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

FINRA FINRA-SERIES-6 Online Questions & Answers

• Question 161:

  Which of the following securities is not exempt from registration requirements?

  A. private-placement variable universal life insurance
  B. a revenue bond issued by the state of Florida to raise money to build an airport
  C. a bond issued by the U.S. post office
  D. a new issue of stock issued by a corporation that already has shares of its stock trading on the NYSE
  D. a new issue of stock issued by a corporation that already has shares of its stock trading on the NYSE

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  Explanation/Reference:

  A new issue of stock issued by a corporation that already has shares of its stock trading on the NYSE is not exempt from registration requirements. Private placements, municipal bonds, and bonds issued by U.S. government agencies are all exempt from registration requirements.

• Question 162:

  NASDAQ market makers provide investors with assurance that:

  A. there is a market for the listed security.
  B. the investor will be able to buy or sell the security at a price he desires.
  C. the investor will be investing in a high quality investment with relatively low risk.
  D. NASDAQ market makers provide investors with no assurance whatsoever. It is “buyer beware.”
  A. there is a market for the listed security.

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  Explanation/Reference:

  NASDAQ market makers provide investors with assurance that there is a market for the listed security by posting bid and ask prices for it. There is no guarantee, however, that the investor will be able to buy or sell the security at the price he desires or that the investment is high quality and low risk.

• Question 163:

  Which of the following are fiscal policy tools under the jurisdiction of the U.S. Congress?

  A. the decision on the amount of cash reserves that a bank must hold
  B. the decision on whether to raise or lower effective tax rates
  C. the decision on whether to raise or lower the rate at which banks can borrow money from the Federal Reserve
  D. Both A and B are fiscal policy tools
  B. the decision on whether to raise or lower effective tax rates

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  Explanation/Reference:

  The decision on whether to raise or lower effective tax rates is a fiscal policy tool under the jurisdiction of the U.S. Congress. The decision on the amount of cash reserves a bank must hold (the reserve requirement) and the decision on whether to raise or lower the rate at which banks can borrow money from the Federal Reserve (the discount rate) are monetary policy tools under the jurisdiction of the Federal Reserve.

• Question 164:

  Ms. Newbie has recently become licensed as a registered representative and is disappointed to discover no clients standing in line at the door to her office at Savvy Investments. She decides she simply must take on a second job in order to pay the rent. The fitness club to which she belongs is advertising for a weekend receptionist, and the club manager has told her the job is hers if she wants it. Given this scenario, Ms. Newbie:

  A. can accept the job since it only entails weekend work, which does not conflict with the hours she works as a registered representative.
  B. can accept the job only if she tells her supervisor at Savvy that she will be working weekends.
  C. must provide a written notice to Savvy Investments and await the firm's approval before accepting the job.
  D. can accept the job without any restrictions. She is not tied to Savvy by ball and chain, and her work as a receptionist at a fitness club does not have anything to do with the financial industry.
  C. must provide a written notice to Savvy Investments and await the firm's approval before accepting the job.

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  Explanation/Reference:

  Ms. Newbie must provide a written notice to Savvy Investments and await the firm's approval before accepting the job at the fitness center. It is also the case that Savvy is entitled to withhold approval.

  FINRA's rule states, “No person associated with a member in any registered capacity shall be employed by, or accept compensation from any other person as a result of any business activity, other than a passive investment, outside the

  scope of his relationship with his employer firm, unless he has provided prompt written notice to the member.”

• Question 165:

  Under current tax law, in order for the profits from the sale of any investment to be considered long -term capital gain income, the investment must have been held for:

  A. longer than 6 months.
  B. longer than 12 months.
  C. longer than 18 months.
  D. longer than 24 months.
  B. longer than 12 months.

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  Explanation/Reference:

  Under current tax law, in order for the profits from the sale of any investment to be considered long-term capital gain income, the investment must have been held for longer than 12 months.

