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FINRA Series 6 Exam
Investment Company and Variable Contracts Products Representative Examination (IR) (Page 8 )

Updated On: 26-Jan-2026
Page 8 of 66
PDF with 325 Questions

Which of the following would be the most suitable investment for a client who has retired and needs some current income to augment her social security check?

  1. growth fund
  2. variable life policy
  3. money market fund
  4. U.S. government bond fund

Answer(s): D

Explanation:

Of the choices provided, the most suitable investment for a client who has retired and needs some current income to augment her social security check would be a U.S. government bond fund. The growth fund is mostly invested in stocks that provide their return in the form of capital appreciation, not dividend income. The variable life policy would not offer her the current income she needs and may even have a surrender charge. Furthermore, these policies are insurance, not investments. A money market fund is good for capital preservation and some of her funds should be invested in a money market fund to meet this objective, but it will not provide her with current income. A U.S. government bond fund is less risky than other bond funds--although its value will fluctuate with interest rate changes-and will provide her with the supplemental income she requires.



You have a client, Richie Rich, who is in the 39.6% marginal tax bracket, and one of his investment goals is to minimize his payments to the IRS.
Which of the following instruments would serve this purpose?

  1. U.S. Treasury bills
  2. general obligation bonds
  3. an investment-grade corporate bond
  4. Both Selections A and B would serve to minimize his payments to the IRS.

Answer(s): B

Explanation:

General obligation bonds would serve to minimize Mr. Rich's payments to the IRS. These are a type of municipal bond, which pays interest that is tax-exempt at the federal level (and at the state and city level under certain circumstances.) Income earned on U.S. Treasury bills and corporate bonds is fully taxable at the federal level.



Which of the following is not considered to be a "security" as defined by the Securities Exchange Act of 1934?

  1. an interest in an oil drilling lease
  2. a collateral trust certificate with an initial maturity of 5 years
  3. a straddle that expires in 3 months
  4. a bankers' acceptance, issued with a maturity of 4 months

Answer(s): D

Explanation:

A bankers' acceptance is specifically excluded from the definition of a security under the Securities Exchange Act of 1934 as long as its maturity at issue does not exceed 9 months. All the other choices are specifically named under the Act's definition of a security.



The total of a mutual fund's front-end load, rear-end load, and 12b-1 fees may not exceed:

  1. 10.0% of the fund's offer price.
  2. 10.0% of the fund's net asset value.
  3. 8.5% of the fund's offer price.
  4. 8.5% of the average annual net assets of the fund.

Answer(s): C

Explanation:

The total of a mutual fund's front-end load, rear-end load, and 12b-1 fees may not exceed 8.5% of the fund's offer price.



Which of the following is a true statement about FINRA rules regarding material that Giant Investments submits to its institutional investors?

I). FINRA requires that each member firm establish procedures for each institutional investor separately.
II). Procedures to be followed in distributing material to institutional investors must be in writing.
III). All institutional sales material must be submitted to a principal for approval prior to being used.
IV). Institutional sales material must be maintained by the member firm for at least three years from the date of last use.

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

Answer(s): D

Explanation:

Only Statements I, II, and IV are true statements regarding FINRA rules on material that Giant submits to its institutional investors. FINRA requires that each member firm establish procedures for each institutional investor separately, and that the procedures to be followed in distributing material to institutional investors be established in writing. Institutional sales material must be maintained by the member firm for at least three years from the date of last use, but there is no requirement that institutional sales material be submitted to a principal for approval prior to being used.



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