Free Practice Questions for FINRA Series-7 Exam

tax anticipation bill. These obligations pay no interest and their maturity comes after corporate tax payment dates. They are accepted for redemption at face value prior to maturity on corporate tax payment dates to encourage purchase by corporations.

it was never executed. The first transaction at 38.75 elected the order, but since it was both a stop order and a limit order, there was never another transaction at 38.75. Consequently, Bubba’s order was never executed.

the certificate is validated by the transfer agent. A mutilated bond must be validated before it can be a good delivery. The validation can be made by the issuer or the transfer agent.

warrants. All of the other choices receive dividends if they are declared. But only warrants are a specific security that never pays dividends.

interstate mail fraud in securities offerings. Blue Sky laws are state security laws and do not cover interstate regulations.

both B and C. The size of tax deductions is not a “primary” consideration.

public utility companies. Interest rates most affect the companies with the greatest amount of debt. Public utility companies are highly leveraged. Hence, they most likely incur the largest effect of rising interest rates.

$10. A point is 1% and bonds are priced in $1,000 increments. Multiplying $1,000 by 1% equals $10.

rate of return. Because T-bills pay no interest, Bubba’s rate of return is the discount as a percentage of the face value he receives at maturity.

firm commitment. The term underwriting means a guarantee to the issuing corporation. This is a firm commitment, unlike a best efforts offering where there is no guarantee.