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Free Series 7 Practice Questions

10 free, exam-style General Securities Representative Exam (Series 7) practice questions with answers and explanations. No signup required. Work through them below, then take the full free Series 7 practice test to study every exam domain.

These 10 free Series 7 questions are organized by exam domain, so you can see how each part of the General Securities Representative Exam blueprint is tested. Reveal the answer and explanation under each question.

Domain 1: Function 1 - Seeks Business for the Broker-Dealer from Customers and Potential Customers (7%, 9 scored items)

Question 1

During the cooling-off period under the Securities Act of 1933, which of the following activities is permitted?

  1. Accepting customer purchase orders
  2. Distributing the final prospectus
  3. Distributing the preliminary prospectus
  4. Confirming sales to interested buyers
Show answer & explanation

Correct answer: C - Distributing the preliminary prospectus

Domain 2: Function 2 - Opens Accounts After Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives (9%, 11 scored items)

Question 2

A 71-year-old retired widow relies entirely on Social Security and a $180,000 savings account for living expenses. She has no investment experience and tells her registered representative she cannot afford to lose any principal. Which recommendation is MOST suitable?

  1. High-yield corporate bond fund
  2. Short-term U.S. Treasury securities
  3. Blue-chip equity index fund
  4. Variable annuity with growth subaccounts
Show answer & explanation

Correct answer: B - Short-term U.S. Treasury securities

Domain 3: Function 3 - Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records (73%, 91 scored items)

Question 3

An investor buys 1 ABC Jul 45 Call at 6 and sells 1 ABC Jul 55 Call at 2. What is the investor's maximum potential gain?

  1. $400
  2. $600
  3. $1,000
  4. $800
Show answer & explanation

Correct answer: B - $600

Question 4

A customer purchases a municipal bond in the secondary market at 96 with 20 years remaining to maturity. At maturity, the discount will be taxed as:

  1. Tax-exempt interest
  2. Ordinary income
  3. Long-term capital gain
  4. Short-term capital gain
Show answer & explanation

Correct answer: C - Long-term capital gain

Question 5

A customer's long margin account shows SMA of $5,000. If the customer wants to purchase additional securities without depositing new funds, what is the maximum market value of stock that can be purchased?

  1. $5,000
  2. $2,500
  3. $10,000
  4. $20,000
Show answer & explanation

Correct answer: C - $10,000

Question 6

During the annuity phase of a variable annuity, the separate account earns 6% while the assumed interest rate (AIR) is 5%. Which of the following will occur?

  1. The next payment will be less than the current payment
  2. The next payment will remain the same as the current payment
  3. The next payment will be greater than the current payment
  4. The payment amount resets to the initial payout level
Show answer & explanation

Correct answer: C - The next payment will be greater than the current payment

Question 7

An investor purchased 500 shares of XYZ stock at $40 per share. She sells all 500 shares at $32 per share and repurchases 500 shares 18 days later at $35 per share. What is the cost basis of the newly purchased shares?

  1. $35 per share
  2. $40 per share
  3. $43 per share
  4. $32 per share
Show answer & explanation

Correct answer: C - $43 per share

Question 8

An open-end mutual fund has total assets of $200 million, liabilities of $4 million, and 10 million shares outstanding. If the fund charges a 5% sales load, what is the public offering price (POP) per share?

  1. $19.60
  2. $20.63
  3. $21.00
  4. $20.00
Show answer & explanation

Correct answer: B - $20.63

Question 9

A bond with a 6% coupon is trading at a premium. Which of the following correctly ranks the bond's yields from highest to lowest?

  1. Current yield, yield to maturity, yield to call
  2. Yield to maturity, current yield, nominal yield
  3. Nominal yield, current yield, yield to maturity
  4. Yield to call, yield to maturity, current yield
Show answer & explanation

Correct answer: C - Nominal yield, current yield, yield to maturity

Question 10

A municipal finance professional (MFP) makes a $500 political contribution to a mayor who is running for re-election. The MFP is not eligible to vote for this candidate. Under MSRB Rule G-37, what is the consequence for the firm?

  1. The MFP must return the contribution within 60 days to avoid any penalties or business restrictions
  2. The firm is banned from negotiated municipal business with that issuer for two years
  3. The firm receives a written warning from the MSRB for a first offense
  4. The MFP is personally fined but the firm faces no restriction on its municipal business
Show answer & explanation

Correct answer: B - The firm is banned from negotiated municipal business with that issuer for two years

The rest of the Series 7 blueprint

The Series 7 exam also covers these domains. Drill them in the full free practice test:

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