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FINRA Series 7

Category - Series 7

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Big Guns Municipal Bond Dealer Corporation buys 100M of 7% 20-year GO bonds at par. The bonds are marked up and immediately re-offered for sale. Which of the following re-offering prices would probably be deemed excessive?

6.8% net
6.9% less 0.5
$100.75
5.00% net

Explanation

Answer: D - 5.00% net. The other quotes indicate moderate markups over cost. A quote of 5% net indicates a large markup and a price not “reasonably related to the market”. The dollar price would be about $125, a 25% markup over the dealer’s cost.

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FINRA Series 7

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FINRA Series 7

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