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FINRA Series 7
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Question 1 of 30
1. Question
When underwriters make proposals to purchase a new issue of securities, with the securities going to the underwriter (or the underwriting syndicate) offering the lowest bid then which of the following sales occur:
I. Negotiated sales
II. Primary financing
III. Competitive sales
IV. Public offeringsCorrect
Competitive sales occur when underwriters make proposals to purchase a new issue of securities, with the securities going to the underwriter (or the underwriting syndicate) offering the lowest bid. This can also be called a public sale or a competitive bid.
Incorrect
Competitive sales occur when underwriters make proposals to purchase a new issue of securities, with the securities going to the underwriter (or the underwriting syndicate) offering the lowest bid. This can also be called a public sale or a competitive bid.
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Question 2 of 30
2. Question
Which of the following statement(s) is true related to Public offerings?
I. when an entity sells shares to a small number of specific investors
II. When an entity sells shares to the public for the purpose of raising funds
III. When underwriters make proposals to purchase a new issue of securities
IV. Used for debt securities, issuing bonds at a lower rateCorrect
Public offerings occur when an entity sells shares to the public for the purpose of raising funds.
Incorrect
Public offerings occur when an entity sells shares to the public for the purpose of raising funds.
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Question 3 of 30
3. Question
When an entity sells share to a small number of specific investors, again for the purpose of raising funds is known as:
I. Public offerings
II. Advance refunding
III. Official statements
IV. Negotiated salesCorrect
Private placements occur when an entity sells share to a small number of specific investors, again for the purpose of raising funds. Investors in private placements are usually larger ones, such as banks and mutual funds.
Incorrect
Private placements occur when an entity sells share to a small number of specific investors, again for the purpose of raising funds. Investors in private placements are usually larger ones, such as banks and mutual funds.
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Question 4 of 30
4. Question
Which of the following is (are) included in Notices of sale?
I. Amount and kind of bonds
II. The purpose for selling the bonds
III. Location and time for bids to be delivered
IV. Used for debt securitiesCorrect
Notices of sale are announcements made by municipal entities to declare that the entity is now accepting bids from underwriters (or underwriting syndicates) to purchase the issue of a new bond.
(i) Amount and kind of bonds (II) Purpose for selling the bonds (iii) Location and time for bids to be deliveredIncorrect
Notices of sale are announcements made by municipal entities to declare that the entity is now accepting bids from underwriters (or underwriting syndicates) to purchase the issue of a new bond.
(i) Amount and kind of bonds (II) Purpose for selling the bonds (iii) Location and time for bids to be delivered -
Question 5 of 30
5. Question
A person or institution which acts as a middleman between the buyer of a security and the seller of a security is known as:
I. Broker
II. Dealer
III. Priority
IV. ParityCorrect
A broker is a person or institution which acts as a middleman between the buyer of a security and the seller of a security. The broker makes his profit by charging a sales charge, or commission, for arranging the transaction.
Incorrect
A broker is a person or institution which acts as a middleman between the buyer of a security and the seller of a security. The broker makes his profit by charging a sales charge, or commission, for arranging the transaction.
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Question 6 of 30
6. Question
A person or institution which sells its own inventory to buyers is known as:
I. Priority
II. Parity
III. Broker
IV. DealerCorrect
A dealer is a person or institution which sells its own inventory to buyers (like a used-car dealer). dealer charges a markdown when he purchases inventory, lowering the price he pays for the inventory; and he charges a markup when he sells it, increasing the price the customer pays for it.
Incorrect
A dealer is a person or institution which sells its own inventory to buyers (like a used-car dealer). dealer charges a markdown when he purchases inventory, lowering the price he pays for the inventory; and he charges a markup when he sells it, increasing the price the customer pays for it.
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Question 7 of 30
7. Question
Which of the following is known as the second market?
I. Pink sheets
II. Over-the-counter (OTC) securities
III. Bulletin board stocks
IV. Auction marketsCorrect
The over-the-counter (OTC) market is also known as the second market (not to be confused with the secondary market, which encompasses all the various ways of trading stock besides new issues). It consists of a nationwide network of brokers and dealers connected by phone and computer who trade non-listed stocks from their offices.
Incorrect
The over-the-counter (OTC) market is also known as the second market (not to be confused with the secondary market, which encompasses all the various ways of trading stock besides new issues). It consists of a nationwide network of brokers and dealers connected by phone and computer who trade non-listed stocks from their offices.
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Question 8 of 30
8. Question
Which of the following statement is false for over-the-counter bulletin board?
