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

FINRA FINRA-SERIES-6 Online Questions & Answers

• Question 171:

  Which of the following are duties of the specialist on an exchange floor?

  I. executing limit orders if/when the limit price specified is reached

  II. minimizing any imbalance in supply and demand for the stock(s) that the specialist is assigned

  III. determining an opening price for each assigned stock every day

  IV.

  serving as an auctioneer for the shares of the assigned stocks

  A. I and II only
  B. I, II, and IV only
  C. I and IV only
  D. I, II, III, and IV
  I. executing limit orders if/when the limit price specified is reached II. minimizing any imbalance in supply and demand for the stock(s) that the specialist is assigned III. determining an opening price for each assigned stock every day IV. serving as an auctioneer for the shares of the assigned stocks
  D. I, II, III, and IV

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  Explanation/Reference:

  All of the choices listed are duties of the specialist on an exchange floor. The specialist maintains a limit order “book” and executes those orders if/when the limit price is reached. The specialist is also charged with maintaining a fair and orderly market in the assigned securities, which means trading on his own account to ensure that the supply and demand of the stock's shares match. Additionally, the specialist is responsible for setting the opening price for the assigned stock each day and for serving as the auctioneer for the shares of the stock.

• Question 172:

  Mary is interested in buying shares of the Lambchops Corporation, which sells over-the-counter. The market maker with the best bid price--$3.15--is Veggie Investments. The market maker with the best ask price--$3.27-is Carnivor Investments. Mary conducts trades in NYSE-listed stocks through her broker, Omnivor and Associates.

  Given this scenario, which of the following statements is true?

  A. Mary can buy shares of Lambchops Corporation at the bid price of $3.15 by contacting Veggie Investments directly.
  B. Mary can buy shares of Lambchops Corporation at the ask price of $3.27 by contacting Carnivor Investments directly.
  C. Mary can buy shares of Lambchops Corporation at the bid price of $3.15 by contacting Omnivor and Associates.
  D. Mary can buy shares of Lambchops Corporation at the ask price of $3.27 by contacting Omnivor and Associates.
  D. Mary can buy shares of Lambchops Corporation at the ask price of $3.27 by contacting Omnivor and Associates.

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  Explanation/Reference:

  Mary can buy shares of Lambchops Corporation for $3.27 from the market maker with the best ask price, Carnivor, by contacting her broker, Omnivor and Associates, which will execute the transaction. The ask price is the price at which market makers in the over-the-counter market are willing to sell the stock, and over-the-counter transactions, like NYSE transactions, are executed by brokers.

• Question 173:

  One difference between investing in a variable annuity and in a mutual fund is that:

  A. the variable annuity guarantees a minimum rate of return on your investment.
  B. the premiums invested in a variable annuity grow tax-deferred.
  C. the fees and charges associated with investing in a mutual fund are much higher than those associated with investing in a variable annuity contract.
  D. Mutual fund investors have voting rights; owners of variable annuity contracts have no voting rights.
  B. the premiums invested in a variable annuity grow tax-deferred.

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  Explanation/Reference:

  A difference between investing in a variable annuity and in a mutual fund is that the premiums invested in a variable annuity grow tax-deferred. The variable annuity contract does not guarantee a minimum rate of return on your investment, and the fees associated with a variable annuity contract are significantly higher than those associated with an investment in a mutual fund. Owners of variable annuity contracts have voting rights, just like mutual fund investors.

• Question 174:

  Giant Investments, a family of mutual funds, is introducing a new fund. Giant has recently filed a registration statement for the new fund with the SEC and is waiting for the SEC to declare the registration statement effective. While it does so, Giant may:

  I. place advertisements in financial publications that announce that a new fund is expected to be available soon, along with Giant's contact information.

  II. mail preliminary prospectuses to existing and prospective clients.

  III.

  mail existing clients who have been pre-screened to determine that the fund's objectives are in line with their investment objectives with information on the price they can lock in today to purchase the shares once the registration statement is deemed effective.

  A. I only
  B. I and II only
  C. I and III only
  D. I, II, and III
  I. place advertisements in financial publications that announce that a new fund is expected to be available soon, along with Giant's contact information. II. mail preliminary prospectuses to existing and prospective clients. III. mail existing clients who have been pre-screened to determine that the fund's objectives are in line with their investment objectives with information on the price they can lock in today to purchase the shares once the registration statement is deemed effective.
  B. I and II only

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  Explanation/Reference:

  While Giant is waiting for the SEC to declare its registration statement effective, it may engage only in the activities described in Selections I and II. It may place advertisements in financial publications that announce that a new fund is expected to be available soon, along with its contact information-i.e., a tombstone advertisement; and it may mail preliminary prospectuses to existing and prospective clients. It may not make any offer to sell the securities to clients, prescreened or otherwise, prior to the effective date of the registration statement.

