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FINRA Series 7 General Securities Representative Exam

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

Our FINRA Series 7 bank has 30 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

Under MSRB Rule G-15, a customer confirmation for a municipal bond bought at a yield must disclose:

  1. Only the coupon rate and the settlement date
  2. The underwriter's spread on the original issue
  3. The issuer's tax base and population figures
  4. The dollar price, and the lower of yield to call or yield to maturity
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D. The dollar price, and the lower of yield to call or yield to maturity — G-15 requires the yield and dollar price; for callable bonds, the yield shown is the lower of yield to call or maturity (yield to worst).

Question 2

Which is a key source of information when analyzing a revenue bond?

  1. The tax base per capita
  2. The debt limit set by voters
  3. The feasibility study
  4. Overlapping debt of the county
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C. The feasibility study — Revenue bond analysis focuses on the facility's ability to generate revenue, set out in a feasibility study and the trust indenture's covenants; tax base and overlapping debt are GO factors.

Question 3

An interest in a 529 college savings plan is regulated as a:

  1. Direct participation program
  2. Variable annuity contract
  3. Municipal fund security
  4. Registered investment company
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C. Municipal fund security — 529 plan interests are municipal fund securities subject to MSRB rules; they are exempt from the Investment Company Act.

Question 4

A municipal bond bought at a premium in the secondary market and held to maturity:

  1. Produces a capital loss equal to the premium at maturity
  2. Produces an ordinary loss deductible against wages
  3. Has its premium amortized, reducing cost basis with no deductible loss
  4. Has its premium added to the investor's taxable income
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C. Has its premium amortized, reducing cost basis with no deductible loss — Premiums on tax-exempt bonds must be amortized; basis falls to par at maturity, so there is no gain or loss (IRS Publication 550).

Question 5

Under a net revenue pledge, a revenue bond's debt service is paid:

  1. After operating and maintenance expenses
  2. Before operating and maintenance expenses
  3. Only from the issuer's property taxes
  4. Only after all capital projects are funded
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A. After operating and maintenance expenses — With a net revenue pledge, operating and maintenance costs are paid first; under a gross revenue pledge, debt service comes first.

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