Free debt drill
Series 7 Debt Securities Practice Questions
Use these free sample questions to rehearse bond price-yield movement, premiums and discounts, current yield, call risk, credit ratings, accrued interest, and suitability. These are educational examples, not actual FINRA exam questions.
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A customer owns a 5% corporate bond. New comparable bonds are issued at 7%. What generally happens to the customer's bond price?
Topic summary
What this drill teaches
Debt securities questions usually combine math with risk. Start with issuer type, coupon, market yield, maturity, call features, credit quality, and customer objective before choosing the answer.
Use this sample set to rehearse the rule. Full access adds the complete mapped bank, saved progress, and exam-style mixed practice.
Common traps
Miss these once here, not on exam day
- Reversing the inverse relationship between bond prices and market yields.
- Confusing current yield with yield to maturity or yield to call.
- Ignoring call risk on premium bonds.
- Treating high yield as suitable without checking credit risk and customer objective.
How to use the page
Answer, review, then fix the miss.
Answer the sample, review the explanation, then move into the related chapter or diagnostic before the same mistake appears in a mixed set.
Exam depth
How to study this page
What the exam is testing
Debt securities questions usually combine math with risk. Start with issuer type, coupon, market yield, maturity, call features, credit quality, and customer objective before choosing the answer.Why candidates miss it
Reversing the inverse relationship between bond prices and market yields.Exam trap
Confusing current yield with yield to maturity or yield to call.Memory trick
Before answering, say the tested rule in one sentence, then point to the exact clue in the stem. For debt securities, the clue usually appears before the answer choices start to look tempting.Work all 10 questions once for accuracy, then repeat only the missed explanations and related concept links. The goal is not memorizing these questions; it is recognizing the rule trigger in a new prompt.
Related concepts
Related concept map
Use this map when a question exposes a weak rule. Move from the missed explanation into the related concept, then return to the drill.
Get an instant score, missed topics, and an optional missed-topic study plan.
Review Series 7 debt securitiesRebuild bond pricing, maturity, credit, call, and suitability concepts.
Drill Series 7 municipal bond questionsApply debt logic to GO bonds, revenue bonds, and tax-exempt income.
Review Series 7 taxationSeparate premium, discount, capital gain, and tax-exempt income clues.
Review Series 7 suitability scenariosConnect bond features to customer risk, income, tax, and time-horizon facts.
Series 7 study guide 2026Review the chapter outline before you drill more questions.
Preview the debt fundamentals chapterPreview the related chapter for bond math and vocabulary.
See PassSeries7 pricingUnlock the full textbook, flashcards, mapped practice, and exam simulation.
Free debt securities sample questions
0 of 10 answered
Question 1 / 10
Debt securitiesA customer owns a 5% corporate bond. New comparable bonds are issued at 7%. What generally happens to the customer's bond price?
Show answer and explanation
Correct answer: It falls below par
Explanation: Bond prices and market yields move inversely. If new comparable yields are higher than the existing coupon, the older lower-coupon bond usually trades at a discount.
Related: Price-yield relationship
Question 2 / 10
Debt securitiesA bond has a $60 annual coupon and trades at $1,200. What is its current yield?
Show answer and explanation
Correct answer: 5%
Explanation: Current yield equals annual interest divided by market price. $60 / $1,200 = 5%. Do not divide by par when the question asks for current yield.
Related: Current yield
Question 3 / 10
Debt securitiesA bond purchased at a premium and held to maturity will generally have a yield to maturity that is what compared with its coupon rate?
Show answer and explanation
Correct answer: Lower than the coupon
Explanation: A premium bond costs more than par but matures at par. That premium loss pulls yield to maturity below the stated coupon rate.
Related: Premium bonds
Question 4 / 10
Debt securitiesWhich bondholder is most exposed to call risk?
Show answer and explanation
Correct answer: Owner of a premium callable bond when rates fall
Explanation: When rates fall, issuers are more likely to call higher-coupon debt. A premium bondholder can lose the above-par premium sooner than expected and must reinvest at lower rates.
Related: Call risk
Question 5 / 10
Debt securitiesA zero-coupon bond is issued at a deep discount. How does the investor generally receive the return?
Show answer and explanation
Correct answer: Through appreciation toward par at maturity
Explanation: Zero-coupon bonds do not make periodic coupon payments. The investor buys at a discount and receives par at maturity if the issuer pays as promised.
Related: Zero-coupon bonds
Question 6 / 10
Debt securitiesA bond rating is downgraded from investment grade to below investment grade. Which risk has most directly increased?
Show answer and explanation
Correct answer: Credit risk
Explanation: A downgrade signals weaker credit quality and higher default risk. Higher yield may compensate investors, but it does not remove credit risk.
Related: Risk and suitability
Question 7 / 10
Debt securitiesIn a secondary-market bond trade between coupon dates, who usually pays accrued interest to whom?
Show answer and explanation
Correct answer: Buyer pays seller
Explanation: The buyer compensates the seller for interest earned from the last coupon date through settlement. The buyer then receives the full next coupon from the issuer.
Related: Accrued interest
Question 8 / 10
Debt securitiesAll else equal, which bond is usually more sensitive to interest-rate changes?
Show answer and explanation
Correct answer: Longer maturity bond
Explanation: Longer maturities generally carry more interest-rate risk because cash flows are received farther in the future and price moves more when rates change.
Related: Interest-rate risk
Question 9 / 10
Debt securitiesA retired income investor wants predictable payments and low default risk. Which feature should be weighed most heavily?
Show answer and explanation
Correct answer: Credit quality and income stability
Explanation: Income needs do not justify ignoring default risk. For a conservative income investor, credit quality, maturity, call features, and payment stability matter more than headline yield.
Related: Income suitability
Question 10 / 10
Debt securitiesWhat feature distinguishes a convertible corporate bond from a straight corporate bond?
Show answer and explanation
Correct answer: It may be exchanged for common stock under stated terms
Explanation: Convertible bonds include a conversion feature tied to the issuer's common stock. They still carry debt risks, but the conversion feature can add equity participation.
Related: Equity-linked features
Topic score
0/10
Answer every question for a topic score.
Use this topic drill as a warmup. For a mixed-topic routing signal, take the free diagnostic and request the missed-topic study plan after your score appears.
Next study steps
Related Series 7 resources
- Take the free Series 7 diagnostic
Get an instant score, missed topics, and an optional missed-topic study plan.
- Review Series 7 debt securities
Rebuild bond pricing, maturity, credit, call, and suitability concepts.
- Drill Series 7 municipal bond questions
Apply debt logic to GO bonds, revenue bonds, and tax-exempt income.
- Review Series 7 taxation
Separate premium, discount, capital gain, and tax-exempt income clues.
- Review Series 7 suitability scenarios
Connect bond features to customer risk, income, tax, and time-horizon facts.
- Series 7 study guide 2026
Review the chapter outline before you drill more questions.
- Preview the debt fundamentals chapter
Preview the related chapter for bond math and vocabulary.
- See PassSeries7 pricing
Unlock the full textbook, flashcards, mapped practice, and exam simulation.
- Review the Series 7 study guide
Use the chapter outline to decide what to read before the next topic drill.
Mixed-topic check
See how this topic holds up in a mixed quiz
Topic drills are useful, but the real exam switches topics constantly. Take the free Series 7 diagnostic when you want an instant mixed score and an optional missed-topic study plan.