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FINRA Series 7 General Securities Representative Exam

3. Provides Information, Makes Recommendations, Transfers Assets / Securities analysis: practice questions

Our FINRA Series 7 bank has 17 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 stock trades at $60 and the company earned $4 per share. What is the price-earnings ratio?

  1. 4
  2. 24
  3. 6.7
  4. 15
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D. 15 — P/E = price / EPS = $60 / $4 = 15.

Question 2

Which investment has the greatest purchasing power (inflation) risk?

  1. A broad common stock fund
  2. A real estate investment trust
  3. A long-term fixed-rate bond
  4. A Treasury inflation-protected security
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C. A long-term fixed-rate bond — Fixed payments lose real value as prices rise; TIPS adjust principal for inflation, and stocks and real estate may grow with prices over time.

Question 3

A company with net income of $11 million pays $1 million of preferred dividends and has 5 million common shares outstanding. What is its earnings per share?

  1. $2.20
  2. $2.00
  3. $0.20
  4. $1.80
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B. $2.00 — EPS = (net income - preferred dividends) / common shares = $10 million / 5 million = $2.00.

Question 4

A company has current assets of $600,000, inventory of $200,000 and current liabilities of $250,000. What is its quick (acid-test) ratio?

  1. 2.4 to 1
  2. 3.2 to 1
  3. 1.6 to 1
  4. 0.8 to 1
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C. 1.6 to 1 — Quick ratio = (current assets - inventory) / current liabilities = $400,000 / $250,000 = 1.6.

Question 5

Strategic asset allocation is best described as:

  1. Holding all assets in cash until prices fall
  2. Investing only in the best-performing sector each year
  3. Setting long-term target weights and rebalancing back to them
  4. Shifting weights frequently based on market forecasts
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C. Setting long-term target weights and rebalancing back to them — Strategic allocation sets long-term targets based on goals and risk tolerance; tactical allocation makes short-term deviations.

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