PN Domain 7: Psychosocial Integrity (Quiz 2) Welcome to your Series 6 Practice Exam 5 This test is designed to prepare you mentally for the actual Series 6 Exam with the same number of (50 questions) and the same time allowed (90 minutes) as the actual exam. The Series 6 Exam is breakdown into four (4) Parts. Here are the Four (4) Domains of the Series 6 Exam with the weightage and number of questions in this practice exam: 1. Seeks Business for the Broker Dealer from Customers and Potential Customers [12 Questions] - 24% 2. Opens Accounts after Obtaining and Evaluating Customers' Financial Profile and Investment Objectives [08 Questions] - 16% 3. Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records [25 Questions] - 50% 4. Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes, and Confirms Transactions [05 Questions] - 10% Please click NEXT to start your Free Series 6 PRACTICE EXAM right away. Best of Luck! 1. A bond trades at 98 and has a nominal yield of 8%. What is the bonds current yield? A) 10.00% B) 8.16% C) 16.25% D) 3.75% None 2. Your customer purchased 100 shares on Jim's Burger Shake Corporation for $450 a share. The stock pays $22.50 in dividends annually. After the year the stock is trading at $495 a share. What is the total return for the holding period? A) 30.0% B) 7.5% C) 15.0% D) 25.0% None 3. Which of the following is permitted during the cooling-off period? A) Solicit orders from investors B) Demonstrate SEC approval of the issue C) Obtain indications of interest D) Accept orders from investors None 4. Which of the following would be found in the final prospectus but not the preliminary prospectus? A) Company history B) Company financials C) Planned use of the funds D) Effective date None 5. A broker-dealer who functions as an over-the-counter (OTC) market maker in a listed security is operating in which market? A) First market B) Second market C) Third market D) Fourth market None 6. If your firm is underwriting a new mutual fund organized under a 12b-1 plan, which of the following statements is permissible in mailings or phone calls to your clients? A) This fund has a 12b-1 sales charge structure—explained in the prospectus—and should be fully understood before investing. B) Investments in no-load funds of this type do have some risks, and you will want to review the prospectus carefully. C) You will not have to pay any sales charges with this fund because our firm is buying it as a long-term investment. D) The fund has the added advantage of being a no-load investment. None 7. 12b-1 fees may be used to pay all of the following except A) mailing expenses. B) commissions on portfolio securities transactions. C) prospectus printing costs. D) advertising costs. None 8. The manager or adviser of an investment company may liquidate portions of the fund's portfolio A) at any time. B) only with the approval of a majority of the shareholders. C) at any time, provided it is within the policies and objectives stated in the fund's prospectus. D) only with the approval of the board of directors. None 9. An investment company that is not classified as either a unit investment trust or a face-amount certificate company would be classified as A) an ETF. B) a non-fixed portfolio trust. C) a fixed portfolio trust. D) a management investment company. None 10. Your customer originally invested $20,000 into the ACE Growth Fund and has reinvested dividends and gains of $8,000. His shares in ACE are now worth $40,000. He exchanges his investment to the ACE Income Fund. Which of the following statements is true? A) He is not liable for taxes in the current year because he did not have constructive receipt of the money at conversion. B) He retains a $20,000 cost basis in the ACE Income Fund because of the conversion privilege. C) He retains his cost basis of $28,000 in the ACE Income Fund. D) He must declare $12,000 as a taxable gain upon exchange into the ACE Income Fund. None 11. The AIR (assumed interest rate) for your customer's variable annuity contract is 5%. In February, the separate account earned 7%. In March, the separate account earns 5%. The April annuity payment will be A) equal to the original payment amount at the time of annuitization. B) equal to the March payment. C) lower than the March payment. D) higher than the March payment. None 12. Your 75-year-old customer has read many articles about variable annuities and would like you to choose one that would be appropriate for his $100,000 investment. Your customer has a well-diversified investment portfolio and is not currently in need of additional income. The most appropriate response to your customer's request in this situation is that A) a variable annuity may be a suitable choice, provided it has subaccount choices that are invested in highly rated bonds and other low-risk alternatives. B) a variable annuity is probably not a suitable investment choice because of your investor's age and the contingent deferred sales charges that apply on withdrawals. C) the tax-deferred growth feature of the variable annuity may make this a good investment alternative for your customer. D) a variable annuity is probably not a suitable investment choice because of the extra costs associated with an insurance benefit your customer doesn't need. None 13. The main benefit that variable life insurance has over whole life insurance is A) the potential for a higher cash value and death benefit. B) a lower sales charge. C) the availability of policy loans. D) an adjustable premium. None 14. If the owner of a variable annuity dies during the accumulation period, any death benefit will A) be returned to the separate account. B) be paid to the IRS. C) be paid to the issuing company to complete the plan. D) be paid to a designated beneficiary. None 