Finra Series-7 Practice Questions| TestInsights

Question 1

Which of the following option positions is indicative of the same class of option?

Along one XYZ July 70 put and one XYZ July 70 call

Blong one XYZ October 20 call and one XYZ January 30 call

Cshort one XYZ February 60 put and one ABC February 60 put

Dshort one XYZ June 40 call and one ABC June 20 call

Correct : B

long one XYZ October 20 call and one XYZ January 30 call. Options in the same class are either both puts or both calls on the same security.

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Along one XYZ July 70 put and one XYZ July 70 call

Blong one XYZ October 20 call and one XYZ January 30 call

Cshort one XYZ February 60 put and one ABC February 60 put

Dshort one XYZ June 40 call and one ABC June 20 call

Question 2

Bubba held one XYZ July 30 listed call option when XYZ split 2 for 1.

What is the resulting position, Bubba has on the Option Clearing Corporation's record?

Along one XYZ July 30 call

Blong one XYZ July 30 call and short one XYZ July 30 call

Clong two XYZ July 30 calls

Dlong two XYZ July 15 calls

Correct : D

long two XYZ July 15 calls. Double the number of contracts and half the strike price. This is similar to XYZ shareholders doubling the number of shares they hold at the lower price.

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Along one XYZ July 30 call

Blong one XYZ July 30 call and short one XYZ July 30 call

Clong two XYZ July 30 calls

Dlong two XYZ July 15 calls

Question 3

In a corporation's financial statements, earned surplus is also recognized as:

Agross profit

Boperating income after payment of interest expense

Cearnings retained after payment of dividends to shareholders

Dnet income

Correct : C

earnings retained after payment of dividends to shareholders. The other choices are clearly incorrect. Earned surplus is also referred to as retained earnings.

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Agross profit

Boperating income after payment of interest expense

Cearnings retained after payment of dividends to shareholders

Dnet income

Question 4

The total assets of a corporation are $840,000, of which $350,000 are current items. Total liabilities are $460,000, of which $290,00 are fixed obligations.

How much is the corporation's working capital?

A$60,000

B$110,000

C$180,000

D$380,000

Correct : C

$180,000. Subtract current liabilities from current assets. Current liabilities are $170,000 ($460,000 - $290,000).

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A$60,000

B$110,000

C$180,000

D$380,000

Question 5

The accounting statement that represents a company's financial position on a particular date is the:

Aincome statement

Bbalance sheet

CProfit and Loss

Dcash flow statement

Correct : B

balance sheet. This report reflects the entire condition of the company by showing all assets, liabilities, and components of net worth.

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Aincome statement

Bbalance sheet

CProfit and Loss

Dcash flow statement

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