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Total 325 questions
Ms. Pye has quit her job to become a full-time mother and wants to roll over the funds from
Answer : B
Explanation:
If Ms. Pye wants to rollover the funds from her 401(k) plan into an IRA, you should tell her that if she has the funds transferred directly from her 401(k) plan to the IRA, she will avoid having 20% withheld. She will not have to pay either taxes or a penalty on the funds that are rolled over if she follows specified guidelines, and if she opts to take possession of the funds herself prior to depositing them in the IRA account, she has 60 days in which to do so before a 10% penalty is assessed.
Mr. Fast Lane met an early death at the age of 42. Mr. Lane had been making contributions to a variable annuity contract for several years, and at the time of his death, his contributions totaled $25,000. Although the value of the contract had at one time reached
$40,000, earnings included, a downturn in the market has resulted in a contract value of only $23,000.
How much will Mr. Lanes beneficiaries receive as the death benefit associated with this contract under these circumstances?
Answer : C
Explanation:
Since Mr. Lane died while he was still making contributions, his beneficiaries will receive
$25,000. If the annuitant dies during the accumulation period, the death benefit is equal to the value of the contract or the total of the contributions, whichever is greater.
Joan is a customer of GetErDone Broker-Dealers. Her twin sister, Jean, has accompanied her to GetErDones 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 GetErDones handling of Joans and Jeans personal information is true?
Answer : A
Explanation:
Since Joan is a customer of GetErDone, GetErDone must provide her 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. GetErDone may not disclose any information about Jean, who is not yet a customer of the firm, unless the broker -dealer has provided Jean with its privacy policy and given her the opportunity to opt out of its ability to share her information with nonaffiliated third parties. GetErDone is not required to have provided Jean with a copy of its privacy policy when she inquired about opening an account, but it will need to provide her with one when/if she becomes a customer.
Mr. B. Beard started making regular investments in a mutual fund with the goal of financing a five-year circumnavigation on his 40-foot sailboat, Pirates Lady. He is getting ready to depart and wants to set up an automatic withdrawal plan such that the money he has invested will see him through his circumnavigation, with nothing remaining in the account at the end.
Which of the systematic withdrawal plans will best fit his needs?
C. fixed-percentage plan -
D. fixed-share plan -
Answer : A
Explanation:
Since Mr. Beard wants an automatic withdrawal plan such that the money will last through his circumnavigation, with nothing remaining at the end, he should elect to use the fixed - time plan. Under this plan, the fund determines how much it will redeem each period over the five years such that the account is depleted at the end of that time period. There is no way of knowing exactly how long Mr. Beards money will last under the other three types of plans; it could be greater than or less than 5 years--or exactly 5 years for that matter.
Tex Payor is an investor in the Invest4U Mutual Fund. The manager of the fund, fearing a substantial decline in the stock market, sold a lot of the funds holdings to lock in profits. As a result, the fund earned a lot of long-term capital gain income.
Which of the following statements is true regarding the tax treatment of this income?
Answer : A
Explanation:
Tex must pay taxes on that portion of the long-term capital gain income that Invest4U distributes to him. Invest4U is required to distribute at least 98% of its capital gain income to its shareholders.
Anna Lyst observes that the beta of a certain stock is 0.8. This means that:
Answer : A
Explanation:
If the beta of a stock is 0.8, it means that if the S&P 500 Index loses 10%, this stock can be expected to lose 8%. Beta is a measure of how a stock or a portfolio of stocks moves with the overall market, and the S&P 500 Index is commonly used as a proxy for the overall market. A beta of 0.8 means that the stock is less risky than the market, which has a beta of 1.0.
Which of the following is not a potential advantage associated with investing through a mutual fund?
Answer : C
Explanation:
Price discovery is not a potential advantage associated with investing through a mutual fund. The net asset value of the fund determines its price, not the interaction of buyers and sellers in the market. All the other choices are advantages of investing through a mutual fund.
Joe Cool is a member of the All Greek Fraternity. A few of the alumni of his fraternity sat for the FINRA Series 6 exam over the past couple of years and, using their cell phones, took pictures of the exam questions. They forwarded these to their fraternity to be included in the test bank file the fraternity keeps in its study room.
