Series 6 Practice Exam Flashcards

Questions and Answers

A registered representative making a sales presentation can say which of the following?

The fund has had a positive performance in the last few years. (correct)

This fund is guaranteed to outpace inflation.

The fund will definitely continue to perform well.

Investing in this fund is risk-free.

If an annuitant receives a check for an amount less than the previous month's payment, which scenario likely occurred?

The account's performance was less than the assumed interest rate. (correct)

The annuity contract was modified.

The annuitant reached their minimum payout threshold.

The annuity was switched to a different plan.

Which bond will see the greatest decrease in value if interest rates are rising?

All bonds will decrease in value equally.

The bond with a 20-year maturity. (correct)

The bond with a 10-year maturity.

The bond with a 1-year maturity.

In which of the following equity securities do stockholders have preemptive rights?

Common stock. Signup and view all the answers

All statements about a bond selling above par value are true except the nominal yield always stays the same.

True Signup and view all the answers

When using an annual report of a mutual fund as sales literature, which statements are TRUE?

The report must contain a list of the industries the fund invests in. Signup and view all the answers

What is the timeframe for a registered representative to re-affiliate without re-examination after terminating their registration?

2 years of the effective date of her Form U-5 filing. Signup and view all the answers

If ABC stock is quoted at 67.75 bid and 67.85 ask, how much would an investor pay for one round lot excluding commissions?

$6,785. Signup and view all the answers

How much should a retired man allocate to growth investments from $100,000 when he has liabilities?

$45,000. Signup and view all the answers

What will be the April annuity payment if the AIR for a variable annuity is 5% and the separate account earned 7% in February and 5% in March?

Equal to the March payment. Signup and view all the answers

With insider information, what can your customer do?

Not use the information as long as it is not public. Signup and view all the answers

Which describe premiums for a variable life insurance policy?

Fixed as to time of payment. Signup and view all the answers

If a customer is concerned about interest rate risk, which security is least appropriate?

25-year municipal bonds. Signup and view all the answers

What actions can FINRA take against members who violate the Conduct Rules?

Suspension. Signup and view all the answers

If an investor in a low tax bracket wants moderate protection from inflation, what would you recommend?

Growth mutual fund. Signup and view all the answers

What is an advantage of investing in mutual funds over individual securities for individual investors?

Professional investment management. Signup and view all the answers

What are the disadvantages of investing in ETFs?

The spread between the NAV and POP can be greater than 8.5%. Signup and view all the answers

If a representative assists in raising funds without informing their employer, what rule have they violated?

Selling away. Signup and view all the answers

In a fiduciary account with objectives of preserving capital and generating income, which strategy is most suitable?

Buying Treasury bonds. Signup and view all the answers

How do hedge funds and traditional mutual funds compare?

Both can have noticeable effects on day-to-day trading. Signup and view all the answers

How much time does a client have to submit a claim against a registered representative or member firm?

Six years. Signup and view all the answers

What is the tax consequence when exchanging shares from a bond fund to an aggressive growth fund?

The exchange is considered a taxable event that must be recognized in the current year. Signup and view all the answers

Which of the following would NOT be subject to Conduct Rules regarding public appearances?

A radio spot announcing office relocation. Signup and view all the answers

An employee managing a member firm's business, especially in supervision or training, must be registered as what?

A principal. Signup and view all the answers

What must a broker-dealer with a mutual fund return if a customer redeems shares within seven business days?

All concessions to the underwriter. Signup and view all the answers

Study Notes

Sales Presentations

Registered representatives can highlight past positive performance when discussing investment funds.

Annuity Payments

Annuitants may see reduced payments if the account performance is below the assumed interest rate.

Bond Value and Interest Rates

Long-term bonds (20 years) are more sensitive to rising interest rates, leading to greater decreases in value compared to short-term bonds.

Preemptive Rights

Holders of common stock possess preemptive rights, allowing them to maintain proportional ownership in future stock offerings.

Bonds Above Par Value

Nominal yield of a bond does not change despite the bond selling above par value.

Mutual Fund Reports

Annual mutual fund reports must be approved by the firm, contain specific date figures, and list the industries of investment.

Registration and Re-affiliation

Registered representatives can re-affiliate without re-examination within two years of Form U-5 filing.

Stock Purchase Costs

Purchasing one round lot of ABC stock at 67.75 bid and 67.85 ask would cost approximately $6,785.

Investment Allocation Strategy

To cover short-term debts, a retired man should allocate $45,000 of his $100,000 for growth investments.

Variable Annuities

Annuity payments remain stable if the earnings match the assumed interest rate, regardless of performance fluctuations.

Insider Information Usage

Insider information may not be used in trades until publicly available, and it cannot be disclosed or used personally.

Variable Life Insurance Premiums

Premiums for variable life insurance are fixed in amount and time of payment but can vary based on cash value.

Interest Rate Risk

To minimize interest rate risk, investors should avoid long-term securities like 25-year municipal bonds.

FINRA Actions

FINRA can censure or suspend members for Conduct Rule violations but cannot impose criminal indictments or prison sentences.

Investment Recommendations

For low-income investors seeking inflation protection, growth mutual funds are recommended.

Mutual Funds vs. ETFs

Mutual funds offer professional management, while disadvantages of ETFs include commissions and potential spreads greater than 8.5%.

Selling Away Rule

Registered representatives cannot distribute offering circulars without informing their employer, even without compensation.

Fiduciary Accounts

Suitable investments for fiduciary accounts aiming for capital preservation and income generation include Treasury bonds.

Hedge Funds and Mutual Funds

Hedge funds and traditional mutual funds can both influence daily trading activities.

Arbitration Claims

Clients have six years to submit claims against registered representatives or member firms under the Code of Arbitration Procedure.

Tax Consequences of Fund Exchanges

Exchanging shares from one fund to another is viewed as a taxable event in the year the exchange is made.

Conduct Rules Exemptions

Conduct Rules do not apply to non-promotional communications, such as announcements regarding office relocations.

Registration Requirements

Employees overseeing solicitation or training in a member firm must be registered as principals.

Broker-dealers must return concessions to mutual fund underwriters if shares are redeemed within seven business days of purchase.

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Test your knowledge with these Series 6 practice exam flashcards. This quiz covers essential concepts related to registered representatives and annuities, helping you prepare for the financial licensing exam. Perfect for anyone studying for the Series 6 qualification.