QUESTION: 49

Which of the following is true about a hedge fund?

It is designed to help investors hedge their risk and, as such, is a low risk alternative to a mutual fund.
It is closed to all but sophisticated, wealthy investors.
It is more liquid than almost any investment other than a money market mutual fund.
It has very low management fees since it is passively managed.

Answer(s): B

Explanation:

A hedge fund is closed to all but sophisticated, wealthy investors. Hedge fund managers engage in riskier strategies than mutual fund managers. They are fairly illiquid; the redemption of shares is restricted. They are actively managed, and management fees are much higher than those charged by other types of funds.

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QUESTION: 50

Mr. Donald is the owner and CEO of Just Ducky Broker-Dealers. His wife, Ms. Daisy, handles all the ministerial duties for the firm. The firm has three other employees. Huey is the municipal bond specialist and handles client trades in municipal securities only; Dewey handles only mutual fund sales for clients; Louie handles all aspects of client trading in stocks, corporate bonds, and options.
Which of the following statements regarding the minimum FINRA registration requirements for these individuals is true?

Mr. Donald, Huey, Dewey and Louie must all be registered as general securities representative s in accordance with FINRA rules.
Mr. Donald, Ms. Daisy, Dewey and Louie must be registered as general securities representatives, and Huey must be registered as a limited securities representative under FINRA rules.
Under FINRA rules, Mr. Donald must register as a principal, Dewey must be registered as a limited securities representative, and Louie must be registered as a general securities representative. Daisy and Huey need not be registered.
Mr. Donald and Ms. Daisy must be registered as principals, and the other three must be registered as general securities representatives under FINRA rules.

Answer(s): C

Explanation:

The true statement regarding FINRA registration requirements for the individuals is that Mr. Donald must register as a principal; Dewey must be registered as a limited securities representative; and Louie must be registered as a general securities representative. Daisy and Huey need not be registered. Mr. Donald is actively involved in the management of Just Ducky and, as such, he must register as a principal. Dewey handles mutual fund sales and, at a minimum, must be licensed as a limited representative. Louie, who executes stock, bond, and option transactions, must be licensed as a general securities representative. Huey is exempt from registration requirements since he trades in municipal securities only. Daisy is exempt since she handles only the ministerial duties of the firm.

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QUESTION: 51

In mid-September, the stock of Amazon.com, Inc. (AMZN) is selling for $147.A January call option on the stock is selling for $6.10 and has a strike price of $160. This call option is:

at the money.
in the money.
out of the money.
overpriced. No one should pay $6.10 for the right to buy a share of stock for $160 when its current market price is only $147.

Answer(s): C

Explanation:

If Amazon.com is selling for $147 and the strike price on the option is $160, the call option is said to be out of the money since, even if an investor were given the option free, he would not benefit from exercising it at this time. If he did so, he would be paying $160 for a stock that is selling for only $147 on the open market. Even so, the option is not necessarily overpriced at $6.10 because the option has what is known as "time value" on it. The stock of Amazon.com has several months during which it could rise well above the $160 strike price on the option.

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QUESTION: 52

Which of the following payout options would provide an annuity owner with the biggest monthly check?

joint and last survivor
straight life
life with period certain
unit refund life

Answer(s): B

Explanation:

The straight life payout option would provide an annuity owner with the biggest monthly check. Under this option, the annuity payments stop upon the death of the owner. All of the other options would require that the insurance company stand ready to continue payments beyond the owner's death.
This means more risk to the insurance company and, ergo, lower payments to the owner.

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Free Series 6 Exam Braindumps (page: 13)

QUESTION: 49

Explanation:

QUESTION: 50

Explanation:

QUESTION: 51

Explanation:

QUESTION: 52

Explanation: