SERIES 6 PRACTICE TEST
1.
Which organization regulates the sale of mutual funds in the U.S.?
A. SEC
B. FINRA
C. Federal Reserve
D. FDIC
Answer: B
Rationale: FINRA regulates broker-dealers and registered representatives who sell mutual funds.
2.
A mutual fund is best described as:
A. A fixed-income bond
B. A pooled investment vehicle
C. A government insurance product
D. A bank deposit
Answer: B
Rationale: Mutual funds pool money from investors to invest in diversified portfolios.
3.
Which NAV formula is correct?
A. Assets + Liabilities ÷ Shares
B. Assets − Liabilities ÷ Shares
C. Assets ÷ Liabilities × Shares
D. Liabilities − Assets ÷ Shares
Answer: B
Rationale: NAV = (Assets − Liabilities) ÷ Outstanding shares.
4.
A load fund typically charges:
A. No fees
B. Sales charges
C. Insurance premiums
D. Bank fees
,Answer: B
Rationale: Load funds charge sales commissions either at purchase or redemption.
5.
A 12b-1 fee is used for:
A. Trading stocks
B. Marketing and distribution
C. Government taxes
D. Insurance coverage
Answer: B
Rationale: 12b-1 fees cover marketing and distribution expenses.
6.
Which fund is least risky?
A. Small-cap fund
B. Sector fund
C. Money market fund
D. International fund
Answer: C
Rationale: Money market funds invest in short-term debt instruments and are lowest risk.
7.
A breakpoint in mutual funds refers to:
A. Fund closure
B. Discount on sales charges
C. NAV calculation error
D. Trading halt
Answer: B
Rationale: Breakpoints reduce sales charges at higher investment levels.
8.
Open-end funds are priced:
A. Intraday
B. At NAV end of day
C. Weekly
D. Monthly
, Answer: B
Rationale: Open-end funds are priced once daily at NAV.
9.
Closed-end funds trade:
A. At NAV only
B. On exchanges
C. Only with issuer
D. Only OTC
Answer: B
Rationale: Closed-end funds trade like stocks on exchanges.
10.
A prospectus must include:
A. Insider trades
B. Risk disclosures
C. Bank secrets
D. Tax evasion data
Answer: B
Rationale: Prospectuses must disclose risks and investment objectives.
11.
Which is a money market instrument?
A. Stock
B. Treasury bill
C. Option
D. REIT
Answer: B
Rationale: T-bills are short-term debt instruments used in money markets.
12.
Systematic investment refers to:
A. One-time purchase
B. Regular investing schedule
C. Insider trading
D. Margin trading
1.
Which organization regulates the sale of mutual funds in the U.S.?
A. SEC
B. FINRA
C. Federal Reserve
D. FDIC
Answer: B
Rationale: FINRA regulates broker-dealers and registered representatives who sell mutual funds.
2.
A mutual fund is best described as:
A. A fixed-income bond
B. A pooled investment vehicle
C. A government insurance product
D. A bank deposit
Answer: B
Rationale: Mutual funds pool money from investors to invest in diversified portfolios.
3.
Which NAV formula is correct?
A. Assets + Liabilities ÷ Shares
B. Assets − Liabilities ÷ Shares
C. Assets ÷ Liabilities × Shares
D. Liabilities − Assets ÷ Shares
Answer: B
Rationale: NAV = (Assets − Liabilities) ÷ Outstanding shares.
4.
A load fund typically charges:
A. No fees
B. Sales charges
C. Insurance premiums
D. Bank fees
,Answer: B
Rationale: Load funds charge sales commissions either at purchase or redemption.
5.
A 12b-1 fee is used for:
A. Trading stocks
B. Marketing and distribution
C. Government taxes
D. Insurance coverage
Answer: B
Rationale: 12b-1 fees cover marketing and distribution expenses.
6.
Which fund is least risky?
A. Small-cap fund
B. Sector fund
C. Money market fund
D. International fund
Answer: C
Rationale: Money market funds invest in short-term debt instruments and are lowest risk.
7.
A breakpoint in mutual funds refers to:
A. Fund closure
B. Discount on sales charges
C. NAV calculation error
D. Trading halt
Answer: B
Rationale: Breakpoints reduce sales charges at higher investment levels.
8.
Open-end funds are priced:
A. Intraday
B. At NAV end of day
C. Weekly
D. Monthly
, Answer: B
Rationale: Open-end funds are priced once daily at NAV.
9.
Closed-end funds trade:
A. At NAV only
B. On exchanges
C. Only with issuer
D. Only OTC
Answer: B
Rationale: Closed-end funds trade like stocks on exchanges.
10.
A prospectus must include:
A. Insider trades
B. Risk disclosures
C. Bank secrets
D. Tax evasion data
Answer: B
Rationale: Prospectuses must disclose risks and investment objectives.
11.
Which is a money market instrument?
A. Stock
B. Treasury bill
C. Option
D. REIT
Answer: B
Rationale: T-bills are short-term debt instruments used in money markets.
12.
Systematic investment refers to:
A. One-time purchase
B. Regular investing schedule
C. Insider trading
D. Margin trading
