Series 7 Practice Test

Series 7 Equity Securities Practice Questions

Equity Securities makes up 6 of every 50 questions on a Tigertest Series 7 practice test. Here are 10 of the 24 questions on it, each with the answer and the reason.

Updated 2026-11-10 by the Tigertest team. Based on FINRA's Series 7 content outline. Original questions; 50 per test, weighted like the real 125-question exam, 72% to pass.

1. 1. A shareholder owns 200 shares and four directors are up for election. With cumulative voting, the shareholder can cast:

   • A.800 votes for each seat
   • B.800 votes in any split
   • C.200 votes for each seat only
   • D.200 votes in total

   Answer: B. Cumulative voting multiplies shares by seats (200 x 4 = 800) and lets the holder put them all on one candidate. Statutory voting caps each seat at 200.

2. 2. Which preferred stock feature lets the holder receive missed dividends before common stock gets paid?

   • A.Callable
   • B.Adjustable rate
   • C.Participating
   • D.Cumulative

   Answer: D. Cumulative preferred carries forward any skipped dividends in arrears, and those must be paid before common holders receive a dividend.

3. 3. A stock's record date is Thursday, May 14. With regular-way T+1 settlement, the ex-dividend date is:

   • A.Thursday, May 14
   • B.Friday, May 15
   • C.Wednesday, May 13
   • D.Tuesday, May 12

   Answer: A. Since settlement moved to T+1 in May 2024, the ex-date for a regular cash dividend is the same business day as the record date. A buyer on that day settles after the record date.

4. 4. A company offers holders one right per share, and 5 rights plus $40 buy one new share. The stock trades cum rights at $52. The right's theoretical value is:

   • A.$12
   • B.$1.50
   • C.$2
   • D.$2.40

   Answer: C. Cum rights value = (market - subscription) / (rights needed + 1) = (52 - 40) / (5 + 1) = $2. Dividing by 5 gives $2.40, the ex-rights formula, which applies only once the stock trades ex rights.

5. 5. Which describes a warrant?

   • A.A dividend paid in additional shares
   • B.A preferred share with a fixed dividend
   • C.A long-term right to buy above market
   • D.A short-term right to buy below the market

   Answer: C. Warrants are usually issued with bonds or preferred as a sweetener, carry an exercise price above the market at issue, and run for years. Rights are short-lived and priced below market.

6. 6. An American depositary receipt pays dividends in U.S. dollars. Its holder still faces:

   • A.Currency risk
   • B.Unlimited liability
   • C.Mandatory call risk
   • D.No foreign risk at all

   Answer: A. The underlying foreign shares pay in local currency, which the depositary bank converts. A stronger dollar shrinks the dividend and the ADR's value.

7. 7. A company with 10 million shares outstanding buys back 1 million shares. The bought-back shares:

   • A.Become authorized but unissued preferred
   • B.Remain outstanding and keep their votes
   • C.Must be retired within one year
   • D.Become treasury stock without votes

   Answer: D. Repurchased shares are treasury stock: issued but not outstanding, with no vote and no dividend. Outstanding shares drop to 9 million, which raises earnings per share.

8. 8. A customer holds 300 shares bought at $60. After a 3-for-2 split, the position is:

   • A.600 shares, cost basis $30
   • B.450 shares, cost basis $40
   • C.450 shares, cost basis $60
   • D.200 shares, cost basis $90

   Answer: B. A 3-for-2 split gives 1.5 shares for each one: 300 x 1.5 = 450 shares. Total cost of $18,000 is unchanged, so each share's basis is $40.

9. 9. A convertible preferred has a par value of $100 and converts into 4 shares of common. The common trades at $27. The preferred's parity price is:

   • A.$25
   • B.$108
   • C.$100
   • D.$104

   Answer: B. Parity equals conversion ratio times the common price: 4 x $27 = $108. The conversion price is $25 ($100 / 4), which is a different figure.

10. 10. Which preferred stock is most sensitive to rising interest rates?

    • A.Convertible preferred stock
    • B.Participating preferred stock
    • C.Adjustable-rate preferred
    • D.Straight, noncallable preferred

    Answer: D. A fixed dividend with no conversion or reset feature behaves like a perpetual bond, so its price falls most when rates rise. Adjustable-rate preferred resets with rates.