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161 multiple-choice questions and 220 flashcards on Equity Securities, about 26% of the Series 7 FINRA bank. Every one carries a written rationale.
Equity Securities is one of 9 chapters in CoStudy's Series 7 (FINRA) bank, and it holds 161 of the bank's 630 multiple-choice questions — roughly 26% of the total. That proportion is not arbitrary: chapters follow the certifying body's published exam outline, and the number of questions in each is set by that domain's published weight, so the share of your practice time this chapter takes matches the share of the real exam it accounts for.
Studying by chapter is worth doing once you have a diagnostic score. A single overall percentage tells you whether you are close; it does not tell you which domain is dragging. Working a weak chapter in isolation, and re-testing it in isolation, is the fastest way to move a score that has stalled — and it is why the mock exams in CoStudy report by domain rather than as one number.
10 questions drawn from this chapter, with the full rationale shown — the controlling principle behind the right answer, and why each wrong option tempts and fails.
A registered rep wants to allocate IPO shares to their spouse. This allocation is:
Answer: C — Generally prohibited as restricted person spillover
A) Written approval doesn't override Rule 5130. B) Tax payment is not the fix. C) Correct — Rule 5130 restricts hot-issue allocation to broker-dealer immediate family. D) Rule 5130 prohibits, not permits, such allocation.
Long 100 XYZ at $40, then write 1 XYZ Jan 45 Call at $2. Max gain per share equals:
Answer: C — $7 per share
A) That is only the premium received. B) That is only the stock appreciation to strike. C) Correct — max gain = ($45 - $40) + $2 premium = $7. D) Ignores that stock is capped at strike.
A frozen account requires the customer to have funds on deposit before:
Answer: A — Any sell order executes
A) Correct — sales must be pre-funded. B) Buy orders may proceed if paid. C) Dividends are unrelated. D) Statements are not affected.
The break-even for a long put is:
Answer: B — Strike minus the premium
A) Strike plus premium is call breakeven. B) Correct — strike minus put premium. C) Premium alone is not breakeven. D) Zero is max profit, not breakeven.
An investor buys 100 shares at $50 and writes one $55 call for a $2 premium. If the stock rises to $60 and the call is exercised, the investor's gain per share is:
Answer: C — $7
C) Correct — gain = (strike − cost basis) + premium = ($55 − $50) + $2 = $7. A) That's the premium alone, ignoring the capital gain on the stock. B) That's the capital gain alone, ignoring the premium. D) That would be the gain without the call capping the sale price at $55.
Convertible preferred, $100 par, $25 conversion price. Conversion ratio equals:
Answer: D — 4 shares per preferred share held (par/price)
A) Ignores the conversion math. B) Ignores the conversion math. C) That is the conversion price, not ratio. D) Correct — $100 par / $25 = 4 common shares.
A 'not held' (NH) order gives the executing broker:
Answer: B — Discretion as to time and price of execution timing
A) NH orders remove strict price/time controls. B) Correct — NH grants the broker discretion; broker is not held to best price. C) NH is not a routing-only status. D) No cancel-and-resubmit mandate applies.
Customer owns 400 shares. Terms: 4 rights + $30 buys 1 new share. Customer can buy at most:
Answer: A — 100 new shares
A) Correct — 400 rights / 4 per share = 100 new shares. B) Off — too many. C) Assumes 1 right per new share. D) Off by an order of magnitude.
Fiduciary accounts (trusts, custodial) generally require investments to be made:
Answer: B — Under prudent investor rule and governing documents
A) Fiduciaries must serve the beneficiary, not themselves. B) Correct — prudent investor rule plus terms of the governing document guide investment selection. C) No such blanket restriction exists. D) Beneficiaries generally do not direct the account.
A general partner has:
Answer: B — Unlimited personal liability
A) LPs, not GPs, have limited liability. B) Correct — full personal liability. C) GP has management authority. D) GP owes fiduciary duties.
4 cards from the 220 in this chapter.
Call breakeven formula?
Strike + Premium (for both buyer and seller).
What is best execution?
The obligation of a broker to execute orders at the most favorable terms available under the circumstances.
What is a backed (insured) bond?
A bond guaranteed by a third-party insurance company (like AMBAC or MBIA) that will pay interest and principal if the issuer defaults. Receives the insurer's rating.
Firm commitment vs. best efforts underwriting?
Firm commitment: underwriter buys entire issue and resells (assumes risk). Best efforts: underwriter acts as agent, sells what it can, returns unsold.
These are a sample. The full Equity Securities chapter runs 381 items with per-chapter progress tracking, on the web and in the iOS app.
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