss of $1,400.

B) a short-term capital gain of $300.

C) a long-term capital loss of $1,333 and a short-term capital loss of $667.

D) a long-term capital gain of $300.

110.

Without an exemption, member firms are required to provide purchasers of penny stocks each of the following except

A) compensation to be earned by both the member firm and the associated person.

B) quarterly statements.

C) current inside bid and ask quotation.

D) a risk disclosure document.

111.

SEC rules require that customers be given a copy of the risk disclosure document before their first transaction in a penny stock. The member firm must receive a signed and dated acknowledgment from the customer that the document has been received. In addition to obtaining the client's signature, the SEC requires the firm to wait at least

A) two business days after sending the statement before executing the first trade.

B) two business days after receiving the statement before executing the first trade.

C) five business days after receiving the statement before executing the first trade.

D) five business days after sending the statement before executing the first trade.

112.

The 5% markup policy would apply to all of the following equity transactions except

A) a proceeds transaction.

B) a riskless principal transaction.

C) an agency trade done on an exchange.

D) a primary market transaction.

113.

In a proceeds transaction for a customer where the proceeds from the liquidation of one stock are used to purchase another stock, the 5% markup policy is computed on the basis of

A) each side of the transaction separately.

B) a combination of both the buy side and the sell side.

C) the markup on the buy side only.

D) the markdown on the sell side only.

114.

A customer sells securities and uses the proceeds to buy more securities at the same cost. Under the 5% markup policy, the markup is calculated on

A) the sell side only.

B) the buy side only.

C) each side separately.

D) the total of both sides.

115.

All of the following considerations apply to the 5% markup policy except

A) the cost of executing the transaction.

B) the availability of the security.

C) the customer's ability to pay.

D) the services rendered by the broker-dealer.

116.

When an investor's account contains penny stocks,

A) the account must maintain minimum equity of $25,000.

B) account statements must be sent monthly.

C) account statements must be sent weekly.

D) orders must be approved before being submitted.

117.

Which of the following transactions would not be subject to the 5% markup policy?

A) Your client enters trades to purchase two different mutual funds in the same fund family. The combined purchases do not qualify for any breakpoints. The client is charged a sales charge of 6.5%.

B) A client enters an order to purchase one share of a stock to be put in the name of her grandchild. You charge the client the minimum commission for your firm ($15) even though the stock is currently trading at $26 per share.

C) A client sells shares of an over-the-counter stock and uses the proceeds to purchase shares from your firm's inventory account.

D) Your firm agrees to do an agency cross-transaction between two of your clients. Each client has been charged a commission.

118.

The 5% markup policy applies to

A) new issues.

B) mutual funds.

C) all of these.

D) principal over-the-counter (OTC) trades.

119.

For purposes of the SEC Rule 15g-9 dealing with penny stocks, the term established customer does not include a person who has

A) both a cash and a margin account with the firm.

B) purchased the securities of three different penny stocks on three different days involving three different issuers.

C) effected a securities transaction in an account more than one year before the proposed penny stock transaction.

D) deposited funds or securities in an account more than one year before the proposed penny stock transaction.

120.

All of the following statements regarding the 5% markup policy are true except

A) the markup policy does not apply to securities sold at a specific price and with a prospectus.

B) the type of security is a factor to consider.

C) a riskless transaction is not generally covered by the 5% markup policy.

D) a transaction in common stock customarily has a higher percentage markup than a bond transaction of the same size.

121.

Which of the following customer accounts requires the sending of monthly customer statements?

A) A margin account

B) An account containing penny stocks

C) An options account

D) A discretionary account

122.

All of the following are subject to the 5% markup policy except

A) commissions.

B) markups.

C) spreads in new stock offerings.

D) markdowns.

123.

One of your customers has asked you about trading penny stocks. After discussing the risks, the customer decides to go ahead. The firm sends the individual a copy of the special penny stock risk disclosure document. The firm needs the customer's signed and dated acknowledgment of receipt of the document. Trading in penny stocks may not begin in that account until

A) at least two business days after sending the statement.

B) at least two business days after receiving the statement.

C) the day the signed acknowledgment has been received.

D) at least $25,000 in equity is in the account.

124.

Before effecting a penny stock transaction with a customer, the member firm must

A) provide the customer with a current bid and asked quote on the stock.

B) verify that the customer has sufficient funds in the account.

C) provide the customer with the price of the most recent trade in the stock.

D) receive the signed copy of the risk disclosure document.

125.

One of your clients frequently enters unsolicited orders to purchase penny stocks. This means

A) the client must sign and return the penny stock suitability statement.

B) as an unsolicited order, the client is exempt from the compensation disclosure requirements.

C) the client must be given a copy of the risk disclosure document prior to each trade.

D) the client receives monthly statements.

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