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Answers to Sample Series 7 Questions



  1. (D) As we know, a short straddle is a short call combined with a short put on the same underlying security, each having the same strike price and exercise month. Should the market price of the underlying stock increase, the short call can be exercised against you. Since the stock price can increase without limit, the short straddle has unlimited loss potential.

  2. (B) SIPC covers investors for $500,000, of which only $100,000 can be cash.

  3. (C) A signature must correspond exactly to the name on the face of the certificate.

  4. (A) The Securities Act of 1933 governs the initial registration/distribution of securities, which is considered the primary market.

  5. (B) 3/2 X 200 = 600/2 = 300. 300 shares TOTAL
    But the question asks for how many ADDITIONAL shares.
    Starts with 200 shares
    Ends with 300 shares
    Additional 100 shares

  6. (B) No activity in the account = quarterly statement
    Activity in the account = monthly statement

  7. (D) Self-explanatory

  8. (C) It is illegal for a RR to enter a customer order without the customer's written consent.

  9. (D) Premiums exist in option transactions only

  10. (B) Limited trading authorizations allow the registered representative to buy and sell for the customer only. The registered representative cannot withdraw any money.


Additional Sample Questions