Series 7 – General Securities Representative Exam Equity Securities & Stock Markets 2

Question 1

A company's earnings per share (EPS) is $4 and the stock trades at $60. What is the price-to-earnings (P/E) ratio?

Accepted Answer

15

Answer

10

Answer

20

Answer

24

Question 2

Which of the following best describes a rights offering?

Accepted Answer

An option to buy stock at a discount given to existing shareholders before a new public offering

Answer

A company's right to repurchase shares on the open market

Answer

A warrant attached to a new bond issue

Answer

The right of bondholders to convert bonds to equity

Question 3

What is a tender offer in the context of equity securities?

Accepted Answer

A public offer to purchase shareholders' shares at a specified price, usually to acquire control

Answer

An offer by a company to buy back its own shares at a premium

Answer

An offer by a broker to sell shares at the bid price

Answer

A company's offer to convert preferred shares to common shares

Question 4

Which SEC rule governs the resale of restricted and control securities?

Accepted Answer

Rule 144

Answer

Rule 10b-5

Answer

Rule 415

Answer

Regulation D

Question 5

A 'blue chip' stock is best described as:

Accepted Answer

A stock of a well-established, financially stable, large-cap company

Answer

A stock trading below $5 per share

Answer

Any stock listed on the NYSE

Answer

A stock that pays no dividends

Question 6

What is the primary function of a market maker in equity markets?

Accepted Answer

To provide liquidity by continuously quoting bid and ask prices

Answer

To set the official opening price of a stock each day

Answer

To enforce FINRA trading rules on member firms

Answer

To audit company financial statements before listing