Author: Asay

July Study Question of the Month

Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card. Continue reading

Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.

Question

Relevant to the Series 6, Series 7, Series 62, Series 65,  Series 66,  Series 82, and Series 99.

 

 

 

 

 

Bob owns convertible preferred stock in BigCo. Which of the following is a taxable event for Bob?
 
A. He converts it into common stock
B. Due to a corporate restructuring, he receives additional shares
C. He receives a cash dividend that is less than the amount that the share price declined last quarter

D. Due to a corporate merger, his shares are exchanged for shares in LargerCo

Answer: C. Receiving a dividend (even a qualified dividend) is a taxable event. When a company merges with another company, it may give its shareholders stock in a new company in exchange for the stock they currently hold. This is usually not a taxable event, meaning the shareholder does not have to pay taxes on the new shares at the time of the exchange. Moreover, if the company gives shares of common or preferred stock to shareholders because of a corporate restructuring or bankruptcy, this is also not a taxable event. Additionally, the conversion of convertible preferred stock (or bonds) to common stock is not a taxable event.

June Study Question of the Month

Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card. Continue reading

Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.

Question

Relevant to the Series 6, Series 7, Series 62, Series 65,  Series 66, and Series 82.

 

 

 

 

 

What does a value investor look for?

A. Increased P/E

B. Small-cap stocks

C. Trading above intrinsic value

D. Higher dividend yield

Answer: D. Value investing places primary emphasis on getting a bargain. Using fundamental analysis, a value investor looks for stocks that are trading below their “intrinsic” value. Value investors like growth as much as growth investors do, but value investors are wary of overpaying for that growth. Value investing’s bargain-hunting approach means value investors pay as much attention to the balance sheet as they do to the income statement, searching for gold that the market might have overlooked. Value stocks then, by definition, on average, have lower P/E ratios, lower price-to-book and price-to-sales ratios, and higher dividend yields.

Solomon Exam Prep and NASA launch SIE mission to Mars

In preparation for the October 1 launch of the Securities Industry Essentials (SIE) exam, Solomon Exam Prep teamed with NASA to send Solomon SIE exam study materials to the Red Planet. Continue reading

In preparation for the October 1 launch of the Securities Industry Essentials (SIE) exam, Solomon Exam Prep teamed with NASA to send Solomon SIE exam study materials to the Red Planet.

Unlike other FINRA securities licensing exams, the SIE exam will be open to anyone 18 years or older who is interested in the securities industry. FINRA has not publicly stated whether Martians will be permitted to take the SIE exam but since FINRA is dedicated to “investor protection” and to promoting “market integrity” Solomon takes the position that investors and markets on other planets can benefit from securities education, and the SIE in particular. Solomon has helped thousands of earthlings pass their Series 7, Series 6, Series 65, Series 63, Series 24, Series 50, Series 79 and other securities licensing exams.

Elon Musk has not responded to the news of the joint NASA/Solomon Exam Prep mission.

May Study Question of the Month

Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card. Continue reading

Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.

Question

Relevant to the Series 6, Series 7, Series 65, and  Series 66.

 

 

 

 

 

Bill is in a serious pinch and would like to take a loan against the value of his annuity. He is still in the accumulation period. Which of the following is true?

A. It is strictly prohibited by the IRS.

B. Many insurance companies allow it, but he will be subject to a 10% early withdrawal penalty.

C. Many insurance companies allow it, but it will be considered a distribution and therefore is taxable. A penalty may also apply.

D. Many insurance companies, allow it and there will be no tax or penalty implications provided it is repaid during the accumulation period.

Answer: C. Unlike a loan against a life insurance policy, a loan against an annuity is considered a distribution and will therefore be taxable. Interest charges are generally handled by reducing the number of accumulation units and if the owner pays back the loan, the number of units will increase. In cases where the customer is under 59 1/2, a 10% federal tax penalty may also apply.