• Question 175:

  Noah Mete is interested in selling his shares of the Lambchops Corporation, which trades over-the-counter. The market maker with the best bid price--$3.15--is Veggie Investments. The market maker with the best ask price--$3.27-is Carnivor Investments. Noah conducts trades in NYSE-listed stocks through his broker, Omnivor and Associates.

  Given this scenario, which of the following statements is true?

  A. Noah can sell his shares of Lambchops Corporation at the bid price of $3.15 by contacting Veggie Investments directly.
  B. Noah can sell his shares of Lambchops Corporation at the ask price of $3.27 by contacting Carnivor Investments directly.
  C. Noah can sell his shares of Lambchops Corporation at the bid price of $3.15 by contacting Omnivor and Associates.
  D. Noah can sell his shares of Lambchops Corporation at the ask price of $3.27 by contacting Omnivor and Associates.
  C. Noah can sell his shares of Lambchops Corporation at the bid price of $3.15 by contacting Omnivor and Associates.

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  Explanation/Reference:

  Noah can sell his shares of Lambchops Corporation for $3.15 from the market maker with the best bid price, Veggie, by contacting his broker, Omnivor and Associates, which will execute the transaction. The bid price is the price at which market makers in the over-the-counter market are willing to buy the stock, and over-the-counter transactions, like NYSE transactions, are executed by brokers.

• Question 176:

  The Securities Act of 1933 did what?

  A. It established the requirement that investment advisers be registered with the SEC.
  B. It established the SEC as the regulatory agency for the secondary market.
  C. It established the requirement that new securities be registered.
  D. All of the above are correct answers.
  C. It established the requirement that new securities be registered.

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  Explanation/Reference:

  The Securities Act of 1933 established the requirement that new securities be registered. The focus of the Securities Act of 1933 was on the primary market. This act also requires that a prospectus be supplied to all prospective investors. The Securities Exchange Act of 1934 established the SEC as the regulatory agency of the secondary market, and the Investment Advisers Act of 1940 established the registration requirement for investment advisers.

• Question 177:

  A general decrease in price levels in the economy is referred to as:

  A. disinflation.
  B. stagflation.
  C. recession.
  D. deflation.
  D. deflation.

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  Explanation/Reference:

  A general decrease in price levels in the economy is referred to as deflation. Disinflation refers to a decrease in the rate of inflation, but price levels in general are still rising. Stagflation refers to an economic condition characterized by high levels of inflation and high unemployment levels. A recession is a prolonged decline in the general economy, typically measured by a decline in the nation's gross domestic product (GDP).

• Question 178:

  Which of the following is not a function performed by an investment banker as part of a full commitment underwriting?

  A. provides advice to the issuing firm on the projects in which it should invest the money raised
  B. provides advice to the issuing firm on what type of security should be issued in order to raise the funds
  C. purchases the securities from the issuing firm
  D. provides short-term price support for the security after it begins trading in the secondary market
  A. provides advice to the issuing firm on the projects in which it should invest the money raised

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  Explanation/Reference:

  The investment banker does not advice the issuing firm on the projects in which it should invest the money raised in a full commitment underwriting. It does advise the issuing firm on what type of security it should issue in order to raise the money; it purchases the securities from the issuing firm for immediate resale to the public; and it provides price support for the security for a short time after it begins trading in the secondary market.

• Question 179:

  Which of the following securities always sell at a discount from their face values?

  I. Treasury bills

  II. Treasury notes

  III. industrial revenue bonds

  IV.

  banker's acceptances

  A. I only
  B. I and II only
  C. II and III only
  D. I and IV only
  I. Treasury bills II. Treasury notes III. industrial revenue bonds IV. banker's acceptances
  D. I and IV only

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  Explanation/Reference:

  Selections I and IV will always sell at a discount from their face values. Both Treasury bills and banker's acceptances are money market instruments that make no interim interest payments. They sell below their face values, and the investor earns the difference between their face values and the price paid. Treasury notes and industrial revenue bonds make interim interest payments, and they may sell below, above, or at their face values.

• Question 180:

  When a broker-dealer hires a new agent, it must submit:

  A. a U-4 form that includes information about the agent's name, address, education, and employment history.
  B. a U-5 form that includes information about the agent's name, address, education, employment history, and marital status.
  C. an REP form that includes information about the agent's name, address, education, and employment history.
  D. a U-4 form that includes information about the agent's name, address, and employment history.
  D. a U-4 form that includes information about the agent's name, address, and employment history.

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  Explanation/Reference:

  When a broker-dealer hires a new agent, it must submit a U-4 form that includes information about the agent's name, address, and employment history. The form must also include information on any felony charges or securities-related misdemeanors, but it does not include anything about the agent's education or marital status. The U-5 form, which is filed when an agent is terminated, would include this additional information.