Assuming all of the following bonds from the same issuer are callable now, which one would most likely get called first?
Answer(s): A
8% maturing 1-15-2016. Bonds with the highest coupon rates would be the first to most likely get called. The issuer will look to issue new debt at a lower rate. Since there are two 8% bonds, the one that would most likely get called are those with the longest maturity.
Under the terms of the 1970 Securities Investor Protection Act, what is the status of a customer whose account assets exceed SIPC insurance coverage when his broker/dealer becomes insolvent?
Answer(s): C
the customer becomes a general creditor of the insolvent firm for the amount of deficiency. After the SIPC coverage is exhausted, the customer becomes a general creditor. Due to the insolvency of the broker/dealer, there is no likelihood of the customer receiving restitution.
Customers who engage in increased activity of wiring money from their account could indicate which of the following activities?
Answer(s): D
money laundering. Potential money laundering activities include excessive wiring of money between accounts.
Bubba sells 100 shares of XYZ short at $58 and buys 1 XYZ Mar 60 Call at $3. What is the customer’s maximum loss?
$500. Bubba sold short at $58. The call with a strike price of 60, gives him the right to buy back the stock at $60. If the stock rises, the call can be used to limit the loss to 2 points. Bubba can lose $200 on the stock. Bubba also paid a $300 premium. Loss potential is $500.
Bubba owns 200 shares of XYZ at $90, and wishes to hedge the position while generating income. What is the best recommendation?
sell calls. Calls are covered by the underlying stock. If the calls were exercised, the stock would be delivered to meet the obligation. The income also reduces the break-even of the stock.
Post your Comments and Discuss FINRA SERIES 7 exam prep with other Community members:
Our website is free, but we have to fight against AI bots and content theft. We're sorry for the inconvenience caused by these security measures. You can access the rest of the SERIES 7 content, but please register or login to continue.