Vendor: FINRA
Certifications: FINRA Certifications
Exam Code: FINRA-SERIES-6
Exam Name: FINRA Investment Company and Variable Contracts Products Representative (IR)
Updated: May 29, 2026
Q&As: 325 ( View Details)
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After passing the Series 6 and becoming a registered representative, you will be able to execute transactions in which of the following securities?
I. corporate stocks
II. mutual funds
III. corporate bonds
IV.
variable contracts
A.
I, II, III, and IV
B.
I, II, and IV only
C.
II and III only
D.
II and IV only
Correct Answer: D
Explanation: After passing the Series 6 and becoming a registered representative, you will be able to execute transactions in mutual funds and variable contracts only. A passing grade on the Series 6 qualifies you to be registered as a “limited representative.”
Jake's Uncle Zeke gave Jake and his new bride 100 shares of the stock of Southwest Airlines (LUV) when they got married. Uncle Zeke had paid $16.60 for the stock several years earlier, but it was selling for only $12.10 on the day of the wedding. Jake and his bride are unimpressed with the stock's performance a few months later and decide to sell it for $11.00, its market price at that point.
What are the tax consequences of the sale for the newly wedded couple?
A. Jake and his bride will have a long-term capital loss of $110 to offset other income.
B. Jake and his bride will have a long-term capital loss of $560 to offset other income.
C. Jake and his bride will have a short-term capital loss of $560 to offset other income.
D. Jake and his bride will have neither a taxable gain nor a capital loss to declare.
Correct Answer: A
Explanation: If Jake and his bride sell the stock of LUV for $11.00 when it was selling for $12.10 on the day that they received it, they will have a long-term capital loss of $110 to offset other income. In this situation, the relevant cost basis is the value of LUV on the day of the wedding. Therefore, the loss is calculated as ($11 - $12.10) x 100 = -$110. The holding period is based on the holding period of the donor, so the loss is considered to be a long-term capital loss. In a gift situation, there are two cost bases. In the case of an asset that has depreciated in value, as in this instance, if the recipient sells the gifted property for less than its market value on the day he received it, the cost basis is considered to be the market price on the day the gift was received. If, on the other hand, the property has appreciated in value and the gift recipient sells the gifted property for more than the cost basis of the donor, then his gain is based on the cost basis of the donor, not the price at which the property was selling on the day the gift was received. If the selling price is somewhere between the two values, there is neither a taxable gain nor a taxable loss for the gift recipient to declare.
Brian is single and 32 years old. He is employed as a buyer for a large sporting goods retail chain and participates in an employer-matched 401(k) plan. He remembers hearing about the benefits of passively managed portfolios in a college investments course he took. Therefore, he is directing 100% of his 401(k) monies into an SandP 500 Index fund. He has also been investing all of his discretionary income into a regular account with the same SandP 500 Index fund. Brian's goal is to retire no later than his 55th birthday.
Is this the best investment strategy for him?
A. Yes. He is investing in a diversified portfolio of stocks that is passively managed, so he isn't having to pay big management fees.
B. Yes. Because index funds are passively managed, they don't have as high a turnover rate, and lower turnover rates result in lower tax bills for the investor. Brian gets diversification and a lower tax bill.
C. No. The SandP 500 Index consists only of large, domestic stocks, so Brian isn't as diversified as he could be, and his investments may not grow fast enough for him to retire on his 55th birthday.
D. Both A and B are reasons that Brian's strategy is the best strategy for him.
Correct Answer: C
Explanation: No, investing all of his retirement savings and all his discretionary income into the same SandP 500 Index fund is not the best strategy for Brian because the SandP 500 Index consists only of large domestic stocks, so Brian isn't as diversified as he could be, and his investments may not grow fast enough for him to retire on his 55th birthday. Although the SandP 500 Index fund is passively managed, which results in lower management fees and lower tax bills, Brian could spread his money among other index funds that offer these same benefits as well. For example, he could invest in a small cap index fund, a mid-cap index fund, and even a foreign stock index fund, such as an EAFE Index fund. This would give him even more diversification potential, and since the stocks in which these funds invest are a bit riskier, the funds offer a higher expected return, which should advance him toward his retirement goal more quickly. Brian's investment horizon is sufficiently long for him to be able to handle the risk. Furthermore, investing all of one's money in a single fund-even a single SandP 500 Index fund-isn't the best strategy, especially if one has a lot of money to invest as Brian does. Not all SandP 500 Index funds perform equally well.
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