FINRA-SERIES-6 Online Practice Questions and Answers

Which of the following statements about the over-the-counter market is true?

A. Only penny stocks are traded in the over-the-counter market.

B. Trades in the over-the-counter market are conducted via the auction process.

C. Only bonds and other debt instruments are traded in the over-the-counter market.

D. Stocks that are listed on exchange floors are also traded in the over-the-counter market.

NASDAQ is:

A. an acronym for Norway's major stock exchange.

B. the government organization that insures accounts at U.S. brokerage firms.

C. a computerized system that links together the U.S. regional exchanges.

D. a computerized quotation system used in the over-the-counter market.

A long-term, unsecured bond issued by a corporation is called:

A. a debenture.

B. a general obligation bond.

C. commercial paper.

D. an industrial revenue bond.

Which of the following would be required to register as an investment company?

I. a non-diversified management company

II. a unit investment trust

III.

a face-amount certificate company

A.

I, II, and III

B.

II only

C.

II and III only

D.

I and II only

In order for the Invest4U Mutual Fund to qualify as a regulated investment company under Internal Revenue Code Subchapter M, it must:

A. distribute at least 90% of its net investment income to its shareholders.

B. distribute at least 98% of its net income from capital gains to its shareholders.

C. invest at least 75% of its monies in diversified securities.

D. Both A and B are required for Invest4U to qualify as a regulated investment company.

As her college graduation present, Jennifer's grandmother gave her 200 shares of the stock of IBM. Her grandmother had purchased the shares for $54 a share in October 2002, and the stock was selling for $132 a share on the day of

Jennifer's graduation eight years later. Eight months after her graduation,

Jennifer decides to sell the shares to get money to help with the down payment on a condo she is purchasing.

If IBM is selling for $125 on the day of the sale, what are the tax consequences of this sale for Jennifer?

A. Jennifer will have taxable income of $15,600, which will be taxed as long-term capital gain income at a tax-preferred rate.

B. Jennifer will have taxable income of $14,200, which will be taxed as long-term capital gain income at a tax-preferred rate.

C. Jennifer will have a loss of $1,400, which will be treated as a short -term capital loss for tax purposes.

D. Jennifer will have taxable income of $14,200, which will be taxed as long-term capital gain income at a tax-preferred rate.

The essential difference between a 401(k) plan and a 403(b) plan is that:

A. the 403(b) plan is for small businesses while the 401(k) plan is for large corporations.

B. only employers can contribute to 403(b) plans while both employers and employees can contribute to 401(k) plans.

C. the 403(b) plan is for employees of specific non-profit organizations whereas the 401(k) plan is for the employees of private corporations.

D. contributions to 403(b) plans are always tax deductible, which is not the case with 401(k) plan contributions.

Your client is trying to choose between a variable annuity and a fixed annuity. You can tell him that:

I. the fixed annuity will make guaranteed monthly payments, but has more purchasing power risk than a variable annuity.

II. he can expect higher monthly payments from his fixed annuity during a bear market than he would get from a variable annuity.

III.

the earnings on both variable and fixed annuities grow tax-deferred.

A.

I only

B.

I and II only

C.

I and III only

D.

I, II, and III

A settlement option associated with a variable life policy in which the insurance company guarantees that the beneficiary will receive equal payments over a specific length of time is known as a:

A. fixed-amount settlement.

B. fixed-period settlement.

C. life-income settlement.

D. guaranteed-payment settlement.

Joan is a customer of GetErDone Broker-Dealers. Her twin sister, Jean, has accompanied her to GetErDone's office and has gathered some information regarding opening an account with the firm, giving it her contact information at the same time.

Under Regulation S-P, which of the following statements regarding GetErDone's handling of Joan's and Jean's personal information is true?

A. GetErDone must provide Joan with a notification of its privacy policies annually and provide her with information on how to mandate that it not share her nonpublic personal information with nonaffiliated third parties.

B. GetErDone can disclose any information that Jean provided them to nonaffiliated third parties since Jean is not a customer of the broker-dealer.

C. GetErDone is required to have provided Jean with a copy of its privacy policy when she inquired about opening an account with the broker-dealer.

D. All of the above are true statements.