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FINRA Administered Qualification Examination, Exams of Business Economics

Harvard UniversityBusiness Economics

FINRA Administered Qualification Examination

Typology: Exams

2023/2024

Available from 12/14/2023

DrShirley
DrShirley 🇺🇸

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Series 6 Exam Study Questions
What factors determine the number of annuity units an investor will receive after annuitizing a variable
annuity? -
1) The payout option
2) Assumed interest rate (AIR)
3) The annuitant's age
4) The annuitant's gender
Who must sign a new account form? -
The two signatures required on a new account form are from the registered representative and the
principal.
What is the purpose of the form U-4? -
The purpose of the form U-4 is to register a registered representative with a member firm.
Businesses that do better in bad economic conditions are _________. -
Counter-cyclical
Registered representatives are prohibited from receiving "off the book" compensation from a
wholesaler. T or F -
True
What is the red herring? -
A preliminary prospectus that includes material information about an offering and contains an
estimate of the range within which the final offering price is to be set.
What is maximum contribution per year into an IRA? What is the penalty for any excess contribution?
-
Maximum contribution = $5000
Penalty = 6% of excess amount and earnings on this amount are not tax-deferred
What are the characteristics of a contractual plan? -
1) Required periodic investments
2) Automatic reinvestment of distributions
3) Protection for plan completion
What is the penalty for an early withdrawal from an IRA? What is the age requirement for withdrawal?
-
Penalty = 10% on the taxable portion of the withdrawal, and is also reported an taxed as income that
year.
Age = 59 1/2
What exceptions would waive the penalty of an early withdrawal from IRA? -
The IRA holder:
-Dies
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Series 6 Exam Study Questions

What factors determine the number of annuity units an investor will receive after annuitizing a variable annuity? -

  1. The payout option
  2. Assumed interest rate (AIR)
  3. The annuitant's age
  4. The annuitant's gender Who must sign a new account form? - The two signatures required on a new account form are from the registered representative and the principal. What is the purpose of the form U-4? - The purpose of the form U-4 is to register a registered representative with a member firm. Businesses that do better in bad economic conditions are _________. - Counter-cyclical Registered representatives are prohibited from receiving "off the book" compensation from a wholesaler. T or F - True What is the red herring? - A preliminary prospectus that includes material information about an offering and contains an estimate of the range within which the final offering price is to be set. What is maximum contribution per year into an IRA? What is the penalty for any excess contribution?
  • Maximum contribution = $ Penalty = 6% of excess amount and earnings on this amount are not tax-deferred What are the characteristics of a contractual plan? -
    1. Required periodic investments
  1. Automatic reinvestment of distributions
  2. Protection for plan completion What is the penalty for an early withdrawal from an IRA? What is the age requirement for withdrawal?
  • Penalty = 10% on the taxable portion of the withdrawal, and is also reported an taxed as income that year. Age = 59 1/ What exceptions would waive the penalty of an early withdrawal from IRA? - The IRA holder: -Dies

-Becomes disabled -Uses the money for the purchase of first home (with a $10,000 lifetime limit) -Uses the money to pay certain medical or qualifying medical insurance premiums. Who backs general obligation bonds? - General obligation bonds are backed by the full faith and credit of the issuer. Why are cash dividends and capital gains taxed at a preferential rate? - They are not considered ordinary income; therefore, they are taxed at preferential rates. Where are contributions placed in a fixed annuity issued by an insurance company? - The insurance company's general account. Why are treasury receipts NOT a direct obligation of the U.S. government? - Treasury receipts are created by brokerage firms by depositing Treasury securities with a trustee and selling securities that are backed by this collateral. What is "selling dividends"? - Selling dividends occurs when a registered rep encourages a customer to purchase shares of a mutual fund right before it distributes a dividend and/or capital gain. What is the dollar limit on a dispute for it to be labeled as simple arbitration? - Disputes involving less than $100,000 are handled through simple arbitration. What is the maximum allowable sales charge on a mutual fund? - The maximum sales charge allowable by FINRA on a mutual fund is 8.5% SIPC coverage provides each separate customer with protection up to $________, of which no more than $________ can be for cash balances. - $500, $250, Who is able to contribute into a Keogh Plan (HR-10)? - People that are self-employed and those who receive self-employment compensation, such as a contract worker, are able to contribute to a Keogh Plan. What is the frequency for contract renewal for a fund's investment adviser? - An investment adviser has two years to establish itself as effective. Assuming the contract is renewed after 2 years, the investment adviser will then be subject to sharehold or board approval every year thereafter. When should a prospectus be presented for both a closed-end fund and an open-end fund? - According to the Act of '33, the closed-end fund is required to make a prospectus delivery with any new shares sold. Open-end funs are in permanent new issue mode, which means a prospectus must be provided for the first purchase of each new investor. A sales charge reduction, once over the breakpoint, applies to only the amount over the breakpoint. T or F -

