Series 7 Orders, Margin & Confirmations Practice Questions
Orders, Margin & Confirmations 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 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. A customer owns stock at $52 and wants to protect a gain if the price falls below $48. The order to enter is a:
- A.Buy limit at 48
- B.Sell stop at 48
- C.Sell limit at 48
- D.Buy stop at 48
Answer: B. A sell stop sits below the market and becomes a market order when the stock trades at or below 48. A sell limit at 48 below the market would execute right away.
2. A customer is short a stock at $30 and wants to limit losses if it rises. The order to enter is a:
- A.Sell stop below the market
- B.Sell limit above the market
- C.Buy limit below the market
- D.Buy stop above the market
Answer: D. A buy stop above the market triggers a purchase to cover the short if the price rises to the stop. Buy limits sit below the market.
3. A customer enters a sell stop-limit order at 40 stop, 39.75 limit. After a trade at 40, the order:
- A.Becomes a limit order at 39.75
- B.Executes only at exactly 40
- C.Becomes a market order to sell
- D.Is cancelled automatically
Answer: A. When the stop price is reached, a stop-limit order becomes a limit order, here to sell at 39.75 or better. It may not fill if the price falls through the limit.
4. A customer buys stock regular way on a Friday. Assuming no holidays, the trade settles on:
- A.Tuesday
- B.Wednesday
- C.Monday
- D.Friday
Answer: C. Regular-way settlement is T+1, one business day after trade date, so a Friday trade settles the following Monday.
5. A customer buys $20,000 of stock in a new margin account. Under Regulation T, the required deposit is:
- A.$2,000
- B.$20,000
- C.$10,000
- D.$5,000
Answer: C. Reg T initial margin is 50% of the purchase, here $10,000. FINRA also requires a $2,000 minimum equity, which this deposit already meets.
6. A customer buys $3,000 of stock in a new margin account. The minimum deposit required is:
- A.$2,000
- B.$3,000
- C.$1,000
- D.$1,500
Answer: A. Reg T would require only $1,500, but FINRA's minimum equity of $2,000 applies. If the purchase were under $2,000, the customer would pay in full.
7. A long margin account has a market value of $40,000 and a debit of $24,000. The equity is:
- A.$20,000
- B.$24,000
- C.$64,000
- D.$16,000
Answer: D. Equity in a long account = market value - debit balance = $40,000 - $24,000 = $16,000.
8. A long margin account has a debit balance of $15,000. At what market value would it hit FINRA's 25% minimum maintenance?
- A.$60,000
- B.$20,000
- C.$18,750
- D.$30,000
Answer: B. The maintenance point = debit / 0.75 = $15,000 / 0.75 = $20,000. At that value equity is $5,000, exactly 25%.
9. A customer sells short $30,000 of stock in a margin account. FINRA's minimum maintenance on the short position is:
- A.100% of market value
- B.30% of market value
- C.25% of market value
- D.50% of market value
Answer: B. Short positions in stocks priced $5 or more need maintenance equity of 30% of market value. Long positions need 25%.
10. A short margin account has a credit balance of $26,000. At what market value would it hit the 30% maintenance level?
- A.$33,800
- B.$26,000
- C.$18,200
- D.$20,000
Answer: D. For short accounts, the maintenance point = credit balance / 1.30 = $26,000 / 1.3 = $20,000. Equity is then $6,000, 30% of $20,000.
Practice all 24 orders, margin & confirmations questions, and the rest of the 200-question bank, in the free Series 7 training sets. Questions you miss come back until you have mastered them.
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