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FINRA Series 7 General Securities Representative Exam

3. Provides Information, Makes Recommendations, Transfers Assets / Debt securities: practice questions

Our FINRA Series 7 bank has 29 questions on this topic. Here are 5 of them with answers; the full mock exam draws from every topic, like the real one.

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Question 1

A Treasury note is quoted at 101-16. What is the dollar price for $1,000 par?

  1. $1,016.00
  2. $1,011.60
  3. $1,001.60
  4. $1,015.00
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D. $1,015.00 — Treasury notes and bonds are quoted in 32nds: 101 16/32 = 101.5% of $1,000 = $1,015.00.

Question 2

Which agency's mortgage-backed securities are backed by the full faith and credit of the U.S. government?

  1. Federal Home Loan Banks
  2. Ginnie Mae (GNMA)
  3. Fannie Mae (FNMA)
  4. Freddie Mac (FHLMC)
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B. Ginnie Mae (GNMA) — GNMA is a government agency whose guarantee carries full faith and credit; Fannie Mae and Freddie Mac are government-sponsored enterprises.

Question 3

A bond is convertible at $25. The common stock trades at $30. What is the parity price of the bond?

  1. $833
  2. $1,000
  3. $1,250
  4. $1,200
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D. $1,200 — Conversion ratio = 1,000 / 25 = 40 shares; parity bond price = 40 x $30 = $1,200.

Question 4

Under the Trust Indenture Act of 1939, a corporate bond issue registered with the SEC generally must have:

  1. A credit rating of investment grade or better
  2. An indenture with an independent trustee
  3. A sinking fund to retire the bonds
  4. A guarantee from the U.S. Treasury
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B. An indenture with an independent trustee — The Trust Indenture Act requires a qualified indenture and trustee for registered corporate debt offerings above the exemption threshold.

Question 5

For a Treasury inflation-protected security, inflation adjustments are made to the:

  1. Call price set by the Treasury
  2. Maturity date, which is extended when consumer prices rise
  3. Coupon rate, which resets every six months
  4. Principal, which then changes the interest paid
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D. Principal, which then changes the interest paid — TIPS principal is indexed to CPI; the fixed coupon rate is applied to the adjusted principal. The increase in principal is taxable each year as income.

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