• Question 166:

  You have just become a licensed registered representative with Fine, Howard, Fine and Associates, a broker-dealer. (Congratulations!) You have had a brokerage account with Anon Brokerage for the past ten years. In this instance, you are required to:

  A. transfer the assets in your account with Anon to a Fine, Howard, Fine account and close your account with Anon.
  B. provide Fine, Howard, Fine with written notification of this fact.
  C. provide Anon Brokerage with written notification of your association with Fine, Howard, Fine.
  D. The actions described in both B and C are requirements.
  D. The actions described in both B and C are requirements.

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  Explanation/Reference:

  If you have an account with another member firm upon becoming associated with a member firm, you are required to provide both the firm with which you have your account and your new employer in writing of the fact.

• Question 167:

  Which of the following is not an auction market?

  A. NASDAQ
  B. NYSE
  C. CHX
  D. All of the above are auction markets
  A. NASDAQ

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  Explanation/Reference:

  NASDAQ is not an auction market. NASDAQ is a computerized system of geographically dispersed securities’ dealers. As such, it is a negotiated market. The NYSE (New York Stock Exchange) and the CHX (Chicago Stock Exchange) are both auction markets.

• Question 168:

  Glamourless Fund is a value fund. As such, it invests primarily in stocks with:

  A. low cash dividend yields.
  B. high betas.
  C. high betas.
  D. low earnings growth rates.
  D. low earnings growth rates.

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  Explanation/Reference:

  As a value fund, Glamourless invests primarily in stocks with low earnings growth rates.

  Because these firms don't need as much money to support a high growth rate, they tend to have high dividend yields. Their betas are generally less than 1.0, the average stock beta. Value stocks are generally out of favor, which results in low

  price-earnings ratios since investors aren't clamoring to buy them.

• Question 169:

  George Geek is 30 years old, single, and earns $103,000 a year as a software engineer for a small, start-up IT company. George's company does not itself offer a retirement plan, and George is considering his options. The current contribution limits for both the traditional IRA and Roth IRA plans is the lesser of $5,000 or 100% of earned income.

  Which of the following statements applies to George's situation?

  A. George's contributions to a traditional IRA will be tax-deductible.
  B. George's contributions to a Roth IRA will be tax-deductible as long as his income is below the threshold specified by the IRS for the current year.
  C. Assuming that George can contribute to both the traditional IRA and the Roth IRA under the current income thresholds, he will be allowed to contribute $5,000 to each of the plans.
  D. Assuming that George can contribute to both a traditional IRA and a Roth IRA under the current income thresholds, his combined contribution to the two plans cannot exceed $5,000.
  D. Assuming that George can contribute to both a traditional IRA and a Roth IRA under the current income thresholds, his combined contribution to the two plans cannot exceed $5,000.

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  Explanation/Reference:

  If George is 30 years old, single, and earns $103,000 as a software engineer for a company that does not offer a retirement plan, his combined contribution to a traditional IRA and a Roth IRA cannot exceed $5,000, assuming that he is eligible to contribute to both. Since George has no other retirement plan, he will be eligible to make tax-deductible contributions to a traditional IRA regardless of his income level. Contributions to a Roth IRA are never tax-deductible in any situation. (FYI: In 2010, a single taxpayer who earns less than $105,000 during the year is eligible to participate fully in a Roth IRA, but this number can change.)

• Question 170:

  On Monday, August 2nd, the Board of Directors of Baldor Electric (BEZ) announced that the firm would pay a dividend of $0.17 a share. Payment will be made on Friday, October 8th to shareholders of record as of Friday, September 17th. In order to receive this dividend check, an investor would have to purchase shares of Baldor Electric before which day?

  A. Monday, August 2nd.
  B. Wednesday, September 15th.
  C. Friday, September 17th.
  D. Friday, October 8th.
  B. Wednesday, September 15th.

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  Explanation/Reference:

  In order to receive the dividend check, an investor would have to purchase shares of Baldor Electric before Wednesday, September 15th, the ex-dividend date. The ex-dividend date of a stock is two business days prior to the date of record.