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FINRA Series 6 Exam
Investment Company and Variable Contracts Products Representative Examination (IR) (Page 9 )

Updated On: 26-Jan-2026
Page 9 of 66
PDF with 325 Questions

Given the same maturity, which of the following debt instruments would you expect to offer the highest yield-to-maturity?

  1. a debenture issued by Abbott Laboratories
  2. a bond issued by the Federal Home Loan Bank Board
  3. a general obligation bond issued by the state of Massachusetts
  4. a U.S. Treasury bond

Answer(s): A

Explanation:

Given the same maturity, the debenture issued by Abbott Laboratories would be expected to offer the highest yield -to-maturity. It is unsecured debt offered by a corporation and is the riskiest of the four choices. Bonds issued by the U.S. government and by U.S. government agencies are considered to be free of default-risk and would have lower yields to reflect this. The general obligation bond offered by the state of Massachusetts pays interest that is free from federal taxation and will have a lower yield because of this feature.



Which of the following would be a reason for a person to receive a statutory disqualification from membership in FINRA?

  1. The person is on the verge of financial insolvency.
  2. The person has been barred from membership in one of the national exchanges.
  3. The person has made a misleading statement of material fact on the membership application.
  4. All of the above are reasons for a person to receive a statutory disqualification from membership in FINRA.

Answer(s): D

Explanation:

All of the choices are reasons for a person to receive a statutory disqualification from membership in FINRA. A person is subject to a statutory disqualification from membership in any self-regulatory organization (SRO) if it is considered to be financially weak, if it has been barred from membership in any other SRO, or if it has made a misleading statement of material fact on the membership application. Nor is this an exhaustive list of reasons that a person would face a statutory disqualification.



Under the Investment Company Act of 1940, an investment company is:

  1. required to register with the SEC.
  2. any company that holds investment securities that have a value that is greater than 40% of the company's total assets.
  3. any issuer whose primary business involves investing, reinvesting, or trading in securities.
  4. All of the above accurately describe an investment company as defined by the Investment Company Act of 1940.

Answer(s): D

Explanation:

All of the choices accurately describe an investment company as defined by the Investment Company Act of 1940.



A passive asset allocation strategy that involves establishing specific targeted percentages for the various asset classes and rebalancing only as necessary to maintain those percentages as long as the investor's investment objectives remain unchanged is called:

  1. strategic asset allocation.
  2. tactical asset allocation.
  3. interactive asset allocation.
  4. dynamic asset allocation.

Answer(s): A

Explanation:

A passive asset allocation strategy that involves establishing specific target percentages for the various asset classes and rebalancing only as necessary to maintain those percentages as long as the investor's investment objectives remain unchanged is called strategic asset allocation. Tactical asset allocation is an active strategy that involves trying to time the market to some extent. Dynamic asset allocation is also an active strategy in which the portfolio mix is adjusted as markets rise and fall, such that the weighting is heaviest in those asset classes that can be expected to perform well under the current economy. Interactive asset allocation is a fictitious strategy.



Which of the following statements regarding the purchase and redemption of mutual fund shares is false?

  1. Mutual fund shares may not be purchased on margin.
  2. An investor can both purchase and sell fractional shares of mutual funds.
  3. When an investor redeems his shares, the mutual fund must pay for the shares within 7 business days.
  4. If an investor places an order to buy or redeem shares of a mutual fund before 4 P.M.EST on a day when the markets are open, the price will be based on the fund's net asset value (NAV), as calculated at the end of that trading day.

Answer(s): C

Explanation:

The false statement regarding the purchase and redemption of mutual fund share is that when an investor redeems his shares, the mutual fund must pay for the shares within 7 business days. The mutual fund must pay for the shares within 7 calendar days. All the other statements are true.



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