Free FINRA Series 6 practice exam
Question 1
Which of the following is one of the critical pieces of information needed from a client?
A.
Investment style
B.
Tax identification number
C.
Annual income
D.
Education level
Question 2
Which of the following statements are true regarding an investment adviser's contract with a mutual fund?
- I. The initial contract must be approved by the Board of Directors and shareholders
- II. The initial contract may be approved by the Board of Directors or shareholders
- III. Contract renewals must be approved by the Board of Directors and shareholders
- IV. Contract renewals may be approved by the Board of Directors or shareholders
A.
I and IV
B.
II and III
C.
II and IV
D.
I and III
Question 3
A customer of a broker-dealer that maintains an individual account dies. Their surviving family reports their death to the broker-dealer maintaining custody. Assuming the decedent died intestate and their account maintained no TOD designation, what statement is true?
A.
The will must be submitted to the firm to claim the account
B.
Account assets pass to the named beneficiary outside of probate
C.
Letters testamentary must be submitted to claim the account
D.
Letters of administration must be submitted to claim the account
Question 4
A representative receives a written complaint from a customer that resulted from a simple misunderstanding. The representative fixes the issue and calls the client to notify them of the resolution. The customer is happy with the result, and the representative discards the complaint. What statement is true?
A.
The representative performed an unethical action
B.
There isn't enough information to determine if the action was ethical
C.
If the complaint can be proven insignificant, the representative followed proper procedures
D.
This is an ethical action because the customer was notified
Question 5
An investor reaches out to you to discuss the benefits and risks of a preferred stock investment. Which statement provided to the customer is misleading or incorrect?
A.
The investment is considered an equity security
B.
The investment typically outperforms inflation
C.
Capital appreciation may be a secondary goal, especially if the security is convertible
D.
Dividend income is not a legal obligation of the issuer
Question 6
A recession is ________ of GDP decline, while a depression is ________ of GDP decline
A.
2 quarters; 6 quarters
B.
6 quarters; 2 quarters
C.
18 quarters; 6 quarters
D.
6 quarters; 18 quarters
Question 7
An investor purchases 20 year STRIPS from a securities dealer. How often will they pay taxes on interest?
A.
Quarterly
B.
At maturity
C.
Only after liquidation
D.
Annually
Question 8
Retail communications are written or electronic communications sent to _______ retail customers in a _______.
A.
more than 25; 30 day period
B.
less than 25; 30 day period
C.
more than 30; 25 day period
D.
less than 30; 30 day period
Question 9
A 30 year old investor plans to start contributing to retirement accounts in order to fund their retirement goals. The investor has a 25 year time horizon, a high tolerance for risk, and an objective of aggressive growth. Additionally, they don't believe the extra costs associated with active management are worth it over long periods of time. Which of the following securities should you recommend for their first investment?
A.
S&P 500 index fund
B.
Russell 2000 index fund
C.
Large cap growth fund
D.
Small cap growth fund
Question 10
A registered representative receives a phone call from a long-time elderly customer. They act "out of sorts" and seem confused throughout the call. The customer eventually requests a full liquidation of their account. What should the registered representative do?
A.
Attempt to inquire about their reasons, but ultimately follow their instructions if they insist
B.
Request approval from the customer's trusted contact person
C.
Refuse the request and restrict the account immediately
D.
Escalate the issue to their manager prior to taking any action
Question 11
According to ERISA standards and regulations, what type of employee must be eligible for qualified plans offered by the employer?
A.
At least 18 years old and 750 hours of annual service
B.
At least 21 years old and 750 hours of annual service
C.
At least 18 years old and 1,000 hours of annual service
D.
At least 21 years old and 1,000 hours of annual service
Question 12
Who is responsible for registering a mutual fund with the SEC?
A.
Selling group
B.
Fund adviser
C.
Fund sponsor
D.
Transfer agent
Question 13
Which of the following statements related to payout structures from an annuitized variable annuity are FALSE?
A.
Unit refund annuities typically have lower payouts than life annuities
B.
Life annuities typically have higher payouts than life with period certain annuities
C.
Joint with last survivor annuities typically have higher payouts than life annuities
D.
Life with period certain annuities typically have higher payouts than joint and last survivor annuities
Question 14
If insider information is passed between parties and a trade occurs, who is subject to criminal prosecution?
A.
Only the tippee
B.
Both the tipper and tippee
C.
Only the tipper
D.
Neither the tipper or the tippee
Question 15
An annuitant contributes a total of $130,000 in periodic payments to a straight life variable annuity. After 10 years, the account holds 6,750 annuity units with an NAV of $20. If the annuitant dies, how much will their listed beneficiary receive?
A.
$0
B.
$125,000
C.
$130,000
D.
$135,000
Question 16
A registered agent receives an email from their client about purchasing life insurance in the near future. They want to pay fixed premiums, have coverage for life, and are concerned about loss of purchasing power with the funds they keep if they decide to forfeit the insurance. What form of life insurance should you recommend?