I. Displays quotes
II. Displays recent sale prices
III. Provides information for the market makers
IV. Nationwide network of brokers and dealers connected by phoneCorrect
The over-the-counter bulletin board (OTCBB) is a regulated electronic medium for trading over-the-counter (OTC) securities, displaying quotes, recent sale prices, and volume information.
Incorrect
The over-the-counter bulletin board (OTCBB) is a regulated electronic medium for trading over-the-counter (OTC) securities, displaying quotes, recent sale prices, and volume information.
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Question 9 of 30
9. Question
Which of the following is an electronic market that handles more volume than the NYSE?
I. NASDAQ
II. New York Stock Exchange
III. Dow Jones Industrial Average
IV. Electronic communication networksCorrect
The National Association of Securities Dealers Automated Quotations (NASDAQ) is an electronic market that handles more volume than the NYSE although the market value of the NASDAQ is lower than that of the NYSE.
Incorrect
The National Association of Securities Dealers Automated Quotations (NASDAQ) is an electronic market that handles more volume than the NYSE although the market value of the NASDAQ is lower than that of the NYSE.
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Question 10 of 30
10. Question
A System which aims to facilitate more direct trading between traders and brokerage firms is known as:
I. Secondary market
II. Government agency bonds
III. Electronic communication networks
IV. New York Stock ExchangeCorrect
Electronic communication networks (ECNs) are systems which aim to facilitate more direct trading between traders and brokerage firms. ECNs allow orders to be executed without a third party, especially orders executed by a market maker.
Incorrect
Electronic communication networks (ECNs) are systems which aim to facilitate more direct trading between traders and brokerage firms. ECNs allow orders to be executed without a third party, especially orders executed by a market maker.
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Question 11 of 30
11. Question
A broker who deals only with other municipal brokers, and large financial institutions, such as banks is known as:
I. Government agency broker
II. Corporate brokers
III. Municipal broker
IV. Broker’s brokerCorrect
Some municipal bond brokers don’t deal with individual investors or the general public at all .They deal only with other municipal brokers, and large financial institutions, such as banks. A broker in this category is known as a broker’s broker
Incorrect
Some municipal bond brokers don’t deal with individual investors or the general public at all .They deal only with other municipal brokers, and large financial institutions, such as banks. A broker in this category is known as a broker’s broker
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Question 12 of 30
12. Question
Which of the following bonds are issued by corporations?
I. high-yield bonds
II. Government agency bonds
III. Repurchase agreement bonds
IV. Certificates of deposit bondsCorrect
Corporate bonds are bonds issued by corporations. Whereas Treasury bonds can be backed by the full faith and credit of the U.S. government, corporations do not have that guarantee, and thus generally have higher interest rates.
Incorrect
Corporate bonds are bonds issued by corporations. Whereas Treasury bonds can be backed by the full faith and credit of the U.S. government, corporations do not have that guarantee, and thus generally have higher interest rates.
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Question 13 of 30
13. Question
Which of the following bonds are called “junk bonds”?
I. Corporate bonds
II. high-yield bonds
III. Certificates of deposit
IV. Government agency bondsCorrect
high-yield bonds are bonds with lower credit ratings than usual corporate bonds (below a “BBB” S&P rating and below a “Baa” Moody’s rating). These are called “junk bonds,”although they are still popular among investors worldwide
Incorrect
high-yield bonds are bonds with lower credit ratings than usual corporate bonds (below a “BBB” S&P rating and below a “Baa” Moody’s rating). These are called “junk bonds,”although they are still popular among investors worldwide
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Question 14 of 30
14. Question
Which of the following is(are) the type(s) of commercial paper?
I. Direct paper
II. Dealer paper
III. Brokered paper
IV. Jumbo CDsCorrect
Direct paper is sold directly by the financing institution to the public, without going through dealers. Dealer paper is any commercial paper marketed through dealers.
(i) Direct paper (ii) Dealer paper
Incorrect
Direct paper is sold directly by the financing institution to the public, without going through dealers. Dealer paper is any commercial paper marketed through dealers.
(i) Direct paper (ii) Dealer paper
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Question 15 of 30
15. Question
A financial instrument offered by banks, having a specific term (such as six months or one year) and usually having a fixed interest rate is known as:
I. Certificates of deposit (CDs)
II. Brokered certificates of deposit
III. Jumbo certificates of deposit
IV. Banker’s acceptanceCorrect
Certificates of deposit (CDs) are financial instruments offered by banks, having a specific term (Such as six months or one year) and usually having a fixed interest rate.
Incorrect
Certificates of deposit (CDs) are financial instruments offered by banks, having a specific term (Such as six months or one year) and usually having a fixed interest rate.
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Question 16 of 30
16. Question
The following certificate(s) is(are) not purchased directly from a bank, but instead mediated by a brokerage firm?
I. Jumbo certificates of deposit
II. Certificates of deposit (CDs)
III. Auction-rate securities
IV. Brokered certificates of depositCorrect
Brokered certificates of deposit are CDs which are not purchased directly from a bank, but instead mediated by a brokerage firm (or from some other entity besides a bank). These CDs are generally pricier.
Incorrect
Brokered certificates of deposit are CDs which are not purchased directly from a bank, but instead mediated by a brokerage firm (or from some other entity besides a bank). These CDs are generally pricier.
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Question 17 of 30
17. Question
Which of the following statement is true for Jumbo certificates of deposit?
I. Usually, have a fixed interest rate
II. They are not purchased directly from a bank
III. They have a minimum face value of $100,000
IV. They are considered to be low-risk.Correct
Jumbo certificates of deposit are CDs with a minimum face value of $100,000. These are, of course, Ordinarily purchased only by large institutional investors and they are considered to be low-risk
Incorrect
Jumbo certificates of deposit are CDs with a minimum face value of $100,000. These are, of course, Ordinarily purchased only by large institutional investors and they are considered to be low-risk
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Question 18 of 30
18. Question
Which of the following is commonly used in international transactions?
I. Auction-rate securities
II. Asset-backed securities
III. Banker’s acceptance
IV. Equity-linked securitiesCorrect
A banker’s acceptance (BA) is commonly used in international transactions. It is the corporate equivalent of a post-dated check, and can have limits of 1 to 270 days. A banker’s acceptance is better than a regular postdated check, however, because the holder has the goods being traded as collateral in case the bank underwriting the acceptance goes under
Incorrect
A banker’s acceptance (BA) is commonly used in international transactions. It is the corporate equivalent of a post-dated check, and can have limits of 1 to 270 days. A banker’s acceptance is better than a regular postdated check, however, because the holder has the goods being traded as collateral in case the bank underwriting the acceptance goes under
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Question 19 of 30
19. Question
Which of the following securities is backed with some sort of asset as collateral?
I. Equity-linked securities
II. Exchange-traded notes
III. Holding company depository receipts
IV. Asset-backed securitiesCorrect
Asset-backed securities (ABSs) are securities which are backed with some sort of asset as collateral. Asset-backed securities (ABSs) are securities which are backed with some sort of asset as collateral.
Incorrect
Asset-backed securities (ABSs) are securities which are backed with some sort of asset as collateral. Asset-backed securities (ABSs) are securities which are backed with some sort of asset as collateral.
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Question 20 of 30
20. Question
Which of the following statement is not true related to Equity-linked securities?
I. Partly involving debt
II. Partly involving equity
III. A mixture of bonds and exchange-traded funds
IV. Printed on a single stock certificateCorrect
Equity-linked securities (ELKSs) are hybrid securities, partly involving debt and partly involving equity. Fundamentally, they are debt securities which will behave like normal debt securities if a specified stock maintains a specific level of performance, but if that stock drops below the minimum
performance level, then the investor receives an amount of stock instead.Incorrect
Equity-linked securities (ELKSs) are hybrid securities, partly involving debt and partly involving equity. Fundamentally, they are debt securities which will behave like normal debt securities if a specified stock maintains a specific level of performance, but if that stock drops below the minimum
performance level, then the investor receives an amount of stock instead. -
Question 21 of 30
21. Question
A hybrid security which serve as a mixture of bonds and exchange-traded funds (ETFs) is also known as:
I. Holding company depository receipts
II. Exchange-traded notes
III. Over-the-counter (OTC) securities
IV. American Depository ReceiptCorrect
Exchange-traded notes (ETNs) are hybrid securities which serve as a mixture of bonds and Exchange-traded funds (ETFs). As their name implies, they are traded on an exchange, although they also have a maturity date like bonds
Incorrect
Exchange-traded notes (ETNs) are hybrid securities which serve as a mixture of bonds and Exchange-traded funds (ETFs). As their name implies, they are traded on an exchange, although they also have a maturity date like bonds
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Question 22 of 30
22. Question
Which of the following term shows the relationship between any two currencies and reflection that how many units of one currency are required to obtain one unit of the other currency:
I. Exchange rate
II. Currency trading
III. Spot markets
IV. Fixed marketsCorrect
An exchange rate is the relationship between any two currencies, and it reflects how many units of one currency are required to obtain one unit of the other currency. They change daily, and many different factors can affect them. This constant change in the exchange rate is known as the float.
Incorrect
An exchange rate is the relationship between any two currencies, and it reflects how many units of one currency are required to obtain one unit of the other currency. They change daily, and many different factors can affect them. This constant change in the exchange rate is known as the float.
