Series 7 Exam Review Questions for Final Week

🧾 Series 7 Exam Review Questions for Final Week
📘 Essential Questions to Help You Focus in the Final Week of Preparation

As you enter the final week of preparation for the Series 7 exam, it’s crucial to focus on review questions that target the key areas of the exam. Here are some critical review questions designed to test your knowledge and ensure you’re ready for the big day.

🎯 1. Types of Securities

Which of the following is an example of a debt security?

A) Common Stock
B) Corporate Bond
C) Mutual Fund
D) Call Option

Answer: B) Corporate Bond

Explanation:
A corporate bond is a debt security issued by a corporation, where the issuer borrows money from the bondholder and promises to repay the principal with interest. Common stock is an equity security, and mutual funds and call options are types of investment products, not debt securities.

🎯 2. Market Participants

Which of the following is NOT a market participant in the securities industry?

A) Broker-Dealer
B) Investment Advisor
C) Mutual Fund
D) Issuer

Answer: C) Mutual Fund

Explanation:
A mutual fund is an investment vehicle and not a market participant. The other choices, such as broker-dealers, investment advisers, and issuers, are all participants in the market, as they play a role in executing, advising, or issuing securities.

🎯 3. Customer Accounts and Regulations

Which of the following is a requirement for opening a customer account?

A) A minimum deposit of $1,000
B) A completed New Account Form with customer details
C) A social security number only
D) A minimum income requirement

Answer: B) A completed New Account Form with customer details

Explanation:
To open a customer account, a firm must complete a New Account Form with details like the customer’s financial profile, investment objectives, and risk tolerance. This helps to ensure that the firm complies with Know Your Customer (KYC) regulations and can make suitable investment recommendations.

🎯 4. Margin Accounts

Which of the following is TRUE about margin accounts?

A) The initial margin requirement is always 100% of the total purchase price.
B) Margin accounts allow the investor to borrow money to purchase securities.
C) The maximum leverage allowed is determined by the Federal Reserve but can be changed by FINRA.
D) Investors cannot sell securities they bought on margin until the full price is paid.

Answer: B) Margin accounts allow the investor to borrow money to purchase securities.

Explanation:
In a margin account, the investor can borrow money from the brokerage firm to purchase securities. The Federal Reserve sets the initial margin requirement, which is typically 50%, and FINRA provides additional rules regarding margin trading. Leverage allows an investor to buy more securities than they could otherwise afford.

🎯 5. Options and Strategies

If an investor buys a put option with a strike price of $45 when the stock is trading at $50, which of the following will result in a profitable trade?

A) The stock rises to $55
B) The stock falls to $40
C) The stock remains at $50
D) The stock rises to $45

Answer: B) The stock falls to $40

Explanation:
A put option gives the investor the right to sell the stock at the strike price of $45. If the stock price falls to $40, the investor can exercise the option to sell at $45, making a profit of $5 per share, minus the cost of the option premium.

🎯 6. Regulatory Framework

Which of the following is TRUE about the role of FINRA in the securities industry?

A) FINRA enforces SEC rules but does not have its own regulations.
B) FINRA registers individuals to sell securities but does not have regulatory authority over firms.
C) FINRA is a self-regulatory organization that oversees broker-dealers and registered representatives.
D) FINRA directly supervises the issuance of new securities in the market.

Answer: C) FINRA is a self-regulatory organization that oversees broker-dealers and registered representatives.

Explanation:
FINRA (Financial Industry Regulatory Authority) is a self-regulatory organization (SRO) that oversees broker-dealers and their registered representatives. It enforces its own rules and regulations, ensuring that firms comply with industry standards and protect investors.

🎯 7. Investment Banking and Underwriting

Which of the following best describes the function of an underwriter in a public offering?

A) The underwriter buys securities from the issuer and resells them to the public.
B) The underwriter buys and holds the securities for a minimum of five years.
C) The underwriter acts as a broker to sell securities on behalf of the issuer.
D) The underwriter determines the dividend rate of securities to be issued.

Answer: A) The underwriter buys securities from the issuer and resells them to the public.

Explanation:
An underwriter purchases securities from the issuer in a public offering and then resells them to the public. The underwriter assumes the risk of the offering by guaranteeing a certain price for the securities, usually through a firm commitment arrangement.

🎯 8. Taxation and Retirement Accounts

Which of the following is TRUE about traditional IRAs?

A) Contributions to a traditional IRA are tax-deductible, and the withdrawals in retirement are tax-free.
B) Contributions to a traditional IRA are taxed, but withdrawals in retirement are tax-free.
C) Contributions to a traditional IRA are tax-deductible, but withdrawals are taxed as ordinary income.
D) Contributions to a traditional IRA are taxed, and withdrawals in retirement are taxed at a lower rate.

Answer: C) Contributions to a traditional IRA are tax-deductible, but withdrawals are taxed as ordinary income.

Explanation:
Traditional IRA contributions are tax-deductible in the year they are made, reducing the investor’s taxable income. However, when funds are withdrawn in retirement, they are taxed as ordinary income. This is in contrast to a Roth IRA, where contributions are not tax-deductible, but withdrawals are tax-free.

🚀 Conclusion: Review and Reinforce Your Knowledge

As you enter the final week of your Series 7 exam preparation, reviewing questions like these will help reinforce key concepts and improve your understanding. Stay focused, continue practicing, and make sure you’re confident in areas like margin accounts, options, customer regulations, and financial products.

🎓 Need more practice questions or study resources?
Explore study guides, practice exams, and exam strategies at
👉 https://finra-exam-mastery.com

Good luck on your Series 7 exam! Stay focused and confident in your preparation!