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Series 7 · 73% of the exam

Provides Customers with Information about Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records practice questions

10 free Provides Customers with Information about Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records questions for the General Securities Representative Exam (Series 7) exam, each with the correct answer and an explanation for every option.

Start the questionsFree 10-question Series 7 quiz

What this domain covers

The largest Series 7 domain by far, at nearly three quarters of the exam: how products work, which ones suit which customer, plus margin, tax treatment, asset transfers and records.

Exam weight
73%
On a real exam
≈ 91 questions
In our bank
434 questions

Topics that come up most

  • Options strategies, breakevens and maximum gain or loss
  • Municipal, corporate and government bonds, yields and pricing
  • Mutual funds, ETFs, variable annuities and other packaged products
  • Regulation Best Interest and suitability for a customer profile
  • Margin requirements and tax treatment of investments

How to study it

Work options and margin problems by hand until you can do them without notes, then practise matching products to short customer profiles; together those cover a large share of this domain.

Sample Provides Customers with Information about Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records questions

Try each one before opening the answer. Original questions written to the official exam objectives.

  1. Question 1

    Which corporate bond's price will change most for a given rate change?

    • AA 1-year note
    • BA short-term high coupon
    • CA long-term zero
    • DA floating-rate note
    Show answer and explanation

    Answer: C) A long-term zero

    • AIncorrect. It has short duration.
    • BIncorrect. It has short duration.
    • CCorrect. It has the longest duration.
    • DIncorrect. Its rate resets.

  2. Question 2

    Common stock dividends are declared by the:

    • ASEC
    • BShareholders' vote
    • CBoard of directors
    • DTransfer agent
    Show answer and explanation

    Answer: C) Board of directors

    • AIncorrect. The board declares them.
    • BIncorrect. The board declares them.
    • CCorrect. Dividends aren't guaranteed.
    • DIncorrect. It pays them.

  3. Question 3

    Which oil and gas program generally carries the highest risk?

    • ARoyalty
    • BDevelopmental
    • CIncome
    • DExploratory
    Show answer and explanation

    Answer: D) Exploratory

    • AIncorrect. It has no drilling costs.
    • BIncorrect. It drills near proven reserves.
    • CIncorrect. It buys producing wells.
    • DCorrect. Wildcat drilling seeks unproven reserves.

  4. Question 4

    A customer buys a 50 call for 3 and a 50 put for 2. The breakeven points are:

    • A50 only
    • B47 and 52
    • C48 and 53
    • D45 and 55
    Show answer and explanation

    Answer: D) 45 and 55

    • AIncorrect. A straddle has two breakevens.
    • BIncorrect. Use the total premium.
    • CIncorrect. Use the total premium.
    • DCorrect. Strike ± total premium of 5.

  5. Question 5

    A customer is comparing shares of a public REIT with units of a real estate limited partnership (a direct participation program). Which tax characteristic applies to the REIT but NOT to the limited partnership?

    • AThe trust's operating losses stay at the entity level and cannot be deducted on investors' returns
    • BInvestors receive a Schedule K-1 and report their share of depreciation and other deductions
    • CDistributions generally qualify for the reduced tax rates that apply to qualified corporate dividends
    • DThe entity must distribute at least 50% of its taxable income each year to keep its tax status
    Show answer and explanation

    Answer: A) The trust's operating losses stay at the entity level and cannot be deducted on investors' returns

    A REIT is not a pass-through entity, so its losses stay inside the trust. A DPP passes income, losses and deductions through to its investors. REITs must distribute at least 90% of taxable income, and their dividends are generally taxed as ordinary income.

    • ACorrect. A REIT is not a pass-through entity. Unlike a partnership, it cannot pass tax losses through to its investors.
    • BIncorrect. This describes a DPP. A DPP gives flow-through tax treatment, so partners report their share of income, losses and deductions.
    • CIncorrect. REIT dividends are generally taxed as ordinary income and don't get the reduced rates that apply to other corporate dividends.
    • DIncorrect. To qualify, a REIT must distribute at least 90% of its taxable income to shareholders each year as dividends, not 50%.

  6. Question 6

    A customer wants to profit from a large price move but isn't sure of the direction. A suitable strategy is:

    • AA covered call
    • BA long straddle
    • CA short straddle
    • DA bull call spread
    Show answer and explanation

    Answer: B) A long straddle

    • AIncorrect. That suits flat or slightly rising markets.
    • BCorrect. It profits from big moves either way.
    • CIncorrect. That profits from little movement.
    • DIncorrect. That's bullish.

  7. Question 7

    A customer buys a 40 call for 5 and sells a 45 call for 2. The maximum gain is:

    • A$300
    • B$200
    • C$500
    • DUnlimited
    Show answer and explanation

    Answer: B) $200

    • AIncorrect. That is the maximum loss.
    • BCorrect. Spread width 5 − net debit 3 = 2, × 100.
    • CIncorrect. Subtract the net debit.
    • DIncorrect. The short call caps it.

  8. Question 8

    In a taxable account, a customer buys shares of a mutual fund a few days before the record date for a large capital gain distribution. This practice, known as "buying the dividend," is generally considered:

    • AAdvantageous, because the distribution raises the fund's NAV after it is paid
    • BDisadvantageous, because the NAV falls and the distribution is currently taxable
    • CAdvantageous, because distributions received soon after a purchase are tax-exempt
    • DNeutral, because the distribution is not taxable if it is reinvested in more shares
    Show answer and explanation

    Answer: B) Disadvantageous, because the NAV falls and the distribution is currently taxable

    Buying just before a distribution gives the investor no economic gain, because the NAV drops by the amount distributed. In a taxable account, though, the distribution creates a current tax liability.

    • AIncorrect. When the distribution is paid, the fund's NAV drops by the amount of the distribution. It does not rise.
    • BCorrect. The NAV drops by the amount of the distribution, so the customer simply gets part of their own investment back, and that amount is taxable in a taxable account.
    • CIncorrect. No rule exempts distributions received soon after a purchase. Capital gain distributions in a taxable account are taxable whenever the shares were bought.
    • DIncorrect. Reinvested distributions are taxed the same way as distributions taken in cash. Reinvesting does not defer the tax.

  9. Question 9

    A closed-end fund's shares trade at prices set by:

    • AThe custodian
    • BNext NAV only
    • CThe SEC staff
    • DThe market
    Show answer and explanation

    Answer: D) The market

    • AIncorrect. The market sets price.
    • BIncorrect. That's an open-end fund.
    • CIncorrect. The market sets price.
    • DCorrect. They may trade at a premium or discount to NAV.

  10. Question 10

    A 75-year-old single customer takes the standard deduction and must take required minimum distributions from her traditional IRA. She wants to give part of this year's IRA money to her church and keep her taxable income as low as possible. Which approach is most suitable?

    • ATake the RMD in cash, then write a check to the church and deduct the cash gift on her return
    • BHave the IRA custodian pay the gift directly to the church as a qualified charitable distribution
    • CConvert the traditional IRA to a Roth IRA, then make the gift from the Roth account
    • DName the church as IRA beneficiary and suspend her RMDs until her death
    Show answer and explanation

    Answer: B) Have the IRA custodian pay the gift directly to the church as a qualified charitable distribution

    A qualified charitable distribution is paid directly from the IRA to a qualified charity by an owner aged 70½ or older, and it is left out of taxable income. Once the owner is 73, it can also count toward the RMD. That makes it better than taking the cash and relying on the limited non-itemizer charitable deduction.

    • AIncorrect. The whole RMD would count as gross income. Starting in 2026, a non-itemizer can deduct only up to $1,000 of cash gifts to charity ($2,000 if filing jointly), so the deduction may not offset the gift. A distribution paid to the owner first also cannot be a QCD.
    • BCorrect. An IRA owner aged 70½ or older can have the IRA pay money directly to a qualified charity, up to the annual limit. The amount is left out of taxable income, and because she is past the RMD age of 73 it can count toward this year's RMD.
    • CIncorrect. A Roth conversion adds the converted pre-tax amount to her taxable income, which works against her goal. It also does not satisfy her RMD.
    • DIncorrect. Naming a charity as beneficiary does not let her skip lifetime RMDs, and it does nothing for this year's gift.

Provides Customers with Information about Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records: FAQs

How much of the Series 7 exam is Provides Customers with Information about Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records?

Provides Customers with Information about Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records is 73% of the Series 7 exam by the official exam guide's weighting, which on a 125-question form works out to roughly 91 questions. The real exam's exact split varies by form.

What does the Provides Customers with Information about Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records domain cover?

The largest Series 7 domain by far, at nearly three quarters of the exam: how products work, which ones suit which customer, plus margin, tax treatment, asset transfers and records.

How should I study Provides Customers with Information about Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records for Series 7?

Work options and margin problems by hand until you can do them without notes, then practise matching products to short customer profiles; together those cover a large share of this domain.

Where can I practise more Provides Customers with Information about Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records questions?

This page has 10 free Provides Customers with Information about Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records questions with answers. The ExamWize Series 7 question bank has 434 questions in this domain. Every practice exam result breaks your score down by domain, and Review Mode re-drills the questions you missed.

Other Series 7 topics

Also: 15 free questions across all topics, the Series 7 cheat sheet and the study guide.

Get Provides Customers with Information about Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records exam-ready

The full Series 7 bank has 434 Provides Customers with Information about Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records questions. Timed practice exams match the real exam's length and domain weights, every result shows your score per domain, and Review Mode re-drills the questions you missed.

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Not affiliated with FINRA; questions are original, written from the official exam outline, and never copied from the real exam.