15. A customer has invested a total of $10,000 in a nonqualified deferred annuity through a payroll deduction plan offered by the school system where he works. The annuity contract is currently valued at $16,000, and he plans to retire. On what amount will the customer be taxed if he chooses a lump-sum withdrawal? A) $16,000 B) $10,000 C) $6,000 D) None, because annuity was nonqualified None 16. Qualified dividends are taxed at what rate? A) The same rate as interest payments B) The investor's capital gains tax rate C) Qualified dividends are not taxable D) The investor's ordinary income tax rate None 17. A shareholder has redeemed some mutual fund shares that were purchased over a period of 10 years. If the shareholder has not indicated the specific dates of purchase and cost of the shares that were redeemed on his tax return, the IRS will follow which of the following methods in determining the cost basis of shares redeemed? A) FIFO B) Step-up in basis C) Average cost of purchase D) LIFO None 18. Amy bought 300 shares of Cooper Advanced Research, Inc., at a price of $72 per share. After holding the shares for three months, Amy sold the stock for $73 per share. From this transaction Amy realizes A) a $300 long-term capital loss. B) a $300 short-term capital loss. C) a $300 short-term capital gain. D) a $300 long-term capital gain. None 19. In the prior year, your customer realized a $17,000 short-term capital loss and a $6,000 long-term capital gain. What are the tax results of these transactions? A) An $11,000 short-term gain B) An $11,000 in carry forward losses C) A $3,000 reduction in income and $11,000 in carry forward losses D) A $3,000 reduction in income and $8,000 in carry forward losses None 20. Which of the following statements describe the pipeline theory of taxation? A) Dividends and interest accumulate tax free to the shareholder. B) Dividends and interest are passed through to the investor after the fund pays taxes. C) Earnings distributed by a regulated investment company are taxed three times. D) A fund is not taxed on earnings it distributes provided distributions equal 90% or more of net investment income. None 21. Which of the following describes a limited liability company (LLC)? A) A legal entity that protects the investors from the company's liabilities but functions like a C corporation for taxes B) A legal entity that protects the investors from the company's liabilities and is a separate taxable entity C) A legal entity that does not protect owners from the company's liabilities but functions like a partnership for taxes D) A legal entity that protects the investors from the company's liabilities but functions like a partnership for taxes None 22. A registered representative for a FINRA member firm would like to open a brokerage account at a different member firm. Which of the following must they have to do so? A) Justification, in writing, for the need to open the account B) Verbal authorization from their employer C) A letter they drafted attesting that they may open the account D) Written authorization from their employer None 23. An investor who works for the city is ready to retire. The city has operated a Section 457 plan for its employees, in which he has participated. What portion of his withdrawals will be taxable? A) Growth and earnings only B) Cost base only C) The entire amount D) None None 24. A customer who has just started an IRA will be vested A) in two years. B) at age 70. C) immediately. D) in five years. None 25. The regulation enacted by the Securities and Exchange Commission (SEC) to protect the privacy of customer information is known as A) the Bank Secrecy Act. B) Regulation S-P. C) Regulation D. D) the Trust Indenture act. None 26. Which of the following is considered nonpublic personal information under Regulation S-P? A) Customer's alma mater B) Social Security number C) Customer's surname D) State of residence None 27. Paul has been appointed by the court to be guardian of his sister, Julie, replacing the prior guardian. In order for Paul to take control of the brokerage account, he will need to take which of the following steps? A) Present the court's letter authorizing the change and open a new account B) Present the court's letter authorizing the change and complete a new account form C) Present an LOA from Julie and complete a new account form D) Present an LOA from Julie and open a new account None 28. Under FINRA rules, the carrying member, after receiving account transfer instructions from the receiving member, must validate the positions in the account within how many business days of receipt? A) five days B) four days C) seven days D) one day None 29. Which of the following does not require the delivery of a specific disclosure regarding liquidity or the option disclosure document? A) Hedge funds B) Option income fund C) Options D) Limited partnerships None 30. Seabird Airlines stock has a beta coefficient of 0.8. Last year the stock declined 2% while the overall market declined 5%. What is Seabird's stock's alpha? A) –3% B) –2% C) 3% D) 2% None 31. Examining a customer's current investment holdings may help with which of the following tasks? A) All of these B) Identifying a customer's investment experience C) Identifying the customer's risk tolerance D) Understanding what type of securities may be needed for the customer to reach their goals None 32. Which of the following would not be listed as an asset on a company's balance sheet? A) Notes issued by the company B) Current assets held by the company C) Fixed assets of the company D) A company's intangibles None 33. Certain investments require special disclosures. Among the special disclosures associated with a limited partnership (LP) are A) that LPs are very difficult