Free SERIES 7 Exam Braindumps (page: 17)

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FINRA advertising standards permit a dealer to state that a CMO has an implied AAA rating if the securities are issued:

  1. with an average life no longer than ten years
  2. by a US government agency
  3. by a private issuer who has not yet received an expected AAA rating
  4. in amounts less than $1,000,000

Answer(s): B

Explanation:

by a US government agency. Since government agencies do not apply for ratings, it is permissible to state that its issues have an “implied AAA rating”. Private issuers must receive a rating in order to state it in advertising.



What is the term applied to a classification of CMO securities having a stated maturity, average life, and estimated yield?

  1. tranche
  2. tier
  3. bracket
  4. bucket

Answer(s): A

Explanation:

tranche. That’s the term used to describe a separate class within a CMO issue.



Bubba is buying a Federal Home Loan Bank issue that is offered at 95.22. How much will he pay to purchase one bond?

  1. $95.22
  2. $951.63
  3. $952.20
  4. $956.88

Answer(s): D

Explanation:

$956.88. The price of 95.22 means 95 and 22 / 32. One thirty-second of a $1,000 bond with a par of 100.00 is $0.3125. Twenty-two thirty-seconds is therefore about $6.88. The 95 is the percentage of one bond with a par value of $1,000. Multiplying 95% by $1,000 equals $950. Adding $6.88 plus $950 equals $956.88.



How much currency is one mil worth?

  1. one-tenth of one cent
  2. one-tenth of $1
  3. one-tenth of $100
  4. one-tenth of $1,000

Answer(s): B

Explanation:

one-tenth of one cent. A point equals $10 and a basis point equals ten cents.






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