FINRA Series 6 Exam Prep

Question 1 of 35

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What securities should a 50-year old investor purchase if the goal is tax-free income?

Select one of the following:

  • A preferred stock inside of a Traditional IRA.

  • A Treasury Bond.

  • A municipal bond.

  • A fixed rate annuity.

Question 2 of 35

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Which of the following is a violation of FINRA conduct rules?

Select one of the following:

  • A registered representative who purchases a security before he buys many shares of it for a customer's account, with advance knowledge of the customer's order.

  • Using soft dollars to purchase investment research.

  • Neglecting to present a prospectus prior to selling an investment to a prospect.

  • A member firm fails to register a broker's assistant.

Question 3 of 35

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A corporate bond selling on the secondary market has a price of 96 and a coupon rate of 4.25%. What is the current yield for this bond?

Select one of the following:

  • 0.0408

  • 0.0425

  • 0.0443

  • 0.0439

Question 4 of 35

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Rule 17f-2 of the Securities Exchange Act requires:

Select one of the following:

  • Registration of securities to be traded in the secondary market

  • Fair trade practices with both customers and non-customers

  • Broker-dealers to register with the SEC

  • Principals, officers, and certain employees of member firms to be fingerprinted

Question 5 of 35

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Which of the following is true regarding the "combination privilege" and mutual funds?

Select one of the following:

  • It allows family members to pool their investments in order to take advantage of break point pricing.

  • It allows an investor to pool her investments from multiple funds from the same family of funds for the purpose of receiving breakpoint pricing.

  • It allows investors to receive financial reporting for several mutual funds on a single financial statement.

  • None of the choices listed.

Question 6 of 35

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Which of the following markets includes the Pink Sheets?

Select one of the following:

  • first market

  • second market

  • third market

  • fourth market

Question 7 of 35

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Which of the following annuity settlement options is likely to offer the lowest monthly payment?

Select one of the following:

  • Insufficient information to answer the question

  • Joint and survivor annuity

  • Life annuity

  • Life with five year period certain annuity

Question 8 of 35

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Which of the following are considered "generic advertising"?

I. a brochure about an individual mutual fund

II. a brochure about an entire mutual fund family

III. an educational brochure from XYZ mutual funds that solely explains the basics of asset allocation

IV. a magazine insert that allows a reader to request more information about certain types of funds

Select one of the following:

  • I, II, and IV

  • I, II, III, and IV

  • III and IV

  • I and II

Question 9 of 35

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Communications with which of the following entities would be considered "institutional communications"?

I. Banks

II. An individual with $25 million in assets

III. A Section 457 plan with 60 clients

IV. A government entity

Select one of the following:

  • I, II, III, and IV

  • II, III, and IV

  • I and IV

  • I, II, and III

Question 10 of 35

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All of the following are possible structural classifications of mutual funds EXCEPT:

Select one of the following:

  • diversified and nondiversified

  • equity and bond

  • all the choices are correct

  • open-ended and closed-ended

Question 11 of 35

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When opening an account for a customer who is a natural person, a broker-dealer must ask for (but not necessarily receive) what of the following information, assuming the broker-dealer will make recommendations to the customer?

I. The social security number or tax identification number of the account owner

II. Investment objectives

III. Estimated income and net worth

IV. Occupational information

Select one of the following:

  • I and III only

  • I, II, and III only

  • I and II only

  • I, II, III, and IV

Question 12 of 35

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Alice, a registered representative, and Bob, a customer, are having a dispute after the variable annuity she sold him just lost value. Bob says that he can't afford to lose income on his investments, so the product Alice sold him was unsuitable. Alice claims that Bob indicated that he was willing to take on risk to increase his potential returns. Alice and Bob each suspect that the other is not acting in good faith and refuse to talk directly to each other. How will the dispute most likely be resolved?

Select one of the following:

  • Mediation

  • Summary judgment

  • Litigation

  • Arbitration

Question 13 of 35

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A Oregon hazelnut farm exports all of their hazelnuts to China and a Chinese trampoline manufacturer exports all of their trampolines to the U.S. Which of the following is true?

Select one of the following:

  • Both the hazelnut farm and the Chinese trampoline manufacturer prefer a weak dollar

  • The hazelnut farm prefers a strong dollar and the Chinese trampoline manufacturer prefers a weak dollar

  • Both the hazelnut farm and the Chinese trampoline manufacturer prefer a strong dollar

  • The hazelnut farm prefers a weak dollar and the Chinese trampoline manufacturer prefers a strong dollar

Question 14 of 35

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Use the following data to answer this question:

I. Primary Residence:
Fair Market Value $800,000
Outstanding Mortgage $150,000
Joint Brokerage Account $130,000
Joint Bank Account $70,000
Vacation Home Fair Market Value $400,000
Outstanding Mortgage $0

II. Primary Residence:
Fair Market Value $500,000
Outstanding Mortgage $0
Joint Brokerage Account $300,000
Joint Bank Account $150,000
Investment Property: Fair Market Value $300,000
Outstanding Mortgage $50,000

III. Primary Residence:
Fair Market Value $400,000
Outstanding Mortgage $200,000
Joint Brokerage Account $250,000
Joint Bank Account $250,000
Individual Brokerage Account $300,000
Individual Bank Account $250,000

Without consideration to income, which of the above net worth scenarios would qualify a married couple for classification as accredited investors?

