QUESTION: 17

Which of the following securities would be exempt from SEC registration requirements?

I). a 15-year bond issued by the state of Colorado
II). an issue of preferred stock that has an aggregate par value of $5 million
III). an issue of commercial paper that has a 5-month maturity

I only
III only
I and III only
I and II only

Answer(s): C

Explanation:

Only Selections I and III are exempt from SEC registration requirements. The bond issued by Colorado is exempt because bonds issued by a government body are exempt from registration. The issue of commercial paper is exempt because securities with less than 270 days to maturity are exempt from registration.

Reveal Solution Next Question

QUESTION: 18

Which of the following stock funds would you expect to be the least risky?

growth
value
balanced
income

Answer(s): C

Explanation:

A balanced stock fund would be expected to be the least risky of the choices listed. Balanced funds have a stated policy of investing in both stocks and bonds, making them more diversified than the other choices that primarily invest in stocks.

Reveal Solution Next Question

QUESTION: 19

Your client has recently heard about "principal-protected funds" and has asked your ad vice. You should tell her that:

I). the majority of principal-protected funds guarantee the investor's initial investment, less any front-end load, even if the stock market falls.
II). it would not be a good investment if she thinks she will need the money within the next five to ten years.
III). it will beat the returns she could earn on an S&P 500 Index fund in most years.
IV). if she sells her shares at any time other than the maturity date specified, she could lose money if the price per share has fallen.

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

Answer(s): D

Explanation:

Only Statements I, II and IV are true. You can legitimately tell your client that the majority of principal-protected funds guarantee the investor's initial investment, less any front -end load, even if the stock market falls (i.e. Selection I), but that there is a lock-up period involved. Therefore, it would not be a good investment if she thinks she will need the money within the next five to ten years (Selection II) because the principal guarantee will likely be voided, and she might be subject to a penalty for early withdrawal. You should also warn her that if she sells her shares at any time other than the maturity date specified, she could lose money if the price per share has fallen (Selection IV) since the guarantee is only valid on the maturity date of the fund in most instances. You should not tell her that the returns on a principal-protected fund will beat the returns she could earn on an S&P 500 Index fund in most years (Selection III). Although this may happen in a bear market year, it will definitely not be true during bull markets.

Reveal Solution Next Question

QUESTION: 20

A load mutual fund offers reduced load charges when an investor invests over $25,000 in the fund.
Which of the following can combine their funds in order to meet that breakpoint and get the reduced sales charge?

I). Mr. and Mrs. Smith
II). Mrs. Smith and her 8-year-old daughter, Susie
III). Mr. Smith and his brother, Darwin
IV). The Smithereen Investment Club, of which Mr. and Mrs. Smith are co-chairpersons

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

Answer(s): B

Explanation:

Only Mr. and Mrs. Smith and Mrs. Smith and her 8-year-old daughter, Susie, can combine their funds in order to meet the breakpoint and get the reduced sales charge. Investments made by a husband and a wife and by a parent on their own account and on a custodial account for a minor child can be combined toward the total needed to reach the breakpoint. (The child cannot be an adult, however.) Investments made by siblings and investment clubs cannot be combined to meet a breakpoint.

Reveal Solution Next Question

Free Series 6 Exam Braindumps (page: 5)

QUESTION: 17

Explanation:

QUESTION: 18

Explanation:

QUESTION: 19

Explanation:

QUESTION: 20

Explanation: