FINRA FINRA-SERIES-6 Online Practice Questions and Exam Preparation

FINRA FINRA-SERIES-6 Online Questions & Answers

• Question 111:

  Which of the following investments would have the least interest rate risk?

  A. a 6-month Treasury bill
  B. a 20-year, AAA-rated municipal bond
  C. a 3-year Treasury STRIP
  D. a 15-year, AAA-rated corporate bond
  A. a 6-month Treasury bill

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  Explanation/Reference:

  A 6-month Treasury bill has the least interest rate risk of the choices listed. It has the shortest duration, and the shorter duration, the less the price of the bond fluctuates with changes in the interest rates.

• Question 112:

  Mr. and Mrs. R. Retired are planning on traveling extensively throughout the U.S. in their new motor home now that they have reached their golden years. Under FINRA rules, upon written instructions from Mr. and Mrs. R. Retired, their broker is required to hold their mail for a maximum of:

  A. 1 month.
  B. 2 months.
  C. 3 months.
  D. none of the above. It is Mr. and Mrs. Retired's responsibility to establish a mail-hold through the post office.
  B. 2 months.

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  Explanation/Reference:

  If Mr. and Mrs. Retired provide their broker with written instructions, their broker is required to hold their mail for a maximum of 2 months under FINRA's rule regarding the keeping of books and records. If Mr. and Mrs. Retired were going abroad instead of traveling only in the U.S., FINRA's rule requires that their mail be held by the broker for a maximum of 3 months.

• Question 113:

  A broker-dealer is required to file a Currency Transaction Report with the Treasury Department for:

  A. any transaction exceeding $10,000 in value.
  B. any cash transaction exceeding $10,000.
  C. any cash transaction exceeding $3,000.
  D. any transaction exceeding $5,000.
  B. any cash transaction exceeding $10,000.

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  Explanation/Reference:

  A broker dealer is required to file a Currency Transaction Report with the Treasury Department for any cash transaction exceeding $10,000. The report does not need to be filed if the transaction simply has a market value of $10,000, but does not involve cash (aka, currency.)

• Question 114:

  Ms. Newbie is a newly-minted registered representative. Mr. Oldman saunters into her office, becomes infatuated with her, opens an account, and signs a document giving Ms. Newbie discretionary authority over the account. Mr. Oldman is 68 years old, retired, lives on a fixed income, and pays taxes at the lowest marginal tax rate available. His stated investment objectives are capital preservation and income. Ms. Newbie invests ¼ of his investment monies in a periodic-payment, deferred, variable annuity. Based on these facts:

  A. Ms. Newbie has done a remarkable job as a newly-minted representative of allocating at least a fourth of Mr. Oldman's funds appropriately.
  B. Ms. Newbie may lose her license before she gets started in the business for making an unauthorized transaction.
  C. Ms. Newbie has a reasonable sexual harassment case against Mr. Oldman for putting her in such a position.
  D. Although Ms. Newbie's asset allocation for Mr. Oldman is less than optimal, she is in no danger of losing her license or any other penalty, given that she has been given discretionary authority over the account.
  B. Ms. Newbie may lose her license before she gets started in the business for making an unauthorized transaction.

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  Explanation/Reference:

  If Ms. Newbie invests ¼ of Mr. Oldman's investment monies in a periodic payment, deferred, variable annuity, given his age and his investment objectives, she may lose her license before she gets started in the business for making an unauthorized transaction. Even though she has discretionary authority over the account, she must still ensure she selects investments that are suitable for her client. A deferred, variable annuity clearly does not match Mr. Oldman's investment objectives. The value of the contract fluctuates, for one thing, and for another, there will be no income from it initially since it is a deferred annuity, and it probably has a surrender charge as well.

• Question 115:

  A bond issued by the Needy Corporation pays an 8% coupon, matures in ten years, and is selling for its face value of $1,000. The yield-to-maturity on this bond is:

  A. less than its coupon rate of 8%
  B. greater than its coupon rate of 8%.
  C. equal to its coupon rate of 8%.
  D. indeterminable with the information provided.
  C. equal to its coupon rate of 8%.

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  Explanation/Reference:

  Since the bond is selling for its face value, its yield-to-maturity is equal to its coupon rate.

• Question 116:

  The entity that serves as the auctioneer for trades conducted on an organized exchange floor is known as a:

  A. registered trader.
  B. specialist.
  C. floor broker.
  D. commission broker.
  B. specialist.

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  Explanation/Reference:

  The entity that serves as the auctioneer for trades conducted on an organized exchange floor is known as a specialist. The specialist is assigned stocks by the exchange and is a market maker in those stocks. A registered trader is a private individual who buys and sells on his own account only. Floor brokers and commission brokers execute trades for other investors.

• Question 117:

  Which of the following is not a money market security?

  A. commercial paper
  B. negotiable certificates of deposit
  C. common stock
  D. Treasury bills
  C. common stock

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  Explanation/Reference:

  Common stock is not a money market security. Money market securities mature in one year or less. Common stock has no maturity.

• Question 118:

  After three warnings, Honest Investments was forced to terminate Sly Conman, one of its representatives, for making inaccurate statements when offering its mutual fund products to customers. Given this scenario:

  A. Honest must provide FINRA with an electronic notification of the termination within 48 hours and provide a written copy of the submitted form to Mr. Conman within 30 days of the filing.
  B. Honest must provide FINRA with an electronic notification of the termination within 30 days and provide a written copy of the submitted form to Mr. Conman within that same period of time.
  C. Honest must provide FINRA with an electronic notification of the termination within 48 hours and provide a written copy of the submitted form to Mr. Conman within 10 business days.
  D. Honest must provide FINRA with an electronic notification of the termination within 48 hours and mail a written copy of the submitted form to both FINRA and Mr. Conman within 14 days.
  B. Honest must provide FINRA with an electronic notification of the termination within 30 days and provide a written copy of the submitted form to Mr. Conman within that same period of time.

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  Explanation/Reference:

  When Honest Investments terminates Mr. Conman, the firm must provide FINRA with an electronic notification of the termination within 30 days and provide a written copy of the submitted form to Mr. Conman within that same period of time.

• Question 119:

  On Friday, August 6th, the Board of Directors of Ecolab (ECI) announced that it would pay a dividend of $0.155 a share to shareholders of record as of Tuesday, September 21st.The dividend checks were scheduled to be mailed on Friday, October 15th. In this scenario, the ex-dividend date is:

  A. Friday, August 6th.
  B. Friday, September 17th.
  C. Tuesday, September 21st.
  D. none of the above.
  B. Friday, September 17th.

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  Explanation/Reference:

  The ex-dividend date is Friday, September 17th in this scenario. It is two business days prior to the date of record, which is Tuesday, September 21st in this example. Saturday is not considered a business day, so the ex-dividend date is the preceding Friday.

• Question 120:

  Giant Investments filed a registration statement with the SEC for a new fund it wanted to introduce and has received word that the registration statement is now effective. Based on this, Jack, a registered representative with Giant Investments, can tell a client that:

  A. because the SEC has recently announced the fund's registration statement effective, the client can rest assured that it is a sound long-term investment.
  B. the SEC pronouncement on the effectiveness of the registration statement means only that the SEC has deemed that enough information has been provided in the registration statement for the client to judge the quality of the investment for himself.
  C. the SEC warrants that there have been no misstatements of fact in the registration statement.
  D. because the SEC has recently approved the fund, it is likely to be a much safer investment than other, older funds in the same fund category.
  B. the SEC pronouncement on the effectiveness of the registration statement means only that the SEC has deemed that enough information has been provided in the registration statement for the client to judge the quality of the investment for himself.

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  Explanation/Reference:

  Jack may tell his client that the recent SEC pronouncement regarding the effectiveness of the fund's registration statement means only that the SEC has deemed that enough information has been provided in the registration statement for the client to judge the quality of the investment for himself. The fact that a registration statement has been deemed effective does not mean that it is necessarily a sound investment, nor does it indicate anything regarding the relative safety of the fund when compared to other, older funds in the same category. It does not imply SEC approval. In fact, the prospectus must have a “no approval” statement printed on its front page. The SEC is not guaranteeing that there are no misstatements of fact in the registration statement, either.