FINRA General Securities Representative 2

Question 1

A customer instructs her broker to sell 500 shares of XYZ 'at the market.' If the current best bid is $42.10 and the best ask is $42.20, at what price should the order execute?

Accepted Answer

$42.10

Answer

A market sell order executes at the best available bid price, which is $42.10.

Question 2

Under FINRA rules, which of the following is considered a 'restricted person' prohibited from purchasing shares in a hot IPO?

Accepted Answer

A broker-dealer employee and member of their immediate family

Answer

FINRA Rule 5130 restricts broker-dealer employees and their immediate family members from purchasing new issue equity securities in a public offering.

Question 3

A convertible bond with a conversion ratio of 25 is trading at par ($1,000). The stock is trading at $38. What is the conversion premium?

Accepted Answer

5.26%

Answer

Parity value is 25 × $38 = $950; conversion premium = ($1,000 − $950) / $950 = 5.26%.

Question 4

Which money market instrument is an unsecured, short-term promissory note issued by a corporation to finance short-term liabilities?

Accepted Answer

Commercial paper

Answer

Commercial paper is an unsecured short-term debt instrument issued by corporations, typically with maturities up to 270 days.

Question 5

A customer buys 1 ABC Jan 50 Call for $3 and simultaneously sells 1 ABC Jan 60 Call for $1. What is the maximum gain on this bull call spread?

Accepted Answer

$800

Answer

Max gain = (difference in strikes − net debit) × 100 = (10 − 2) × 100 = $800.

(FINRA) FINRA Exams Practice Test

(FINRA) FINRA Exams Practice Test

FINRA General Securities Representative 2