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Free Series 6 Exam Braindumps (page: 23)

Page 22 of 83
PDF with 325 Questions

Under current tax laws, which of the following distributions received from a mutual fund qualify for preferential tax treatment?

I). short-term capital gains
II). long-term capital gains
III). qualifying dividends
IV). non-qualifying dividends

  1. III only
  2. II and III only
  3. I, II, and III only
  4. I, II, III, and IV

Answer(s): B

Explanation:

Only Selections II and III-long-term capital gains and qualifying dividends-qualify for preferential tax treatment under current tax laws. Both are taxed at either 0% or 15%,
depending on the investor's marginal tax rate. Short-term capital gains and non-qualifying dividend distributions are taxed as ordinary income at the investor's marginal tax rate.



No: 102
Which of the following bonds would not be considered investment grade?

  1. a municipal bond with a BB rating.
  2. a corporate bond with a BBB rating.
  3. a general obligation bond with an AA rating.
  4. a debenture with an A rating.

Answer(s): A

Explanation:

A municipal bond with a BB rating would not be considered investment grade. Regardless of whether a bond is issued by a state or local government or a corporation, to be considered investment grade it must be rated BBB or higher.



Mr. Walt Street has observed that a Treasury note maturing in November of 2019 and paying a 3.375% coupon has a bid price of 105:25 and an ask price of 105:26.
In this instance, what is the dealers' spread for every $1,000 of par value?

  1. $0.31250
  2. $0.10000
  3. $0.03125
  4. $0.03375

Answer(s): A

Explanation:

For every $1,000 of par value, the dealers' spread is $0.31250. The prices of Treasury bonds and notes are quoted in 32nds of a dollar per $100 of par value. Therefore, the bid price is $105 25/32, or $105.78125, per $100 of par, and the ask price is $105 26/32, or $105.8125 per $100 of par. The difference between the two is the dealers' spread per $100 of par value, or $0.03125. The question asks for the dealers' spread for every $1,000 of par value, so this must be multiplied by 10: $0.03125 x 10= $0.31250.



A table providing detailed information on the various fees and expenses charged by a mutual fund can be found in the fund's:

  1. Statement of Additional Information (SAI).
  2. prospectus.
  3. financial statements.
  4. annual report.

Answer(s): B

Explanation:

A table providing detailed information on the various fees and expenses charged by a mutual fund can be found in the fund's prospectus. The other choices provide a wealth of information regarding such items as investment strategies, fund holdings, and financial statements, however.






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