Series 7 – General Securities Representative Exam Equity Securities & Stock Markets

Question 1

A company declares a 2-for-1 stock split. If a shareholder owns 100 shares at $80 each, what will they hold after the split?

Accepted Answer

200 shares at $40 each

Answer

In a 2-for-1 split, share count doubles and price halves, so 100 shares at $80 becomes 200 shares at $40.

Question 2

Which type of order instructs a broker to buy or sell a stock immediately at the best available current price?

Accepted Answer

Market order

Answer

A market order executes immediately at the best available price without a specified price constraint.

Question 3

What is the primary difference between common stock and preferred stock?

Accepted Answer

Preferred stockholders have priority over dividends and assets in liquidation

Answer

Preferred stockholders receive dividends before common stockholders and have priority claims on assets in liquidation.

Question 4

An investor sells short 200 shares of XYZ at $50. If the price rises to $65, what is the investor's loss?

Accepted Answer

$3,000

Answer

The loss is ($65 - $50) × 200 = $15 × 200 = $3,000.

Question 5

Which market is known as the secondary market for over-the-counter (OTC) equity securities in the U.S.?

Accepted Answer

NASDAQ

Answer

NASDAQ is the primary electronic OTC marketplace for U.S. equities, operating as a dealer-based market.

Series 7 – General Securities Representative Exam Practice Test