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FINRA Series 6 Exam (page: 3)
FINRA Investment Company and Variable Contracts Products Representative Examination (IR)
Updated on: 12-Feb-2026

Viewing Page 3 of 66
Series 6 PDF 325 Questions

Simple Simon owns 1,000 shares in the Pasty Pie Corporation, which has just declared a stock dividend of 5%. Just prior to this announcement, Pasty Pie was selling for $10 a share. This announcement will:

  1. increase Pasty's shares outstanding and reduce Simple's proportionate ownership in the firm.
  2. increase the number of shares that Simple owns to 1,050, which will increase the market value of the shares that he owns from $10,000 to $10,500.
  3. increase the number of shares that Simple owns to 1,050, but this will not affect the
    market value of Simple's holdings.
  4. increase Simple's cash by the amount of the dividend paid: 0.05 x $10 = $0.50 x 1,000 shares = $500.

Answer(s): C

Explanation:

If Simple Simon owns 1,000 shares of Pasty Pie Corporation when Pasty declares a 5% stock dividend, the stock dividend will increase his number of shares to 1,050, but it will not affect the market value of Simple's holdings since the market price per share will also decrease proportionately. The aggregate market value of the firm stays the same, but the number of shares outstanding increases, resulting in a lower market value per share. Simple's proportionate ownership remains the same because his shares increased in the same percentage as the shares outstanding of the firm did. A stock dividend does not result in any cash payments to the shareholders.



Ms. Newbie's client, Mr. Nomad, has decided that he wants to go on an extended backpack trip through the Amazon. Since he'll be out of touch, he has given a friend of his limited power attorney to act on his behalf. Based on this, Mr. Nomad's friend can:

I). present Ms. Newbie with an order to purchase securities on Mr. Nomad's behalf.
II). present Ms. Newbie with an order to sell securities on Mr. Nomad's behalf.
III). request a check be issued to him so that he can send Mr. Nomad some money.

  1. I only
  2. I and II only
  3. I, II, and III
  4. none of the above. Only a relative can hold a power of attorney to engage in financial transactions for the grantor.

Answer(s): B

Explanation:

Mr. Nomad's friend can engage in the activities described in Selections I and II only. A limited power of attorney gives Mr. Nomad's friend the authority to buy and sell securities
on Mr. Nomad's behalf, but not to make any cash withdrawals. He would need a full power of attorney to be able to do so.



Which of the following statements regarding callable bonds is false?

  1. Callable bonds offer a higher yield than non-callable bonds, all else equal.
  2. Investors in callable bonds are subject to prepayment risk.
  3. The issuer of a callable bond is most likely to redeem the bond early when interest rates fall.
  4. A callable bond protects the investor by allowing him to sell his bond back to the issuer and invest in another, similar-risk bond that pays a higher rate of interest should the investor choose to do so.

Answer(s): D

Explanation:

Statement D is the false statement. A callable bond does not protect the investor by allowing him to sell his bond back to the issuer and invest in another, similar-risk bond that pays a higher rate of interest should the investor choose to do so. The investor does not have the option to redeem or not in the case of a callable bond. It is the issuing firm that has the option. Therefore, a callable bond must offer a higher-yield than similar non- callable bonds, and the investor in a callable bond is subject to prepayment risk. The bond is most likely to be redeemed when interest rates fall, in which case the issuer will want to call it in and replace it with a bond with a lower coupon rate.



Which of the following represents a secondary market transaction?

  1. An investor buys Treasury bills in the regular Monday auction.
  2. An investor buys 300 shares of Electromed (ELMD) at its IPO offer price of $4.00 a share.
  3. An investor sells her shares of Sunvalley Solar, Inc. (SSOL), which sells on the OTC Bulletin Board for $0.059 a share.
  4. A home buyer obtains a mortgage through his savings and loan.

Answer(s): C

Explanation:

When an investor sells her shares of Sunvalley Solar that is listed on the OTC Bulletin Board, it is a secondary market transaction since shares are being bought and sold between investors. All the other selections involve a new issue of securities, which makes them primary market transactions.



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

  1. 10 years in prison or a $10,000 fine, or both.
  2. 5 years in prison or a $10,000 fine, or both.
  3. 10 years in prison or a $25,000 fine, or both.
  4. 5 years in prison or a $5,000 fine, or both.

Answer(s): B

Explanation:

Any person who willfully acts in violation of the Securities Act of 1933, or any SEC rule, is subject to a penalty of 5 years in prison or a $10,000 fine, or both.



Viewing Page 3 of 66



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asl 9/14/2023 3:59:00 PM

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Av dey 8/16/2023 2:35:00 PM

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