Finra Series-6 Exam Practice Test Instant Access

Question 1

Jill worked as a registered representative with GoForBroke Broker-Dealers for 8 years. She is married to Jack, whose job made it necessary for them to relocate to Thailand for 3 years. They have now returned, and Jill would like to begin working as a registered representative with GoForBroke again after her 3 -year hiatus. Given this scenario:

AJill can begin working in her previous position with GoForBroke immediately, but GoForBroke will have to register her as one of its representatives with FINRA within 30 days of her hire date, and Jill will have to pay the applicable filing fees within that same period of time.

BJill will have to retake the qualifying FINRA exams for her position, and after she has done so successfully, GoForBroke must register her with FINRA as one of its representatives.

CAs long as GoForBroke maintained Jill as a registered representative for its firm during her hiatus, Jill can begin working in her previous position immediately. There is no need to file additional paperwork or pay any fees to FINRA.

DBoth A and C are true statements.

Answer : B

Given that she has been gone for 3 years, Jill will have to retake the qualifying FINRA exams required for her position, and after she has done so successfully, GoForBroke must register her with FINRA as one of its representatives. According to FINRA rules, GoForBroke is prohibited from maintaining Jill as a registered representative after she is no longer active in the securities business.

Question 2

Mr. Big of HiGrow Corporation needs more money to support the exceptional growth rate that his firm is enjoying. He meets with BigFee Investment Banker, who agrees to handle the IPO for HiGrow. Subsequently, InTheLoop Brokerage is tapped to be part of the selling group that will handle the sale of the new stock to the public. In this example, the issuer is:

AMr. Big

BHiGrow Corporation

CBigFee Investment Banker

DInTheLoop Brokerage

Answer : B

HiGrow Corporation is the issuer in this example. The issuer is the firm that is receiving the proceeds from the IPO.

Question 3

Mr. and Mrs. R. Retired are planning on traveling extensively throughout the U.S. in their new motor home now that they have reached their golden years. Under FINRA rules, upon written instructions from Mr. and Mrs. R. Retired, their broker is required to hold their mail for a maximum of:

A1 month.

B2 months.

C3 months.

Dnone of the above. It is Mr. and Mrs. Retired's responsibility to establish a mail-hold through the post office.

Answer : B

If Mr. and Mrs. Retired provide their broker with written instructions, their broker is required to hold their mail for a maximum of 2 months under FINRA's rule regarding the keeping of books and records. If Mr. and Mrs. Retired were going abroad instead of traveling only in the U.S., FINRA's rule requires that their mail be held by the broker for a maximum of 3 months.

Question 4

Which of the following risks would not be a risk associated with a municipal bond fund?

i. credit risk

ii. reinvestment risk

iii. currency exchange risk

AI and III only

BIII only

CII and III only

DI, II, and III

Answer : B

Currency exchange risk is the only risk listed that would not be associated with a municipal bond fund. Municipal bond funds invest only in bonds of state and local governments in the U.S., so there is no exposure to exchange rate fluctuations. Like corporate bonds, municipal bonds have varying degrees of credit risk. Investors are also exposed to reinvestment risk since interest payments received may have to be reinvested at lower interest rates if rates have been falling.

Question 5

By investing in a diversified portfolio, an investor will:

Alower both his risk and his expected return.

Blower his risk without affecting his expected return.

Clower his risk and increase his expected return.

Deliminate all the market risk associated with his investment portfolio.

Answer : B

By investing in a diversified portfolio, an investor will lower his risk without affecting his expected return. In diversifying, he selects securities whose returns do not move together. This does not affect the expected returns of the individual securities and, by extension, his portfolio of securities. When he does so, he is diversifying away the unsystematic (non-market) risk associated with the individual securities. Market risk is the risk that all firms face to one degree or another and cannot be diversified away.

Question 6

A warrant differs from a standard call option in that:

Aa standard call option generally has a longer period to expiration than a warrant.

Bwhen a warrant is exercised, the firm whose stock is being purchased will have an increase in cash; this is not the case when a standard call option is exercised.a warrant gives the holder the right to sell shares of the underlying stock; a call option gives the holder the right to buy shares of the underlying stock.when a call option is exercised, the outstanding shares of the firm whose stock is being purchased increases; this does not occur when a warrant is exercised.

Answer : B

A warrant differs from a standard call option in that when a warrant is exercised, the firm whose stock is being purchased will have an increase in cash; this is not the case when a standard call option is exercised. Both the warrant and the call option give the holder the right to purchase shares of a firm's stock, but the writer (seller) of a warrant is the firm itself whereas the writer of a standard call option is simply another investor. Upon exercising a warrant, the investor buys the stock from the firm itself, which increases the firm's cash account. When a call option is exercised, another investor's cash account is increased. For the same reason, when a call option is exercised, nothing happens to the outstanding shares of the firm; but when a warrant is exercised, the firm's outstanding shares will increase.

Question 7

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

AI, II, and III

BII only

CII and III only

DI and II only

Answer : A

All three choices must register as an investment company since all meet the definition of an investment company under the Investment Company Act of 1940. A management company refers to either a closed-end or an open-end investment company, both of which must register, regardless of the diversification of their investments.

Finra Investment Company and Variable Contracts Products Representative Series-6 Exam Practice Test