Series 7

Series 7 practice questions, page 5 of 16, with answer review and explanations.

Question 21

The most common type of bond issued by a well-established company is:

  1. a debenture
  2. a senior secured note
  3. a convertible
  4. an open-end mortgage

Question 22

A corporate bond is quoted as having a net change in value of plus one point. By how much did the bond price increase?

  1. $1,000
  2. $100
  3. $10
  4. $1

Question 23

A basis point is:

  1. 0.10%
  2. 0.01%
  3. 1.00%
  4. 0.001%

Question 24

Bubba buys a $4 convertible preferred with a $50 par value that is exchangeable for common stock at 47.50. If the preferred stock is trading at 52 and the common stock at 51, Bubba determines that the preferred stock is:

  1. overpriced and will quickly decline
  2. selling at a 4% premium over conversion value
  3. underpriced and should rise quickly
  4. going to be called when the common stock price is $52

Question 25

A case of leverage is:

  1. selling common stock short and buying warrants for the equivalent number of shares followed by subscribing to the shares and covering the short
  2. borrowing at 6% and investing the funds at 10%
  3. buying stock on the NYSE and later selling it the same day on the CBOE
  4. redeeming a convertible bond before maturity