FINRA Series 7 – General Securities Representative Exam Practice Test
The Series 7 practice material samples securities knowledge used when discussing investments and handling customer transactions. Questions address bond interest and repayment, stock dividends and splits, options, margin accounts, investment risk, and customer requests involving sale proceeds. Working through these topics calls for applying product features and transaction rules to specific investor situations.
Exam overview
About the FINRA Series 7 – General Securities Representative Exam
Representative tasks include calculating annual or semiannual bond interest, distinguishing municipal general obligation bonds from other debt, and considering how an investor’s time horizon relates to price stability and liquidity. Stock questions may test dividend entitlement under settlement practices or the effect of a split on share count. Options require understanding how contract value relates to the underlying stock and how a cash dividend affects that relationship. Margin questions focus on account equity and maintenance requirements, while portfolio questions distinguish risks that diversification can reduce from broader market risk. Other scenarios call for identifying appropriate firm handling when a customer directs proceeds to a third party. These exercises emphasize reading transaction details carefully, performing basic securities calculations, and connecting product terms to customer objectives and account procedures.
Sample Practice Questions
Review a selection from this exam's published US Practice Tests practice bank.
A municipal bond has a 5% annual coupon and a $1,000 par value. What annual interest does it pay, assuming it is not in default?
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Correct answer: BAnnual coupon interest is the coupon rate multiplied by par value: 0.05 × $1,000 = $50 per year.
A customer owns shares of a company that declares a cash dividend. Which date determines whether the customer is entitled to receive the dividend under standard settlement practices?
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Correct answer: BFor a regular-way secondary-market purchase, the ex-dividend date is the key date: a buyer purchasing on or after that date is generally not entitled to the upcoming dividend. A buyer before the ex-dividend date generally is entitled to it.
A customer purchases a 6% corporate bond with a $1,000 face value. The bond pays interest twice a year. How much interest is paid on each scheduled payment date?
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Correct answer: BThe annual coupon is 6% of $1,000, or $60. With two equal payments per year, each payment is $30.
A customer expects to need investment funds in about six months and wants minimal exposure to changes in market value. Which investment characteristic is generally most consistent with that objective?
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Correct answer: BShort-maturity fixed-income investments generally have less price sensitivity to interest-rate changes than longer-duration bonds. Matching maturity to the investor’s time horizon can also reduce the risk of needing to sell a longer-term investment at an unfavorable price.
A customer buys a municipal bond that is designated as a general obligation bond. What is the principal source of repayment typically pledged for this type of bond?
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Correct answer: BA general obligation bond is generally backed by the issuer’s full faith and credit, including its taxing power and general revenues, subject to the applicable legal framework. A revenue bond, by contrast, is typically supported by specified project or enterprise revenues.
An investor holds a diversified portfolio of bonds issued by many different companies. Which risk is least likely to be eliminated merely by holding bonds from more issuers?
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Correct answer: CDiversification can reduce issuer-specific risks by spreading exposure across different issuers. It does not eliminate broad market risks such as changes in interest rates that may affect many bonds at the same time.
An investor buys a call option and the underlying stock pays a cash dividend before the option expires. Which statement is generally true?
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Correct answer: CAn option is a contract, not ownership of the underlying shares. A call holder does not receive shareholder dividends unless the option is exercised and the shares are owned by the relevant entitlement date.
How to use this practice test
Access is free. The bank contains 50 published practice questions; each session presents up to 20 random questions and shows results afterward. Use a session to check calculations and reasoning on topics such as bond payments, stock actions, options, margin, and customer transactions. Review missed answers by identifying which fact or product feature changes the outcome.
Preparation tips
- For bond questions, distinguish coupon rate from payment frequency; calculate annual interest from par value, then divide by the number of scheduled payments.
- Practice comparing municipal general obligation repayment sources with corporate debt obligations, and identify which risks diversification can and cannot reduce.
- For stock-action scenarios, track both share count and dividend entitlement; note the relevant settlement timing rather than relying only on the declaration date.
- Review call-option scenarios by separating the stock’s cash dividend from the option contract, and identify whether the question concerns ownership rights or option value.
- For margin and customer-instruction questions, define maintenance margin in terms of account equity and consider the firm’s controls before routing sale proceeds to a third party.