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FINRA Series 6 Exam
Investment Company and Variable Contracts Products Representative Examination (IR) (Page 4 )

Updated On: 26-Jan-2026
Page 4 of 66
PDF with 325 Questions

The price at which an investor can sell a security to a market maker in the over-the-counter market is called the:

  1. sale price.
  2. put price.
  3. bid price.
  4. ask price.

Answer(s): C

Explanation:

An investor can sell a security to a market maker in the over -the-counter market at the bid price, which is the price at which the market maker is willing to buy the security.



Andy and Annie Raggedy own their own graphics art business that they operate out of their home and, happily, generate enough income to meet their current needs. The couple is planning on having children in the not too distant future, however, and they want to start putting money aside for their children's college education and also want to start saving for retirement more aggressively.

  1. Which of the following describes one of their primary investment objectives? tax-exempt income
  2. preservation of capital
  3. current income
  4. capital appreciation

Answer(s): D

Explanation:

Since Mr. and Mrs. Raggedy's stated goals are to save for their future children's college education and to save for retirement, one of primary investment objectives is capital appreciation. That is, they will want to invest their monies in assets that will grow at a sufficient rate for them to be able to meet these targets. They have enough income to meet their current needs, so Choices A and C are not primary objectives, and although we'd all like to preserve capital, we need to take some risk in order to get the returns we require.



Which of the following statements regarding zero-coupon bonds is true?

  1. An advantage of investing in zero -coupon bonds is that the bondholder does not receive interest income that he must pay taxes on each year and instead receives profits from the bond investment in the form of tax-preferred capital gain income when the bond matures.
  2. Only governments at the federal, state, or local levels, or government agencies are permitted to issue zero-coupon bonds.
  3. All else equal, zero-coupon bonds will have less price fluctuation when interest rates change.
  4. Although the bondholder receives no interim interest payments from his investment in zero -coupon bonds, the difference between the purchase price and the maturity value of the bond is considered to be interest income, and the bondholder must pay taxes on a percentage of this amount each year.

Answer(s): D

Explanation:

The true statement about zero-coupon bonds is that although the bondholder receives no interim interest payments from his investment in zero-coupon bonds, the difference between the purchase price and the maturity value of the bond is considered to be interest income, and the bondholder must pay taxes on a percentage of this amount each year.



The dividends distributed by which of the following are taxed as ordinary income?

  1. mutual funds
  2. closed-end investment companies
  3. IBM
  4. real estate investment trusts

Answer(s): D

Explanation:

The dividends distributed by real estate investment trusts are taxed as ordinary income. Dividends on all of the other choices are subject to preferential tax treatment under current tax laws.



Callie has a new client who wants to begin investing in mutual funds with the $5,000 she has pulled out of her savings account. The client has indicated she wants to set this money aside in a separate account so that her baby girl, now 2 years old, can have the "wedding of her dreams" when she grows up. Based on the information the client has provided, Callie believes the client would benefit most by purchasing shares of a certain fund that offers Class A, Class B, and Class C shares.
Given these facts, Callie's client is probably best off purchasing the shares of which class?

  1. Class A
  2. Class B
  3. Class C
  4. None of that above. Based on the facts, Callie's client would be better off buying a Treasury STRIP that matures in 20 to 30 years.

Answer(s): B

Explanation:

If Callie's client wants to have enough money for her 2-year-old daughter to have the wedding of her dreams and a suitable fund has been selected, Callie would probably be best off purchasing Class B shares of that fund. Class B shares have a deferred sales charge, but this sales charge goes away after so many years, and since Callie's investment horizon is long -term, she should never have to pay this fee. If she buys the Class A shares, she will have to pay a front -end load when she buys the shares, thus reducing the total amount that she has invested. Class C shares tend to charge higher 12b-1 fees than Class A or Class B shares, which will reduce the annual return on Callie's client's investment. With Class B shares and a long-term investment, Callie can effectively avoid the "loads." A Treasury STRIP investment will not return enough to provide Callie's little girl with "the wedding of her dreams."



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