Series 7 practice questioneasyProduct Knowledge and Suitability Foundation 1
Which factor is most relevant before recommending a callable bond to an income investor?
- AReinvestment risk if rates fall✓ Correct answer
- BThe issuer’s transfer restrictions
- CWhether the bond votes in director elections
- DWhether it qualifies for SIPC coverage
Explanation
Why A — Reinvestment risk if rates fall
Callable bonds may be redeemed early when rates decline, forcing investors to reinvest at lower rates. That reinvestment risk is especially important for income-oriented customers.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 758+ Series 7 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Seeks Business for the Broker-Dealer questions
- A referral fee for opening brokerage accounts may generally be paid only to:
- Which statement in a sales presentation would be prohibited?
- A representative discussing a new issue with a prospect should describe a preliminary prospectus as:
- Which communication is retail communication under FINRA rules?
- A customer-focused investment recommendation must take into account all of the following EXCEPT the customer’s:
- If a representative does not understand how a non-traded REIT values its shares, the representative should:
- Retail correspondence prepared by a representative generally requires prior approval by:
- If a prospect asks whether a broker-dealer account is insured against market loss, the representative should explain…