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Question 23 of 30
23. Question
Which of the following is the function of Spot Markets?
I. Markets involving agreements for future transactions
II. Controlling the quantity of a foreign currency which is imported or exported
III. The relationship between any two currencies
IV. Aiding a developing countryCorrect
Spot markets are markets where goods are exchanged for cash and immediately delivered. There is no delay to the purchases, and contracts are effective at once.
Incorrect
Spot markets are markets where goods are exchanged for cash and immediately delivered. There is no delay to the purchases, and contracts are effective at once.
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Question 24 of 30
24. Question
When U.S. dollars are deposited anywhere in the world outside the United States, they are called:
I. Eurodollar bond
II. Riyal
III. Eurodollars
IV. RupeesCorrect
When U.S. dollars are deposited anywhere in the world outside the United States, they are called Eurodollars (even if they’re not in Europe).The important thing to remember is that they’re in American dollars, and not the currency of the bank where they’re deposited.
Incorrect
When U.S. dollars are deposited anywhere in the world outside the United States, they are called Eurodollars (even if they’re not in Europe).The important thing to remember is that they’re in American dollars, and not the currency of the bank where they’re deposited.
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Question 25 of 30
25. Question
Business cycle contains how many stages?
I. Four
II. Five
III. Six
IV. SevenCorrect
There are four stages of Business cycle. The first phase of the business cycle is expansion. Second phase of the business cycle, the peak. Third phase of the cycle, called contraction. The last phase of the cycle, the trough.
Incorrect
There are four stages of Business cycle. The first phase of the business cycle is expansion. Second phase of the business cycle, the peak. Third phase of the cycle, called contraction. The last phase of the cycle, the trough.
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Question 26 of 30
26. Question
Which of the following is the third phase of the business cycle?
I. Expansion
II. Peak
III. Trough
IV. ContractionCorrect
The third phase of the cycle, called contraction. After an economy has peaked, economic indicators and trends gradually go on the downswing due to less
investing and spending.Incorrect
The third phase of the cycle, called contraction. After an economy has peaked, economic indicators and trends gradually go on the downswing due to less
investing and spending. -
Question 27 of 30
27. Question
Which of the following statement is true for inverted yield curve?
I. The yield (interest rate) increases as the bond’s maturity increases
II. These can signify a change from recession to economic health
III. Bonds with longer maturities are displayed as having a lower yield rate.
IV. Shares of stock whose value is extremely sensitive to changes in interest ratesCorrect
Inverted yield curve, bonds with longer maturities are displayed as having a lower yield rate. This generally signifies a future recession.
Incorrect
Inverted yield curve, bonds with longer maturities are displayed as having a lower yield rate. This generally signifies a future recession.
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Question 28 of 30
28. Question
A share of stock whose value is extremely sensitive to changes in interest rates is known as:
I. Normal yield stocks
II. Inverted yield stocks
III. Flat yield stocks
IV. Interest-rate-sensitive stocksCorrect
Interest-rate-sensitive stocks are shares of stock whose value is extremely sensitive to changes in interest rates. The price of these stocks will fluctuate widely, for instance, with a modification in the risk-free rate. These stocks will have large beta factors according to the capital asset pricing model.
Incorrect
Interest-rate-sensitive stocks are shares of stock whose value is extremely sensitive to changes in interest rates. The price of these stocks will fluctuate widely, for instance, with a modification in the risk-free rate. These stocks will have large beta factors according to the capital asset pricing model.
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Question 29 of 30
29. Question
Which of the following statement is related to food products and tobacco products:
I. Open Market industries
II. Defensive industries
III. Federal Reserve Board
IV. Cyclical industriesCorrect
Two big defensive industries are food products and tobacco products. Defensive industries are those sectors of the economy that sell products that people tend to buy no matter what the state of the economy is.
Incorrect
Two big defensive industries are food products and tobacco products. Defensive industries are those sectors of the economy that sell products that people tend to buy no matter what the state of the economy is.
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Question 30 of 30
30. Question
Which of the following industries tend to sell expensive durable goods, such as automobiles, or the raw materials used to produce durable goods:
I. Federal Reserve Board
II. Defensive industries
III. Federal Open Market Committee
IV. Open Market industriesCorrect
Cyclical industries tend to sell expensive durable goods, such as automobiles, or the raw materials used to produce durable goods. Cyclical industries are the opposite of defensive industries. The prospects for companies in these industries tend to rise and fall right along with the business cycle
Incorrect
Cyclical industries tend to sell expensive durable goods, such as automobiles, or the raw materials used to produce durable goods. Cyclical industries are the opposite of defensive industries. The prospects for companies in these industries tend to rise and fall right along with the business cycle