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FINRA Series 7Free General Securities Representative practice test
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10 real FINRA Series 7 practice questions with instant answers and explanations — no account, no credit card, no email. Score yourself, then unlock the full bank of 600 questions whenever you’re ready. The FINRA Series 7 passing score is 72%.
Which statement best describes the priority of preferred stock dividends relative to common stock dividends?
Answer key
All 10 FINRA Series 7 questions & answers
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Q1. Which statement best describes the priority of preferred stock dividends relative to common stock dividends?
Correct answer: A. Preferred dividends must be paid in full before common shareholders can receive a dividend
Preferred stock has priority over common stock for dividend payments; common shareholders cannot receive a dividend until preferred dividend obligations are satisfied.
Q2. An investor who purchases a call option is buying the right to:
Correct answer: B. buy the underlying stock at the strike price before expiration
A call option gives the holder the right, but not the obligation, to buy the underlying stock at the strike price on or before expiration.
Q3. A convertible bond with a $1,000 par value has a conversion price of $40. If the common stock is currently trading at $50 per share, what is the parity price of the bond?
Correct answer: C. $1,250
Conversion ratio = $1,000 / $40 = 25 shares. Parity price = 25 shares x $50 = $1,250.
Q4. A bond with a 6% coupon is currently trading at $900. What is the bond's current yield?
Correct answer: D. 6.67%
Current yield = annual interest / market price = $60 / $900 = 6.67%.
Q5. An investor establishes a long straddle by buying a 50 call for a $3 premium and a 50 put for a $2 premium, both on the same underlying stock with the same expiration. What are the breakeven points for this position?
Correct answer: A. $45 and $55
Total premium paid = $3 + $2 = $5. Upside breakeven = strike + total premium = $50 + $5 = $55. Downside breakeven = strike - total premium = $50 - $5 = $45.
Q6. A municipal bond yields 4% and a customer is in the 32% federal tax bracket. What is the taxable-equivalent yield of this municipal bond?
Correct answer: B. 5.88%
Taxable-equivalent yield = municipal yield / (1 - tax bracket) = 4% / (1 - 0.32) = 4% / 0.68 = approximately 5.88%.
Q7. A company suspends dividends on its cumulative preferred stock for two years. What happens to the missed dividends?
Correct answer: C. They accumulate as dividends in arrears and must be paid before any common dividend
Cumulative preferred stock requires that any skipped dividends accumulate as arrearages, which must be fully paid to preferred holders before common shareholders receive any dividend.
Q8. A 68-year-old retired customer with a conservative risk tolerance states that current income and preservation of capital are the primary objectives. Which of the following is the most suitable recommendation?
Correct answer: D. A diversified portfolio of investment-grade bonds and a high-quality income fund
For a retired, conservative customer seeking income and capital preservation, investment-grade fixed income and a high-quality income fund align with the stated objectives and risk tolerance far better than speculative or leveraged strategies.
Q9. A customer's margin account has a long market value of $20,000 and a debit balance of $8,000. If the minimum maintenance requirement is 25% of long market value, how much excess equity does the account have above the minimum maintenance requirement?
Correct answer: A. $7,000
Equity = $20,000 - $8,000 = $12,000. Minimum maintenance requirement = 25% x $20,000 = $5,000. Excess equity = $12,000 - $5,000 = $7,000.
Q10. In a corporate rights offering, existing shareholders are typically given the preemptive right to:
Correct answer: B. purchase additional shares at a discount to the current market price, in proportion to their existing ownership
Rights offerings allow existing shareholders to maintain their proportional ownership by purchasing additional shares, usually at a subscription price below the current market price.
Exam facts and objectives sourced from the official FINRA certification page. Last reviewed June 2026.
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