General Securities Representative Qualification Examination (GS) v1.0 (Series 7)

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Total 400 questions

FINRA advertising standards permit a dealer to state that a CMO has an implied AAA rating if the securities are issued:

  • A. with an average life no longer than ten years
  • B. by a US government agency
  • C. by a private issuer who has not yet received an expected AAA rating
  • D. in amounts less than $1,000,000

Answer : B

by a US government agency. Since government agencies do not apply for ratings, it is permissible to state that its issues have an "implied AAA rating". Private issuers must receive a rating in order to state it in advertising.

What is the term applied to a classification of CMO securities having a stated maturity, average life, and estimated yield?

  • A. tranche
  • B. tier
  • C. bracket
  • D. bucket

Answer : A

tranche. Thats the term used to describe a separate class within a CMO issue.

Bubba is buying a Federal Home Loan Bank issue that is offered at 95.22.
How much will he pay to purchase one bond?

  • A. $95.22
  • B. $951.63
  • C. $952.20
  • D. $956.88

Answer : D

$956.88. The price of 95.22 means 95 and 22 / 32. One thirty-second of a $1,000 bond with a par of 100.00 is $0.3125. Twenty-two thirty-seconds is therefore about $6.88. The 95 is the percentage of one bond with a par value of $1,000. Multiplying 95% by $1,000 equals $950. Adding $6.88 plus $950 equals

How much currency is one mil worth?

  • A. one-tenth of one cent
  • B. one-tenth of $1
  • C. one-tenth of $100
  • D. one-tenth of $1,000

Answer : B

one-tenth of one cent. A point equals $10 and a basis point equals ten cents.

Which of the following pays interest at maturity only?

  • A. a corporate serial bond
  • B. US treasury bills
  • C. Income bonds
  • D. Series H savings bonds

Answer : B

US treasury bills. T-bills are purchased at a discount and do not have interest coupons. When surrendered, the par value is paid at maturity. All the other choices, if they are paying any interest, pay throughout the term of the issue.

Which of the following securities has the highest amount of market risk?

  • A. US treasury bills
  • B. US treasury certificates
  • C. US treasury notes
  • D. savings bank deposits

Answer : C

US treasury notes. Savings bank deposits have no risk. The short duration of treasury bills and certificates embodies less market risk than longer- term treasury notes.

Which of the following is not a marketable security?

  • A. tax anticipation bonds
  • B. municipal bonds
  • C. treasury bonds
  • D. Series EE bonds

Answer : D

Series EE bonds. All the other securities may be traded. Series EE bonds are purchased and held to maturity. They are not tradable.

What type of security is quoted with a bid price of 4.72 and an asking price of 4.68?

  • A. US treasury note
  • B. US treasury bill
  • C. US treasury bond
  • D. Series H bond

Answer : B

US Treasury bill. T-bills are quoted by yield. Therefore, the bid is higher than the asking price. A higher yield means a lower price.

Bubba is buying a treasury bill. The discount he receives results in Bubba’s determination of:

  • A. face value
  • B. nominal yield
  • C. rate of return
  • D. yield to call

Answer : C

rate of return. Because T-bills pay no interest, Bubbas rate of return is the discount as a percentage of the face value he receives at maturity.

A treasury obligation having no fixed rate of interest with a thirty-day maturity due April 22 is most likely a:

  • A. treasury note
  • B. tax anticipation bill
  • C. Series H bond
  • D. Series EE bond

Answer : B

tax anticipation bill. These obligations pay no interest and their maturity comes after corporate tax payment dates. They are accepted for redemption at face value prior to maturity on corporate tax payment dates to encourage purchase by corporations.

Which of the following has the greatest risk?

  • A. a guaranteed corporate bond
  • B. a GNMA bond
  • C. a Series H bond
  • D. a treasury bill

Answer : A

a guaranteed corporate bond. All of the other securities are obligations of the US government, which is considered to have minimal or no risk.

Bubba wants to buy a US treasury bond with a bid of 97.28 and an asking of 98.2.
How were these prices established?

  • A. by the FINRA
  • B. by the Federal Reserve Board
  • C. by competitive biding
  • D. by the terms of the bond

Answer : C

by competitive biding. The quoted prices for treasury bonds-as with all negotiable securities-is determined in the market by competitive biding.

Which of the following are direct obligations of the US government?

  • A. Import-Export bank bonds
  • B. Series EE bonds
  • C. Farm Credit System bonds
  • D. both B and C

Answer : B

Series EE bonds. Import-Export bank bonds and Farm Credit System bonds are not direct obligations of the United States.

A financial institution requesting a quote on a block of 100 bonds from a dealer in government securities receives a quote of 98.02 bid, 98.06 asked.
What is the dollar amount the institution will receive if the financial institution sells these bonds to the dealer?

  • A. $98,062.50
  • B. $98,187.50
  • C. $98,250.00
  • D. $98,750.00

Answer : A

$98,062.50. The financial institution receives the bid price, which is 98 and 2 / 32. Two thirty-seconds is $0.625. The 98 is the percentage of a $1,000 bond. Multiplying 98% by $1,000 results in $980. Add $0.625 to $980 to arrive at $980.625 per bond. But there are 100 bonds. So, multiplying $980.625 by 100 equals $98,062.50.

Bubba plans to borrow some money and pledge securities as collateral.
Which of the following can he not use as collateral?

  • A. Series EE bonds
  • B. US treasury bills
  • C. US treasury notes
  • D. US treasury bonds

Answer : A

Series EE bonds. Because Series EE bonds are not negotiable, they have no collateral value. They cannot be sold back to the US government.

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Total 400 questions