Finra Series-6 Quiz 3 Topic 10 Questions 11-15

Question: 1

Your nephew has asked you to help him formulate a financial plan for his family. Scott is 27 years old and has been employed as an associate with a law firm for two years. Sarah, his wife, is 26 years old and works in the human resources department of a large corporation. The couple is childless now, but they plan to begin a family in a few years. Together, they have accumulated $10,000 in a savings account and recently inherited $40,000 cash. They expect to be able to start saving at least $5,000 annually since their incomes more than meet their current needs. They each have employer-provided health insurance and retirement plans. Both have excellent upward mobility potential in their careers. They currently pay taxes at the marginal rate of 15%. Scott tells you that although they regularly read some of the more popular financial investment magazines, neither feels particularly knowledgeable about the world of investments.

Based on this information, which of the following statements is true?

AA greater than average percentage of their money should be invested in money market mutual funds to meet their needs for liquidity.

BA greater than average percentage of their money should be invested in municipal bonds to minimize their currently high tax bill.

CAlthough some money should be allocated to bond funds for diversification purposes, bond funds should be underweighted in favor of stock funds.

DPurchasing power risk is not an issue in their situation.

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Question: 2

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

AThe monies in the separate account are used to make payments to all the policyholders of the company when a payment is triggered.

BThe separate account contains the monies from which the company pays its operating expenses, e.g., salaries, etc.

CFunds from the separate account are used to make payments to fixed annuity investors.

DThe separate account must register as an investment company under the Investment Company Act of 1940.

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Question: 3

Which of the following persons is not subject to the fingerprinting requirements of the Securities Exchange Act of 1934?

i. a registered transfer agent of a securities exchange

ii. a firm that engages only in the sale of mutual fund shares

iii. a receptionist at a brokerage firm who answers phones and directs calls to the agents employed by the firm

IV. a market maker in the over-the-counter market

AI and III only

BII and III only

CII, III, and IV only

DIII only

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Question: 4

The investment banker bears the risk if the securities do not sell in a(n):

Afirm commitment underwriting agreement.

Bbest efforts agreement.

Call-or-nothing commitment.

DNone of the above selections are correct. The investment banking firm is never exposed to risk if the securities don't sell.

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Question: 5

Which of the following statements regarding a letter of intent is true?

AAn investor has 12 months in which to invest the amount stipulated in the letter.

BReinvested dividends and capital gain distributions count toward the amount stipulated in the letter of intent.

CAn investor who signs a letter of intent and does not invest the amount stipulated must make up the difference between the sales charge he paid and what he should have paid, plus interest.

DA letter of intent may be backdated up to 90 days so that any purchases made during that prior time period will count toward making a breakpoint.

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Finra Series-6 Quiz:3 Topic:10 Questions:11-15