FINRA, MSRB, and NASAA Question Types

To ensure that you are fully prepared for your licensing exam, Solomon Exam Prep recommends taking some time to familiarize yourself with the question types that FINRA, MSRB, and NASAA use on their tests. Continue reading

The five question types you need to know.

To ensure that you are fully prepared for your licensing exam, Solomon Exam Prep recommends taking some time to familiarize yourself with the question types that FINRA, MSRB, and NASAA use on their tests.

FINRA, MSRB, and NASAA use five question formats. They include:

Closed-stem
Open-stem
Most/least/best
Except or not
Complex multiple choice

 

Closed-Stem. “Stem” is another word for the question itself. “Closed-stem” means that the question is a complete sentence and ends with a question mark.

Example
According to the Securities Act of 1933, which of the following is a non-exempt security?

  1. An option to purchase a certificate of deposit at some time in the future
  2. A contract to purchase 10,000 bushels of corn for $5 a bushel three months from now
  3. A non-renewable banker’s acceptance note that matures in six months
  4. A municipal bond issued by the City of Los Angeles

 

Open-Stem. An open-stem question is an incomplete sentence that asks you to fill in the blank or what’s missing.

Example
The “tax-equivalent yield” tells an investor:

  1. How much lower a yield he can accept from a corporate bond
  2. The impact of his federal tax bracket on a municipal bond he purchases
  3. The risk-adjusted difference in par value of a corporate bond versus an insured municipal bond
  4. What the yield on a corporate bond would be to be equivalent to the yield of a municipal bond

 

Most/Least/Best. This type of question asks you to choose the answer that is either more suitable or less suitable than the other answer choices.

Example
Which of the following BEST describes a customer complaint?

  1. A customer calls upset about the stock market’s recent decline.
  2. A customer sends an email complaining about the impact of the government’s stimulus package on the stock market.
  3. A customer sends an email complaining about a representative’s purchase of General Motors in the client’s brokerage account.
  4. A customer calls and complains about the music played while on hold.

 

Except or Not. This type of question may be open-stem or closed-stem. It asks you to identify which answer choice is not correct with regard to the concept being covered.

Example
Owners of common stock enjoy all of the following rights and privileges except:

  1. Priority in bankruptcy
  2. Ownership stake
  3. Voting rights
  4. Growth potential

 

Complex Multiple Choice. These questions contain four Roman numeral options and may be open-stem or closed-stem. They can function in one of two ways: sequence or choose two.

Sequence

The question might ask you to put the four Roman numeral options into a correct sequence.

Example
Order the following from lowest to highest:

  1. Broker call rate
  2. Federal funds rate
  3. Prime rate
  4. Discount rate
  1. II, IV, III, I
  2. III, II, I, IV
  3. IV, III, I, II
  4. II, IV, I, III

Choose two.

The question might ask you to choose the two best answers out of the four Roman numeral options.

Example
“Phantom tax exposure” is a characteristic of:

  1. T-bonds
  2. Treasury STRIPS
  3. Zero-coupon bonds
  4. Municipal revenue bonds
  1. I and III
  2. I and IV
  3. II and III
  4. II and IV

 

Being familiar with these question types will allow you to go into the test with confidence, prepared to demonstrate your command of the subject matter. For more information, visit www.solomonexamprep.com or call 503-601-0212.

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