Series 6 Practice Exam

The Series 6 Exam is officially titled the Investment Company and Variable Contracts Products Representative Exam. Passing this exam provides you with the qualifications to transact mutual funds, variable annuities, and variable life insurance. It is administered by FINRA, and the questions focus on mutual funds, variable contracts, customer evaluation, securities regulation, and tax rules. Try our free Series 6 practice exam to see if you are ready.

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Question 1

The amount of a person's income that is available for spending after food, clothing, shelter, taxes, and other essentials have been taken care of:

A
Real Income.
B
Disposable Income.
C
Discretionary Income.
D
After-Tax Income.
Question 1 Explanation: 
Disposable income is a person's total personal income minus personal current taxes. Discretionary income is total income minus taxes and necessities.
Question 2

Edward is 50 years old and has saved for retirement with a Roth IRA. He has just inherited $300,000 and he has decided to quit his full-time job and take a part-time position. He is looking to invest the $300,000 for income. Which of these will NOT meet his objectives?

A
Preferred stock.
B
Corporate bonds.
C
Money market funds.
D
Municipal bonds.
Question 2 Explanation: 
Money market funds are best for investors who need liquidity. They do not provide much income.
Question 3

Which of the following is TRUE of dollar cost averaging?

A
It will prevent losses in a declining market.
B
More money is invested when prices are low.
C
It is a more profitable way to buy stock.
D
More shares are purchased when prices are low.
Question 3 Explanation: 
With DCA the same amount of money is invested in a security over a number of periods (such as $200 per month). When prices are lower, more shares will be purchased. Declining markets will still lead to losses on the invested money. The ultimate profitability of the strategy will depend on market movements, and it may or may not end up being more profitable than a lump sum investment.
Question 4

Which of the following are TRUE of preferred stock?

I.     Dividends are always cumulative.

II.    Liquidation claims are senior to common stock.

III.   Voting rights are senior to common stock.

IV.   Dividend is usually a fixed percentage of par value.

A
I, II
B
II, IV
C
II, III, IV
D
IV only
Question 4 Explanation: 
Their dividends may be cumulative or noncumulative. Their claim is senior to common stock in liquidation (common stock has only a residual claim). Preferred stock usually has no voting rights, but may have limited voting rights or the right to vote under certain extraordinary events. The dividend is usually fixed as a percentage of par value.
Question 5

Regulation S-P deals primarily with:

A
Privacy policies.
B
Fees and commissions.
C
Options and futures trading.
D
Disciplinary action.
Question 5 Explanation: 
Regulation S-P requires financial institutions to provide their customers with information on their privacy policies and also regulates the disclosure of the customer's personal information to third parties.
Question 6

NASD rules require all advertisements, sales literature, and independently prepared reprints to be maintained in a separate file for a period of _____ years from the date of last use.

A
Two.
B
Three.
C
Five.
D
Seven.
Question 6 Explanation: 
The file must be maintained for 3 years and needs to include the name of the registered principal who approved the advertisement, the advertising literature, and the date that approval was given.
Question 7

Which of the following are TRUE of breakpoints?

I.    Breakpoints are the investment amounts at which a fund offers investors discounts on sales charges.

II.   Mutual funds are required by law to offer breakpoint discounts on front-end load funds.

III.  No-load mutual funds usually have higher breakpoints.

IV.  Mutual fund purchases can sometimes be combined in order to qualify for a breakpoint discount.

A
I, II, IV
B
I, III, IV
C
II, III
D
I, IV
Question 7 Explanation: 
While many mutual funds offer breakpoints, they are not required to do so. No-load funds do not have breakpoints since there is no front-end sales load to discount. The fund's "rights of accumulation" policy will explain how the investor can combine various mutual fund purchases to qualify for breakpoint discounts.
Question 8

All of the following are characteristics of Roth IRAs EXCEPT:

A
Early withdrawals are normally subject to a 10% tax penalty.
B
Reaching age 59 1/2 is the only requirement to begin qualified distributions.
C
There are no minimum required distributions.
D
Contributions are not tax-deductible.
Question 8 Explanation: 
Qualified distributions (tax and penalty free) may begin 5 years after the first contribution and after reaching age 59 1/2.
Question 9

What is the annual contribution limit (per child) for Coverdell Education Savings Accounts?

A
$2,000.
B
$5,000.
C
$7,500.
D
No restrictions on contributions, up to the maximum lifetime contribution.
Question 9 Explanation: 
Only $2,000 per year per child is allowed. This is different than 529 plans which have no restrictions up to the lifetime maximum.
Question 10

The Securities Investor Protection Corporation:

A
Provides insurance coverage up to $1,000,000 of the customer's net equity balance.
B
Was created by the Securities and Exchange Act of 1934.
C
Provides insurance coverage up to $250,000 of the customer's cash balance.
D
Exists to protect investors from market losses.
Question 10 Explanation: 
Coverage from the SIPC is limited to $500,000 per customer, including up to $250,000 for cash. It was created by the Securities Investor Protection Act of 1970. It exists to protect investors against the fraud and insolvency of broker-dealers, not to protect investors from market losses.
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Related Exams and Resources

Series 6 Exam

The Series 6 test has 100 multiple choice questions and must be completed in 135 minutes. A score of 70% is required to pass. In order to take the exam you must be sponsored by a firm that is a member of FINRA. The exam is challenging, so make sure you do plenty of Series 6 exam prep and be sure to work through plenty of practice questions, along with our Series 6 sample questions.