to liquidate. B) that LPs are often listed on exchanges. C) that LPs trade like mutual funds. D) that LPs entail investment risk. None 34. Your customer wishes to invest $25,000 using investment company securities as a means of diversification, but she states that she is not comfortable with stock market risk. Which of the following fund types would be the least appropriate recommendation? A) Balanced or hybrid fund B) Municipal bond fund C) Blend/core fund D) Government income fund None 35. Your married customers, both 34 years old, have one daughter, age 4. They want to begin accumulating the money required to send their daughter to one of the nation's top universities in 14 years. In addition, they have not yet begun to accumulate money for their retirement. Which of the following mutual funds is the most suitable for these customers? A) ATF Capital Appreciation Fund B) NavCo Cash Reserves Money Market Fund C) LMN Government Income Fund D) NavCo Growth & Income Fund None 36. A client who is a manager of a pension plan has recently liquidated approximately $1 million in securities and now has only cash and cash equivalents in the account. This client's outlook concerning the market is A) neutral. B) bearish. C) unknown. D) bullish. None 37. Which of the following would be found on a customer's balance sheet? A) The amount of the customer's mortgage payment B) The customer's annual income C) The value of the customer's 401(k) account D) The customer's education level None 38. A retiree, widowed and in his early 70s, has adequate savings to meet large unexpected expenses. However, he has no pension or IRA, and in some months Social Security payments leave him short, requiring him to dip into his savings and investments for recurring expenses such as his mortgage payment and utilities. With an already diversified portfolio, he wishes there could be a way to add to his monthly income on a regular basis. He's willing to liquidate and allocate up to $100,000 of his current portfolio or cash out a life insurance policy if need be to meet this objective. Which of the following recommendations would be better? A) A variable annuity B) Growth and income fund C) Ginnie Mae's (GNMA) mutual fund D) Fixed annuity None 39. FINRA Rule 2210, communications with the public, describes several different categories of communications. One of those categories is called A) email. B) social media. C) correspondence. D) public appearances. None 40. A representative would like to send to 50 clients a copy of an article from a major financial publication. This is an example of which of A) a research report. B) institutional communication. C) correspondence. D) an independently prepared reprint (IPR). None 41. All of the following are true regarding institutional communications except A) they include communication to any entity with $50 million or more of total assets. B) they must have prior principal approval. C) supervisory procedures regarding institutional communications must be readily available to FINRA. D) they may never be used with a retail investor. None 42. All of the following may be included in mutual fund communications with the public except A) total return computations. B) graphics that are prepared outside the firm if the source is disclosed. C) performance predictions. D) charts depicting 10 years of performance history. None 43. How are complaints that are subsequently withdrawn reported to FINRA? A) They are not reported to FINRA B) They are included in the quarterly reports to FINRA C) They are included with the quarterly reports to the SEC D) They are included with the statistical report but not the summary report None 44. Who should handle a written complaint from a customer? A) The representative that handles the account B) A firm principal C) The representative that receives the complaint D) FINRA's Department of Complaints (DOC) None 45. The Code of Procedure (COP) A) is the application for granting extensions of time for trade settlements under Regulation T. B) is used in the processing of applications for the registration of registered representatives. C) handles OTC transactions and primary issues of stock. D) handles trade practice complaints regarding violations of the Conduct Rules. None 46. FINRA encourages members in a monetary dispute to attempt to settle the disagreement before entering into arbitration. This process is called A) pre-arbitration. B) hypothecation. C) adjudication. D) mediation. None 47. When filing a Form U5 a member must mark one of five reasons for the termination. Which of the following reasons would not require additional details surrounding the termination? A) Other B) Deceased C) Discharged D) Permitted to resign None 48. The central registration depository (CRD) maintains information on the disciplinary history of all persons currently registered. A customer can access this information toll free through what service of the CRD? A) The CRD registration checker B) BrokerCheck C) Rep Referral D) Broker Background None 49. Which of the following people would not be exempt from the fingerprinting requirement? A) Casey, a representative that sells variable annuities exclusively B) Blair, a general securities representative C) Cameron, a representative that sells mutual funds exclusively D) Drew, a representative that sells limited partnerships exclusively None 50. Disciplinary sanctions by the SEC, another SRO, a foreign financial regulator, or a foreign equivalent of an SRO may be cause for which of the following? A) Statutory disqualification of SEC membership B) Statutory disqualification of NASAA membership C) Statutory disqualification of AARP membership D) Statutory disqualification of FINRA membership None 1 out of 50 Time is Up! Time's upTime is Up!
