Exam 1: Investment and Bond Market

Which of the following statements about 1035 exchanges are true? I. A 1035 exchange refers to the exchange of all of the shares owned in one mutual fund for shares of another mutual fund in the same family of funds. II. A 1035 exchange refers to the exchange of one variable annuity contract for another variable annuity contract without the need to pay tax on any of the income or capital appreciation associated with the original contract. III. A 1035 exchange refers to the exchange of a variable annuity contract for a whole life insurance policy offered by the same company with no tax consequences to the transaction.

Any compensation earned by a broker-dealer and its registered representative on the sale of mutual fund shares must be returned to the fund's underwriter if the purchaser decides to redeem his shares within:

Giant Investments, a family of mutual funds, is introducing a new fund. Giant has recently filed a registration statement for the new fund with the SEC and is waiting for the SEC to declare the registration statement effective. While it does so, Giant may: I. place advertisements in financial publications that announce that a new fund is expected to be available soon, along with Giant's contact information. II. mail preliminary prospectuses to existing and prospective clients. III. mail existing clients who have been pre-screened to determine that the fund's objectives are in line with their investment objectives with information on the price they can lock in today to purchase the shares once the registration statement is deemed effective.

The board of directors of a mutual fund is responsible for: I. authorizing purchases and sales of securities made by the fund. II. approving the fund's contract with its investment adviser. III. ensuring that the fund complies with federal securities laws regarding such issues as 12b-1 fees. IV. establishing the fund's dividend and capital gains policy.

Ears is an investment adviser representative. During lunch today, she overheard two men talking about a hostile takeover that their firm was preparing to undertake. Based on this information, Ms. Ears does not hesitate to advise the client she meets with immediately after lunch-Mrs. Clueless-- to invest a sum of money in the firm the men had named as the target firm. Ms. Ears remembers that the price of target firms, on average, increases significantly with an announcement of this sort, but she does not inform Mrs. Clueless of the reason underlying her recommendation. Has there been any violation of insider trading laws in this scenario, as described?

The price at which an investor can sell a security to a market maker in the over-the-counter market is called the:

On Friday, August 6^th, the Board of Directors of Ecolab (ECI) announced that it would pay a dividend of $0.155 a share to shareholders of record as of Tuesday, September 21^st.The dividend checks were scheduled to be mailed on Friday, October 15^th. In this scenario, the payment date is:

Newbie, a registered representative employed by Savvy Investments, has received a letter of complaint from a client that Ms. Newbie believes is unfair and illegitimate. More specifically, she believes that the complaint misstates the facts. Under these circumstances, Ms. Newbie:

Tex Payor owns 500 shares of Amazon.com, Inc. that he bought seven years ago when the stock price was $18 a share, at which time he paid a commission of $12.95 to purchase the stock. At the beginning of this year, Amazon was selling for $89 a share. Today, December 31st, Amazon's stock closed at $152 a share. Based on this information, what must Tex include on this year's tax return as taxable income from his investment in Amazon?

Which of the following represents a secondary market transaction?

A person's discretionary income is:

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 S&P 500 Index fund. He has also been investing all of his discretionary income into a regular account with the same S&P 500 Index fund. Brian's goal is to retire no later than his 55^th birthday. Is this the best investment strategy for him?

A mutual fund may not do which of the following, under any circumstances? I. buy securities on margin II. engage in short sales III. change its investment objective IV. invest in more than 1% of the outstanding voting stock of another investment company

Which of the following would not be defined as an "interested person," under the Investment Company Act of 1940?

Joe Cool is a member of the All Greek Fraternity. A few of the alumni of his fraternity sat for the FINRA Series 6 exam over the past couple of years and, using their cell phones, took pictures of the exam questions. They forwarded these to their fraternity to be included in the test bank file the fraternity keeps in its study room. Have there been any violations of FINRA/NASD rules in this instance?

Jack is an investment adviser representative employed by Giant Investments, a family of mutual funds. Jack has recently read an article posted on the web that he thinks explains some consequences of some tax law changes that are being considered extremely well, and he e-mails his existing retail customers with a summary of the salient facts of the article. Given these facts:

Tex Payor has invested in Invest4U Mutual Fund shares at various times over the last eight years. In the past year, he has sold some of the shares purchased. To determine the cost basis of these shares, Tex:

One difference between a unit investment trust (UIT) and a closed-end fund is that

Any person who willfully acts in violation of the Securities Act of 1933, or any SEC rule, is subject to a penalty of:

Which of the following investor characteristics is inconsistent with an aggressive investment strategy? I. short investment horizon II. high risk tolerance III. young