Finra Series-7 Exam - Topic 7 Question 47 Discussion

Actual exam question for Finra's Series-7 exam

Question #: 47
Topic #: 7

The initial Federal Reserve Bank margin requirement is set at 60% and Bubba purchases 100 shares of XYZ at $100 per share. He deposits $6,000 of the $10,000 purchase price in his account.

If XYZ increases in value to $150 per share, how much excess equity would Bubba have in his account?

A$1,000

B$1,500

C$2,000

D$3,000

Show Suggested Answer

Suggested Answer: C

$2,000. Bubba started with $6,000 of equity and a debit balance of $4,000. The market value of his XYZ stock increased by $5,000 ($15,000 - $10,000). Therefore, his equity increased to $11,000. Since Bubba only needs 60% equity, his Reg T requirement is $9,000 ($15,000 x 60%). His equity exceeds the requirement by $2,000.

by Shawnda at May 04, 2022, 11:33 PM

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Myrtie

5 months ago

Are we sure about those calculations? Seems off.

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Willow

6 months ago

I think it's $2,000 excess equity, right?

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Rebbeca

6 months ago

Wait, how does that translate to excess equity?

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Olene

6 months ago

So he has $5,000 in equity after the price jump!

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Garry

6 months ago

Bubba's total investment is $15,000 now.

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Lynna

6 months ago

I believe the margin requirement means he has to maintain a certain percentage, but I'm not sure how to apply that to find the excess equity in this case.

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Isabella

6 months ago

If I recall correctly, Bubba's initial investment was $6,000, and with the price increase, he should have a good amount of excess equity.

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Cristen

6 months ago

I'm a bit unsure about the exact calculations, but I feel like I practiced a similar question where we had to find the equity after a price increase.

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Sueann

6 months ago

I think I remember that excess equity is calculated by subtracting the margin requirement from the current value of the shares.

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Tu

6 months ago

I've seen questions like this before, so I'm feeling pretty confident. I think the key is to focus on the EVPN and Layer 2 service requirements.

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Kimbery

6 months ago

Key is understanding the geographic rules in the allocation chart. Each location has a specific Experience assignment.

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Sherill

6 months ago

I think the common application means we might only need one object for it, but I'm not sure how to account for the unique process.

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