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Series 6 Top-Off Exam Questions & Answers

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Series 6 Top-Off Exam Questions & Answers What type of fund can issue more than one type of security? - ANS - Closed-end funds. They can issue common & preferred stock, and bonds. Open-end can only issue redeemable common stock. What are some key features of the Securities Exchange Act of 1934? - ANS - (The People Act) it requires registration of people and exchanges transacting securities business in order to prevent manipulative and deceptive practices. The Act of 1934 also created the SEC and mandated the creation of SROs. How are municipal bonds taxed? - ANS - They are exempt from federal income taxes, but taxed on capital gains When a brokerage firm sells stock from its own inventory, it is acting in the capacity of - ANS - a principal and is charging a markup What are mutual fund shareholders taxed on? - ANS - Capital gains distributions, reinvested dividends and interest distributions. They are NOT taxed on unrealized capital gains When should a customer purchase a combination annuity? - ANS - When they want a source of retirement income that is both stable and will offer some protection against purchasing-power risk in times of inflation, advantages of both a fixed & variable annuity Characteristics of Treasury Notes - ANS - Intermediate maturity with various maturities (2-10 years), pay semiannual interest, and they sell at par. Characteristics of index annuities - ANS - They have a guaranteed minimum return and longer surrender periods, and are not considered securities What is a third market transaction - ANS - Listed and trading on the over-the-counter market (OTC) Mid-cap stocks - ANS - Good for someone in low tax bracket, wishing to invest moderate sum of money and have some protection from inflation. These historically provide good hedges against inflation making them appropriate for an investor seeking long-term growth and inflation protection. Equity income funds - ANS - invest in common stock, preferred stock and convertible securities for the purpose of generating current income and capital growth What is a 403(b) plan, or a tax-sheltered annuity (TSA) - ANS - Public schools-403(b) organizations-and for private schools, research foundations, religious organizations, and other nonprofits. What does the investor receive when they redeem shares with no redemption fee? - ANS - They receive the bid (or NAV) times the number of shares How often can open-end investment companies issue long-term securities? - ANS - No more than once per year (annually) What should be done when interest rates in the market where a long-term unit investment trust is increases? - ANS - Nothing - UITs interest rates are fixed so they would not react to market changes. Exchange privileges for funds and how they are taxed - ANS - Selling price/offering price of shares when given the NAV - ANS - NAV / (100% − SL%) = public offering price $9.30 divided by 93% (.93) = $10. Blend/core funds - ANS - Portfolios consisting of equ

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