Have there been any violations of FINRA/NASD rules in this instance?
Answer : B
Explanation:
Yes, there have been violations of FINRA/NASD rules in this instance. It is a violation of
Rule 2110 for an exam-past or present-to be reproduced and distributed for study purposes. Whether there has been compensation paid or not is irrelevant.
Answer : B
Explanation:
The option that makes sense for Mr. Venturer is to place a stop sell order at a price less than Riskys current market price of $8. A stop loss order becomes a market order when the specified price is reached. If he were to place it for Riskys current market price of $8, his shares would be sold immediately at the next available price. If the specified price is less than $8, the order wont get executed unless the price falls to that level. A limit order specifies the lowest price at which hes willing to sell the shares, so if he places a limit order for $8 or less, the order will be executed immediately at the current market price of
$8. A call option would not help him-it would just enable him to buy additional shares for $8 a share. And there is no such thing as a good til cancelled market order. A market order is executed immediately at whatever the prevailing price is at the moment.
The Invest4U Mutual Fund is a regulated investment company under Internal Revenue
Code Subchapter M. This means that:
Answer : B
Explanation:
A regulated investment company under Internal Revenue Code Subchapter M is one that does not itself have to pay taxes on any dividend or capital gain income it receives and distributes to its shareholders. There is no requirement that it file an updated prospectus with the IRS, nor that it be a non-diversified management company. By definition, a mutual fund is not a UIT.
Which of the following securities would be exempt from SEC registration requirements?
I. a 15-year bond issued by the state of Colorado
II. an issue of preferred stock that has an aggregate par value of $5 million
III. an issue of commercial paper that has a 5-month maturity
Answer : C
Explanation:
Only Selections I and III are exempt from SEC registration requirements. The bond issued by Colorado is exempt because bonds issued by a government body are exempt from registration. The issue of commercial paper is exempt because securities with less than
270 days to maturity are exempt from registration.
Marge is 57 and wants to retire early. Since she is not yet eligible for social security, she wants to begin tapping a variable annuity to which she has been contributing for the last 20 years.
Which of the following statements regarding her withdrawals is true?
Answer : D
Explanation:
Since Marge is only 57, she can begin her withdrawals without penalty under IRS rule 72(t) as long as she does so following the specific guidelines for a period of 5 years, but the withdrawals will be subject to taxation. Once she starts the program outlined in rule 72(t), she must remain on it for at least five years or until she turns 59 , whichever comes last.
This means that although shes already 57 and will be turning 59 in 2 years, she will have to continue to follow the guidelines for a full five years, or until she turns 62, in this case.
In 2008, Mr. Conservative bought a 1-year Treasury bill that was yielding 1.63%. The average annual rate of inflation in 2008 was 3.85%. In this case:
Answer : B
Explanation:
If Mr. Conservative bought a 1-year Treasury bill in 2008 that was yielding 1.63%, and the average annual rate of inflation in 2008 was 3.85%, Mr. Conservative earned a real return of -2.22 % on his investment. In other words, he lost 2.22% in purchasing power since the dollars he received when the bill matured were worth less than the dollars he paid to buy the bill. Real return = nominal return - inflation rate = 1.63% - 3.85% = -2.22%.
Which of the following is not one of the purposes of FINRA as stated in its articles of incorporation?
Answer : A
Explanation:
FINRAs articles of incorporation does not state that one of FINRAs purposes is to maintain a fair and orderly securities market. All the other selections are stated purposes.
The articles of incorporation also state that FINRA has the power to write and enforce rules for its members to promote fair practices.
Sams neighbor has just inherited some bonds from his uncle. The neighbor, knowing that
Sam is a registered representative with a brokerage firm, asks Sam if he would like to handle the sale of these securities. Sam agrees to do so and calls his existing clients with an offer to sell the bonds at a price that he researches to be the average ask price of dealers in the same bonds. In this situation:
Answer : B
Explanation:
If Sam sells his neighbors bonds by calling his existing clients with an offer to sell them the bond, he has engaged in the illegal practice of selling away. This practice is defined as a broker or agent offering securities for sale that are not owned or offered by his member firm and is in violation of NASD Rule 3040.