Select one of the following:

  • III only

  • None of the above scenarios meet the asset requirements

  • I, II, and III

  • I and II

Question 15 of 35

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The federal legislation that requires issuers of securities to register the securities and provide full disclosure to investors is:

Select one of the following:

  • The Securities Exchange Act of 1934

  • The Securities Act of 1933

  • The Investment Company Act of 1940

  • The Uniform Sales of Securities Act of 1930

Question 16 of 35

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XYZ stock is selling for $60 per share with a quarterly dividend of $0.40. The current yield for XYZ is

Select one of the following:

  • 1.5%

  • 0.67%

  • 2.67%

  • 4%

Question 17 of 35

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All of the following entities are exempt from the securities registration requirements of the Paper Act EXCEPT

Select one of the following:

  • Berkshire Hathaway common stock.

  • GMAC Bank.

  • the U.S. Treasure Department.

  • the state of New Jersey.

Question 18 of 35

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If there is activity in a customer's account, statements must be sent:

Select one of the following:

  • Monthly

  • Annually

  • Weekly

  • Quarterly

Question 19 of 35

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For representatives whose telemarketing activities are subject to the tape-recording rule, when must the reports reviewing those taped conversations be submitted to FINRA?

Select one of the following:

  • Twice a year

  • Quarterly

  • Within 30 days of the end of each quarter

  • Within 30 days of the end of each month being monitored

Question 20 of 35

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Which type of risk would a registered representative be least likely to emphasize to their clients about inverse leveraged ETFs?

Select one of the following:

  • They are designed to meet their goals on a daily basis, and their goals are reset daily which can lead to large tracking errors

  • The fund is betting the opposite direction of the market that they are tracking

  • The underlying securities of leveraged ETFs are more liekly to default

  • Managers rely on complicated investment strategies such as derivatives, swaps, and futures contracts that can lead to high volatility in returns

Question 21 of 35

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According to FINRA, the duties of a registered principal include all of the following except:

Select one of the following:

  • Reviewing correspondence

  • Opening all new accounts

  • Initialing all order tickets

  • Handling all written customer complaints

Question 22 of 35

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Annuities are considered to be:

I. qualified
II. tax-deferred
III. retirement vehicles
IV. risky

Select one of the following:

  • I and III

  • II, III and IV

  • II and III

  • I, II, III and IV

Question 23 of 35

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Which of the following departments of a member firm is responsible for sending out order confirmations?

Select one of the following:

  • Order room

  • Margin

  • Cashiering

  • Purchasing and sales

Question 24 of 35

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The FINRA Conduct Rules consider an email to be corresponsdence if it meets all of the following conditions EXCEPT

Select one of the following:

  • the email was sent to all customers within a 30-day period

  • it was sent to less than 25 prospective retail customers

  • All of these conditions would be considered correspondence.

  • the email was sent to a single customer

Question 25 of 35

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On what financial reporting document must a broker-dealer indicate that it is not a member of SIPC?

Select one of the following:

  • ADV Part II

  • ADV Part I

  • Trade confirmation

  • Application

Question 26 of 35

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John is developing promotional material for Megafund, an investment company. The material compares Megafund's performance over the past ten years against five other investment companies, based on information provided by Megafund. Once the material gets the required approval, John will send the material out to potential customers and to broker-dealers who will send it out to their customers. Which of the following are true?

I. The promotional material will require prior principal approval

II. John will need to send the material to FINRA 10 days prior to its first use

III. John will need to send the material to FINRA within 10 days of its first use

IV. If the broker-dealers do not change the promotional material as is to their customers, they will need to re-file it with FINRA

Select one of the following:

  • II and IV

  • I and II

  • III and IV

  • I and III

Question 27 of 35

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All of the following are considered low-cost methods of investing in a broad stock market portfolio EXCEPT:

Select one of the following:

  • Variable annuities

  • Closed-end funds

  • ETFs

  • Open-end mutual funds

Question 28 of 35

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Martha is worried about another bear market and wants you, her registered representative, to position her portfolio defensively. What would be an appropriate investment for Martha?

Select one of the following:

  • An equity income fund

  • A small cap growth fund

  • An energy services fund

  • A technology fund

Question 29 of 35

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Securities held in UTMA/UGMA accounts are owned by:

Select one of the following:

  • The custodian

  • The minor

  • The parent

  • The broker

Question 30 of 35

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On the floor of an exchange, who is responsible for maintaining a fair and orderly market in a security?

Select one of the following:

  • NASDAQ market maker

  • Floor broker

  • Specialist

  • Broker's broker

Question 31 of 35

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According to FINRA, the fundamental responsibility all registered representatives have in common when it comes to working with customers is:

Select one of the following:

  • Honesty

  • Integrity

  • Fair dealing

  • Suitability

Question 32 of 35

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What is the maximum contribution a 55-year old person might be able to make to a Roth IRA in 2013?

Select one of the following:

  • $4,000

  • $6,500

  • $2,000

  • $5,500

Question 33 of 35

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Which of the following is biggest risk of leveraged ETFs?

Select one of the following:

  • Large tracking errors

  • Business risk

  • Interest rate risk

  • Default risk

Question 34 of 35

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When the US Treasury sells bonds, the price of the securities may be _________________ the bond's par amount.

Select one of the following:

  • all of the choices listed

  • equal to

  • less than

  • greater than

Question 35 of 35

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David is considering an investment with the following characteristics: actively managed and invests exclusively in Asia, currently trades at a premium to the value of its underlying investments and can be bought and sold on the New York Stock Exchange, not redeemable, uses leverage to increase returns. What type of security is David considering?

Select one of the following:

  • Mutual fund

  • Unit investment trust

  • ETF

  • Closed-end fund

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FINRA Series 6 Exam Prep

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