QUESTION: 109

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

The monies in the separate account are used to make payments to all the policyholders of the company when a payment is triggered.
The separate account contains the monies from which the company pays its operating expenses, e.g., salaries, etc.
Funds from the separate account are used to make payments to fixed annuity investors.
The separate account must register as an investment company under the Investment Company Act of 1940.

Answer(s): D

Explanation:

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.

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QUESTION: 110

MBIA, Inc., a municipal bond insuring company, has a bond issue that is selling for $80.05 per $100 of par. The bond has a coupon rate of 7%, with semiannual payments, and matures in 2025. The current yield on this bond is:

8.745%.
7.000%.
9.550%.
none of the above

Answer(s): A

Explanation:

The current yield on this MBIA bond is 8.745%. The current yield is the annual interest payment of $7 per $100 of par divided by the bond price of $80.05: $7/$80.05 = 8.745%.

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QUESTION: 111

Which of the following would not have to register as an investment adviser or an investment adviser representative under the Investment Advisers Act of 1940?

I). an insurance agent who sells only whole life and term life policies
II). a commodity futures broker
III). a bank employee who sells the bank's customers only CDs and other bank securities that are FDIC-insured
IV). a person that is registered as a broker-dealer with the SEC that also provides investment advice to its customers for additional compensation

I and III only
I, II, and III only
II and III only
I, II, III, and IV

Answer(s): B

Explanation:

Only the persons described in Selections I, II, and III would not have to register as an investment adviser or an investment adviser representative under the Investment Advisers Act of 1940. Whole life and term life policies, commodity futures, and FDIC-insured bank products are excluded from the definition of a security, and those persons selling these products need not register. Therefore, the insurance agent, the commodity futures broker, and the bank employee who sells only FDIC-insured bank securities need not register. Even if a person is registered as a broker-dealer with the SEC, if that entity also provides investment advice to its customers for additional compensation, it must register as an investment adviser.

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QUESTION: 112

Which of the following is true about treasury bonds?

have no default risk.
have no interest-rate risk.
have no prepayment risk.
are totally risk-free.

Answer(s): A

Explanation:

Treasury bonds have no default risk. They do have interest -rate risk; their prices will fall with increases in interest rates, just like any other bond. Some Treasury bonds are callable, in which case the investor is exposed to prepayment risk.

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Free Series 6 Exam Braindumps (page: 28)

QUESTION: 109

Explanation:

QUESTION: 110

Explanation:

QUESTION: 111

Explanation:

QUESTION: 112

Explanation: