Finra Series-6 Exam Practice Test Instant Access

Question 1

Upon receiving a complaint about one of its member firms, FINRA may:

i. require any person associated with the member firm to provide information to FINRA and to testify under oath.

ii. inspect and copy the books, records and accounts of the member firm.

iii. share information obtained from its investigation of a member firm with a foreign regulatory agency.

AII only

BI and II only

CII and III only

DI, II, and III

Answer : D

Upon receiving a complaint about one of its member firms, FINRA may require any person associated with the member firm to provide information and to testify under oath; it may inspect and copy the books, records, and accounts of the member firm; and it may share information obtained from its investigation of a member firm with a foreign regulatory agency. The foreign regulator must agree to treat the information confidentiality, and the agreement with the foreign regulator is predicated on two requirements: ''(A) the other regulator party to the agreement must have jurisdiction over common regulatory matters; and (B) the agreement must require the other regulator to reciprocate and share with FINRA information of regulatory interest or concern to FINRA.''

Question 2

Your client bought a variable annuity contract that has a 5% contingent deferred sales charge with a 7-year surrender period four years ago. He has been reading about bonus annuities and 1035 exchanges and has asked for your advice. You can tell him:

Athat it's a great idea, and you plan on how you're going to spend the unexpected income.

Bthat although the exchange doesn't have any tax consequences, he'll be looking at a new, longer, surrender period.

Cthat he'll have to pay the 5% deferred sales charge if he executes the exchange.

Dboth B and C.

Answer : D

If your client bought a variable annuity contract with a 7-year surrender period four years ago, you can tell him that even though there will be no tax consequences associated with the exchange, he'll have to pay the 5% deferred sales charge if he executes the exchange, and he'll be looking at a new, longer, surrender period-one of the less desirable features associated with bonus annuities.

Question 3

Which of the following is not a cost associated with an investment in a variable annuity contract?

Amortality and expense risk fee

Binvestment management fee

Cstate premium tax

DAll of the above are costs associated with an investment in a variable annuity contract.

Answer : D

All of the choices are costs associated with an investment in a variable annuity contract. Nor is this an exhaustive list of the costs.

Question 4

The mortality guarantee of a variable annuity contract:

Aguarantees a fixed death benefit amount will pay to your beneficiaries upon your death.

Bguarantees that you can receive a monthly check of a specified amount as long as you live.

Cguarantees that both you and a person you specify as your beneficiary will continue to receive payments as long as one of the two of you is alive.

DNone of the above is a true statement about the mortality guarantee of a variable annuity contract.

Answer : D

None of the choices provided is a true statement about the mortality guarantee of a variable annuity contract. The mortality guarantee guarantees that you can receive a monthly check for as long as you live, but it does not guarantee that the check will be for a specified amount.

Question 5

Which of the following statements regarding the separate account of an insurance company is true?

AThe monies in the separate account are used to make payments to all the policyholders of the company when a payment is triggered.

BThe separate account contains the monies from which the company pays its operating expenses, e.g., salaries, etc.

CFunds from the separate account are used to make payments to fixed annuity investors.

DThe separate account must register as an investment company under the Investment Company Act of 1940.

Answer : D

The true statement is that the separate account must register as an investment company under the Investment Company Act of 1940. The premiums paid by investors for variable life insurance (less numerous charges) are invested in subaccounts within the separate account, and the earnings of the subaccounts are used, in turn, to make payments to the owners of variable life insurance policies, but not to any of the other policyholders of the company, such as the fixed annuity investors. The insurance company pays its operating expenses out of its general account.

Question 6

Nancy invested $1,850 in the MidFee Mutual Fund, which has a 4% front -end load. The net asset value (NAV) per share of the fund at the time of her purchase was $22.20.

How many shares of the fund was Nancy able to purchase?

A83.33

B80.00

C80.13

DNone of the above is correct.

Answer : B

If Nancy invested $1,850 in MidFee, which has a 4% front-end load, when the fund's net asset value was $22.50, she was able to purchase 80.00 shares. The offer price of the fund = NAV/ (1 - % load) = $22.20/ (1 - 0.085) = $23.125. An investment of $1,850 would, therefore, purchase $1,850/$23.125 = 80 shares.

Question 7

The URMoney Mutual fund, a no load fund, has 10 million shares outstanding. The market value of its assets is $620 million and its liabilities are $150. Based on this information, an investor who wants to buy shares of the fund will pay:

A$62 a share.

B$47 a share.

C$15 a share.

DThis cannot be answered without knowing what, if any, the front-end load is.

Answer : B

Based on the information provided, an investor who wants to buy shares of the URMoney Mutual Fund will pay $47 a share. Since the fund is a no load fund, the shares can be purchased at the net asset value per share of the fund. Net asset value per share (NAVPS) = (market value of fund's assets - fund liabilities) total number of share outstanding, so NAVPS = ($620 million - $150 million) 10 million shares = $47.

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