True. Sales charges and expense ratios are in inverse proportion to one another. High sales charge creates a lower expense ratio. How does current yield measure how hard an investor's capital is working? - It compares the coupon payments to the price paid for the bond. What is the calculation for current yield? - Annual interest / Current Market Price On a T-Bill, what is the maturity time, the frequency of interest payments, and the pricing structure? - Initial maturity: 30 days to 1 year Interest Payment: None - issued at a discount Pricing: Discounted yield basis What is the percentage sales charge calculation? - (Public Offering Price - Net Asset Value) / (Public Offering Price (POP-NAV)/POP When is the ex-dividend date for a mutual fund? - The next business day after the record date. What is the record date? - The record date is the day used to determine who will receive the distribution. If you are a shareowner as of the close of business on the record date, you will receive the distribution. When must a mutual fund make payment to a customer requesting redemption? - An investment company is required to send payment to a customer within 7 calendar days of the customer's request for redemption of shares. What is the capital structure of an open-end fund? - An IPO with continuous issuance and redemption of shares. What is the only fund that is available for purchase on margin? - Closed-end funds are the only funds that are available to be purchased using margin. They may be bought on margin only after 30 days have elapsed since their initial public offering. What three things must you have in order to complete non-discretionary order for a customer if they are not present? -

  1. Name of stock
  2. Amount
  3. Time Contributions made into sectin 529 plans are considered _________. - Gifts. These contributions are considered gifts under the federal tax code. What is dollar cost averaging? - The purchase of a fixed dollar amount on a regular schedule.

What is the maximum amount an open-end fund could borrow from a bank to meet its liquidity need for short-term redemptions? - 33% of its NAV (1/3 of NAV). It is often expressed as a minimum 300% asset to debt ratio. Insider trading rules apply to who? - The prohibtion against insider trading applies not only to those who work for an issuer, but to anyone who is tipped off by an insider. What is the maximum that can be contributed into a Keogh plan? - The maximum contribution into a Keogh plan each year is 20% of self-employment compensation or $49,000 whichever is less. If YTM of a bond is greater than the coupon rate, then the bond is a ___________. - Discount bond. If Yield To Maturity is greater than the coupon (nominal) rate, then it is on discount. If YTM is lower than the nominal rate, then it is a premium. In order, what are the expiration time frames for options, warrants, and rights? -

  1. Rights: 30 days
  2. Options: 9 months
  3. Warrants: May not expire for years; sometimes no expiration date. How long must records of advertising and sales literature be kept on file? - All records of advertising and sales literature must be kept on file for three years. What are the options for switching to something other than a variable life insurance policy? - Under federal regulations, variable life policy holders must be allowed to convert their contracts into whole life policies for a minimum of two years. Variable policies have a 45-day "free look" provision. What are you prohibited from doing as a holder of a limited representative license? - Series 6 registered individuals are prohibited from taking part in equity transactions and secondary market transactions of closed-end share on either the buy or sell side. As a Registered Representative, what is the rule for reporting outside employment? - RRs are required to notify their employers of any outside employment, whether securities related or not. Volunteer activities are not subject to this rule. Who is responsible for approving mutual fund sales literature that is mailed to a customer? - All advertising and sales literature is approved by a firm's designated principal. Class A shares are not entitle to a "free look" provision. If a customer wants to refund his purchase, then what will they receive? - The customer will receive the next calculated NAV for each of the shares the customer wishes to liquidate. The customer will not receive a refud of any sales charges. Since "private activity" bonds are considered "tax preferred items" by the IRS, what are the tax implications? - Private activity bonds are Industrial Development Bonds (IDRs) and are subject to an alternative minimum tax (AMT).

Life insurance and collectibles cannot be place in an IRA, however, U.S. minted gold coins are an exception. When can you appeal a Hearing Panel decision and who do first appeal with? - Within 25 days of a Hearing Panel decision, the person appeal the decision with the National Adjudicatory Council (NAC) What are the limitations and privileges of a preferred stock? -

  1. Pays a fixed annual dividend, usually quarterly
  2. Trades more like a bond than an equity
  3. Normally does not have voting rights
  4. Has preference over common stock in the payment of dividends and in case of corporate liquidation.