A.
Whole life insurance
B.
Variable life insurance
C.
Term life insurance
D.
Universal life insurance
Question 17
A prospective customer comes to your office and you discuss your firm's products and services. After the sales pitch, the customer asks to open an account and transfer their assets held at another broker-dealer to your firm. The request is denied by the delivering firm. Which of the following is a valid reason for the denial?
A.
The customer is too valuable to the delivering firm
B.
The account contains proprietary products
C.
The delivering firm suspects the receiving firm is providing unsuitable advice
D.
The customer will pay higher fees at the receiving firm
Question 18
A customer of a broker-dealer maintains an individual account with a TOD designation. The account's named beneficiary is the owner's son. A few years after the account is opened, the owner passes away unexpectedly. Their surviving spouse, who is the stepmother of the owner's son, reports the owner's death to the broker-dealer. Additionally, they present the owner's last will and testament, which names her as the sole beneficiary of his estate. What statement is true?
A.
The probate court must rule on the rightful heir to receive the account assets
B.
The dispute must be handled through binding arbitration
C.
The surviving spouse will inherit the account according to the last will and testament
D.
The son will inherit the account according to the TOD designation
Question 19
A married couple in their early 30s are both clients of yours and are in need of investment advice. Their combined annual income is $750,000, and they currently have investment accounts with a balance of $500,000. Their entire portfolio is invested in money markets. If the couple maintains a moderate risk tolerance and dual investment objectives of growth and income, what portfolio allocation should you recommend?
A.
90% stocks / 5% bonds / 5% money markets
B.
60% stocks / 35% bonds / 5% money markets
C.
30% stocks / 60% bonds / 10% money markets
D.
50% stocks / 35% bonds / 15% money markets
Question 20
Several top executives at Timber Enterprises Corporation decide to sell a large amount of their personally held shares in a registered offering. What type of offering is this?
A.
APO
B.
Primary offering
C.
Secondary offering
D.
Combined offering
Question 21
Which of the following securities is MOST suitable for an investor specifying moderate income investment objective?
A.
AA-rated general obligation bond
B.
Preferred stock
C.
Large cap growth fund
D.
C-rated secured bond
Question 22
Issuers taking part in Regulation D offerings may sell securities to how many non-accredited investors?
A.
30
B.
35
C.
80
D.
unlimited
Question 23
A customer of a broker-dealer calls their assigned representative. After quick pleasantries, their discussion revolves around one UVX 80 put held by the investor that will expire later that day. The total premium involved in establishing the position several months ago was $1,200. Currently, UVX stock's market price is at $71. Assuming the customer requests to liquidate the position and the representative closes the put at intrinsic value, what is the customer's profit or loss?
A.
$300 loss
B.
$300 gain
C.
$2,100 gain
D.
$2,100 loss
Question 24
If the Dow Jones Industrial Average (DJIA) is down 2.70%, a 200% inverse DJIA ETF would be:
A.
Up 2.70%
B.
Down 2.70%
C.
Up 5.40%
D.
Down 5.40%
Question 25
A customer wants to purchase a debt security that avoids reinvestment risk. Which of the following securities should you recommend?
A.
14 year, zero coupon corporate bond
B.
4 year, 3.30% municipal general obligation bond
C.
20 year, 5.20% municipal revenue bond
D.
24 year, 1.70% Treasury bond
Question 26
An annuitant contributes a total of $50,000 in periodic payments to a straight life variable annuity. After 10 years, the account holds 5,500 accumulation units with an NAV of $10. If the annuitant dies, how much will their listed beneficiary receive?
A.
$0
B.
$45,000
C.
$50,000
D.
$55,000
Question 27
Which of the following mutual funds is most likely to distribute qualified dividends to its shareholders?
A.
Equity income fund
B.
High yield bond fund
C.
Ginnie Mae fund
D.
US Government bond fund
Question 28
A sales charge assessed on a customer selling their shares of a mutual fund is known as a:
A.
CDSC
B.
Redemption fee
C.
Front-end load
D.
Commission
Question 29
A money market fund invests primarily in which of the following types of securities?
A.
Long term, high quality debt obligations
B.
Speculative bonds
C.
Short term, high quality debt obligations
D.
High quality preferred stock
Question 30
A registered representative analyzes a growth stock to determine if it could be recommended to her clients. After a thorough examination, she determines the volatility of the security and the company's high debt levels make the investment unsuitable for all of her clients. What statement is true?
A.
This is a blanket recommendation, which is an unethical action
B.
The representative followed FINRA's reasonable-basis suitability guideline
C.
The representative followed FINRA's qualitative suitability guideline
D.
This is frontrunning, which is an unethical action
Question 31
The measure of an account owner's ownership in their variable annuity separate account during the distribution phase can be determined by the number of:
A.
Payout units
B.
Annuity units
C.
