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FINRA Series 6 Investment Company and Variable Contracts Products Representative Exam

3. Products and recommendations / Investment company structure: practice questions

Our FINRA Series 6 bank has 43 questions on this topic. Here are 5 of them with answers; the full mock exam draws from every topic, like the real one.

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Question 1

An open-end company is a management company that:

  1. Issues redeemable securities
  2. Issues a fixed number of shares that trade on exchanges
  3. Has no investment adviser
  4. Invests only in government securities
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A. Issues redeemable securities — Section 5(a)(1): an open-end company offers for sale or has outstanding any redeemable security of which it is the issuer. Any other management company is closed-end.

Question 2

Which describes an index fund?

  1. One that tracks a market index
  2. A fund managed to beat the market by frequent trading
  3. A fund that guarantees the index return
  4. A fund that holds only cash
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A. One that tracks a market index — Investor.gov: index funds follow a passive strategy designed to achieve approximately the same return as a particular index before fees.

Question 3

A fund named "Tax-Exempt Income Fund" must have a fundamental policy to invest at least 80% of its assets in investments whose income is:

  1. Free of all sales charges
  2. Guaranteed by the U.S. government
  3. Exempt from federal income tax
  4. Paid monthly
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C. Exempt from federal income tax — Rule 35d-1 requires such a fund to adopt a fundamental policy to invest at least 80% in tax-exempt investments or have at least 80% of distributed income tax-exempt.

Question 4

Under Section 22(e), an open-end fund may not postpone payment on redemption for more than:

  1. One business day after the tender
  2. Thirty days
  3. Ninety days
  4. Seven days, except in limited circumstances
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D. Seven days, except in limited circumstances — Section 22(e): no suspension of redemption or postponement of payment beyond seven days after tender, except when the NYSE is closed or in other limited circumstances.

Question 5

Under Rule 22c-1, mutual fund purchases and redemptions are priced at:

  1. The NAV computed at the previous day's close
  2. Any price the fund chooses that day
  3. The next computed NAV
  4. The average NAV for the week
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C. The next computed NAV — Rule 22c-1 requires forward pricing: the current NAV next computed after receipt of the order.

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