Series 7 Packaged Products Practice Questions
Packaged Products 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 mutual fund has a NAV of $19.00 and a public offering price of $20.00. Its sales charge as a percentage of the offering price is:
- A.4.75%
- B.5%
- C.5.26%
- D.1%
Answer: B. Sales charge % = (POP - NAV) / POP = $1 / $20 = 5%. Dividing by NAV gives 5.26%, which is the wrong base.
2. A customer signs a letter of intent to reach a fund's $50,000 breakpoint. The letter covers purchases made within:
- A.90 days
- B.24 months
- C.12 months
- D.13 months
Answer: D. A letter of intent gives the breakpoint price on purchases over 13 months, and it may be backdated up to 90 days to include a recent purchase.
3. A rep recommends buying $48,000 of a fund just below its $50,000 breakpoint without mentioning it. This is:
- A.Breakpoint selling, a violation
- B.Required for suitability
- C.Acceptable if fully disclosed later
- D.Acceptable for B shares
Answer: A. Selling just below a breakpoint, or failing to tell the customer about it, so the customer pays a higher sales charge is a prohibited practice.
4. Rights of accumulation let a fund investor:
- A.Reinvest gains at the offering price
- B.Skip delivery of a new prospectus
- C.Count holdings toward breakpoints
- D.Buy more shares at NAV for life
Answer: C. Under rights of accumulation, the value of shares already owned in the fund family counts toward the next breakpoint on new purchases.
5. Which mutual fund share class usually suits a long-term investor buying a large amount at once?
- A.Class B shares
- B.Class R shares
- C.Class A shares
- D.Class C shares
Answer: C. Class A shares carry a front-end load that drops at breakpoints and lower ongoing 12b-1 fees, so they are usually cheapest for large, long-held purchases.
6. A customer plans to hold a fund for about two years. Which share class is usually most cost-effective?
- A.Class C shares
- B.Class B shares
- C.Any class equally
- D.Class A shares
Answer: A. C shares have little or no front load and a short CDSC, but higher ongoing 12b-1 fees, so they suit short holding periods. Over many years A shares usually cost less.
7. Under FINRA rules, a fund may describe itself as no-load only if its 12b-1 fee is no more than:
- A.0.50% a year
- B.1.00% a year
- C.0.75% a year
- D.0.25% a year
Answer: D. A fund with no front or back load and a 12b-1 fee of 0.25% or less may call itself no-load. The maximum 12b-1 fee is 1%, of which up to 0.25% is a service fee.
8. Mutual fund orders received before the 4 p.m. ET close are priced at:
- A.The price shown when the order is entered
- B.That day's next-calculated NAV
- C.The prior day's NAV
- D.The opening NAV that day
Answer: B. Forward pricing means an order is filled at the next price computed after it is received, normally that day's closing NAV plus any sales charge.
9. An investor redeems open-end fund shares. The fund must pay the proceeds within:
- A.Ten business days
- B.Seven calendar days
- C.One business day
- D.Thirty calendar days
Answer: B. The Investment Company Act requires an open-end fund to pay redemption proceeds within seven calendar days of receiving the request.
10. A customer switches from one fund to another fund in the same family with no new sales charge. For tax purposes the switch is:
- A.Taxed only on dividends
- B.Deferred until the new fund is sold
- C.Not a taxable event
- D.A taxable sale and purchase
Answer: D. An exchange within a fund family avoids a new load but is still a sale of the first fund, so any gain or loss is realized.
Practice all 24 packaged products 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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