Shares
D.
Accumulation units
Question 32
An investor purchases newly issued 3% TIPS at par ($1,000) from the Treasury auction. CPI is reported at 4% by the time the first interest payment is due. What is the amount of the interest payment?
A.
$15.60
B.
$16.60
C.
$31.20
D.
$33.20
Question 33
Which of the following is a non-exempt issue?
A.
G.O. bonds
B.
Moral obligation bonds
C.
T-notes
D.
Collateral trust certificates
Question 34
A registered representative emails a letter to 27 retail customers regarding a new service being offered by their broker-dealer. What statement is true?
A.
The communication must be kept on file for 5 years
B.
The letter is not required to be filed with FINRA
C.
Principal approval is required prior to sending the communication
D.
The communication must be easily accessible for the next year
Question 35
G.O. bonds are associated with all of the following, EXCEPT
A.
Ad valorem taxation
B.
Debt limits
C.
Feasibility studies
D.
Voter approval
Question 36
Which of the following is most likely to earn a markup?
A.
Floor brokers
B.
Agents
C.
Designated market maker
Question 37
A registered representative plans on cold-calling a number of leads. Each lead has been confirmed to hold a variable annuity at another firm. The representative's goal is to determine if the prospective customer would be best suited to exchange their annuity for one held the representative's firm. An exchange recommendation should not be recommended to any investor that performed a similar exchange within the last:
A.
2 years
B.
4 years
C.
12 months
D.
36 months
Question 38
A 55 year old investor with a moderate risk tolerance seeks an investment that will generate ongoing, predictable income. Which of the following investments should you recommend?
A.
Debenture
B.
Income bond
C.
Commercial paper
D.
Dividend paying common stock
Question 39
What is the lowest investment grade bond rating?
A.
BBB
B.
BB
C.
AA
D.
A
Question 40
All of the following risks are potentially applicable to preferred stock investments, EXCEPT:
A.
Interest rate risk
B.
Call risk
C.
Credit risk
D.
Purchasing power risk
Question 41
What statement accurately describes the difference between a taxpayer's marginal and effective tax rate?
A.
The effective tax rate is assessed on investment income while the marginal tax rate is assessed on all income
B.
The marginal tax rate is assessed on investment income while the effective tax rate is assessed on all income
C.
The marginal tax rate is assessed on the last dollar earned while the effective tax rate is the average rate assessed on all income earned
D.
The effective tax rate is assessed on the last dollar earned while the marginal tax rate is the average rate assessed on all income earned
Question 42
Which of the following securities is MOST suitable for an investor specifying a tax advantaged income investment objective?
A.
Mortgage bonds
B.
High yield bond fund
C.
Pass through certificates
D.
BBB-rated general obligation bond
Question 43
Which statement is true regarding Regulation A+ offerings?
A.
Tier 1 imposes purchase limits on investors
B.
Offering limits covers a period of 36 months
C.
Tier 1 allows a sale of up to $20 million
D.
Tier 2 allows a sale of up to $40 million
Question 44
What is the most accurate description of suitability?
A.
Firms providing adequate supervision to representatives
B.
Acceptable recommendations based on client's situation
C.
Hiring registered representatives with no criminal background
D.
Firms only dealing with specific types of clients
Question 45
A 64 year old investor at the 35% tax bracket takes a $30,000 distribution from their Traditional IRA to remodel their home. What is their tax liability?
A.
$10,000
B.
$10,500
C.
$13,500
D.
$15,000
Question 46
Specialized funds primarily invest in what type of securities?
A.
Securities from specific regions or industries
B.
Securities facing credit risk
C.
Conservative securities
D.
Passive securities
Question 47
A client of yours invests primarily in micro-cap stocks that have low trading volumes. While the portfolio has high capital appreciation potential, the client wants to know what unique risks the investments expose her to. What risk should you discuss?
A.
Market risk
B.
Business risk
C.
Liquidity risk
D.
Regulatory risk
Question 48
A 40 year old investor has $5,000,000 in one portfolio, which comprises all of their investments. They are at the 24% tax bracket, comfortable with risk, and are seeking income from their portfolio as they recently retired and need to replace their employment income. What investment objective does this investor most likely match with?
A.
High yield income
B.
Capital appreciation
C.
Speculation
D.
Tax advantaged income
Question 49
A 48 year old customer with a spouse the same age hears about a "spousal IRA" from a friend and asks you some questions regarding its contribution structure. What statement is true?
A.
An annual contribution of $7,000 into each separate spouse's IRA is allowed
B.
An annual contribution of $8,000 into each spouse's IRA is allowed
C.
An annual contribution of $14,000 into one spouse's IRA is allowed
D.
An annual contribution of $16,000 into one spouse's IRA is allowed
Question 50
Which of the following regulations requires an opt-out feature for third party disclosures?
A.
Regulation SHO
B.
Regulation S-P
C.
Regulation D
D.
Regulation T
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