Series 6

Study Question of the Week: May 1, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 62, Series 65, Series 66, Series 79, and Series 82. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Question (Relevant to the Series 6, Series 7, Series 62, Series 65, Series 66, Series 79, and Series 82):

Which of the following Treasury securities does not pay interest semi-annually?

Answers:

A. T-bills

B. T-notes

C. T-bonds

D. TIPS

Correct Answer: A

Rationale: Treasury bills, or T-bills are issued at a discount from the par value (face value) and the interest payment is paid one time, on maturity, and it is the difference between the par value and the purchase price. T-notes, T-bonds and TIPS pay interest semi-annually (twice a year).

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: April 24, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 62, Series 65, Series 66, and Series 82. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Question (Relevant to the Series 6, Series 7, Series 62, Series 65, Series 66, and Series 82):

Ten years ago, Janice bought 100 shares of Humdrum Inc. at $70 per share. The price of the stock has declined and this year she decides to sell the stock at $25. A week after she sells the stock, Humdrum announces an exciting new product called Humdinger and Janice decides Humdrum is a stock she wants to own after all and she buys 100 new shares of Humdrum at $30. Which of the following is true?

Answers:

A. Janice can claim a $45 per share loss on her tax return

B. Janice can claim a $40 per share loss on her tax return

C. The basis of the new shares will be $75

D. The basis of the new shares will be $55

Correct Answer: C

Rationale: According to IRS rules, if you sell a security at a loss and then buy back the same securities within 30 days, any loss on the sale of the original securities is disallowed. This is called a Wash Sale. However, you are permitted to capture the loss by adding it to the basis of the new shares. Therefore, the basis of the new shares will be $30 (purchase price) + $45 (per share loss on sale of old shares) = $75.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: March 27, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 62, Series 65, and Series 82. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Question (Relevant to the Series 6, Series 7, Series 62, Series 65, and Series 82):

“Phantom tax exposure” is a characteristic of:

I. T-bonds

II. Treasury STRIPS

III. Zero-coupon bonds

IV. Municipal revenue bonds

Answers:

A. I and III

B. I and II

C. II and III

D. II and IV

Correct Answer: C

Rationale: Treasury STRIPS, which are sold at a discount and don’t pay annual interest to owners, are a type of zero coupon bond. Zeroes are taxed each year based upon the imputed annual value of the cumulative interest earned. “Phantom tax exposure” means you pay taxes each year on interest you don’t receive. Zeros do not pay interest each year, instead interest is paid in a lump sum at maturity. For this reason, investors in zeros do not have to worry about the risk of having to reinvest their interest payments at a lower rate (reinvestment risk).

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Exam Alert: SEC clarifies standards for filing social media communications by investment companies

On March 15, 2013, the SEC issued guidance for investment companies regarding their communications over social media. Noting that investment companies have been filing certain communications unnecessarily, the SEC describes which types of communications should or should not be filed, providing examples of each. Continue reading

Communications that should be filed include:

-Discussion of the specific elements of the performance of a fund

-Promotion of the performance of a fund

-Communication initiated by the issuer that talks about the merits of the fund

Communications that do not need to be filed include:

-Mention of an investment company that does not address the investment merits of the fund

-Talking about performance with no mention of any specific element of a fund’s return

-Factual introductory statements that include a link to the fund’s prospectus

-Factual responses to queries that do not address the investment merits of a fund

To see examples of what needs to be filed and what does not, check out the SEC guidance.

For further analysis of the SEC release, along with a general discussion of the intersection of regulation and social media, check out the blog post by Augie Ray at http://www.experiencetheblog.com/2013/03/regulators-to-financial-service-stop.html. Mr. Ray, an ex-Forrester analyst (source), asserts that regulators are encouraging firms to make more active use of social media, and that this guidance is part of that trend.

Source: SEC Release 2013-40: SEC Issues Guidance Update on Social Media Filings by Investment Companies

This alert applies primarily to the Series 6, Series 7, and Series 26. It may also be relevant to the Series 24, Series 62, Series 82, Series 99.

Study Question of the Week: March 7, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 62, Series 79, and Series 82. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Question (Relevant to the Series 6, Series 7, Series 62, Series 79, and Series 82):

Which of the following are not true of CMOs?

Answers:

a. CMOs tend to be more sensitive to interest rates than most fixed income securities

b. Most CMOs protect against both prepayment risk and extension risk

c. A decrease in interest rates may lead to CMO investors getting their principal payments sooner than expected

d. CMOs can be issued as a government agency CMO or as a private-label CMO

Correct Answer: B

Rationale: A sequential pay CMO is the most basic of CMO structures, also known as a plain vanilla offering. Each tranche receives regular interest payments, but principal payments are made to the first tranche alone until it is completely retired, after which principal payments are applied to the next tranche until it is fully retired, and so on until the last tranche is retired in sequence. While most CMOs protect against prepayment risk better than a traditional mortgage backed security, they are still subject to prepayment risk and extension risk. CMOs are also more sensitive to interest rate changes than other fixed income securities because when interest rates fall, prepayment speeds usually accelerate, and CMO investors may receive their principal back sooner than they expected. They then have to reinvest this principal at lower interest rates.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: February 19, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 24, Series 26, Series 62, Series 79, Series 82, and Series 99. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Question (Relevant to the Series 6, Series 7, Series 24, Series 26, Series 62, Series 79, Series 82, and Series 99):

Richard had just returned to the States from his third tour of duty in Afghanistan. After relaxing with family and friends for a couple of months, he re-registers with his old employer where he had worked as a broker. In the meantime his license:

Answers:

A. Expired after his second year-long tour of duty

B. Expired ninety days after completing his second tour of duty

C. Remains current

D. Expires in 30 days unless Richard successfully completes his continuing education program

Correct Answer: C

Rationale: FINRA provides licensing relief to registered representatives who are called into or volunteer for active military service. Richard’s license will expire ninety days after completion of active service, unless he re-registers with a member firm before that time. Since he took only two months off before re-registering, Richard’s license is still current and will remain so.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Join Solomon Exam Prep at the LAMP Conference in sunny San Diego, CA

Solomon Exam Prep is excited to announce its appearance at LAMP March 10-13, 2013 at the Manchester Grand Hyatt in sunny San Diego, CA. Continue reading

Solomon Exam Prep is excited to announce its appearance at LAMP March 10-13, 2013 at the Manchester Grand Hyatt in sunny San Diego, CA. LAMP is GAMA International’s annual Leadership and Management Program meeting.

GAMA International is an association committed to developing future leaders in the financial services and insurance industry. “LAMP is where industry leaders come to connect with colleagues, learn from industry’s best and brightest, and recharge and reinvigorate themselves for the coming year. It’s an annual must for those field leaders who are serious about working on their business, not just in it.” (http://gamaweb.com/lampconf/)

Come by our booth to learn more about Solomon’s corporate study solutions for the Series 6, Series 63 and Life & Health licensing exams. We will be showcasing our new website & giving away some great licensing exam swag!

Study Question of the Week: February 13, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 65, and Series 66. — ANSWER POSTED — Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Question (Relevant to the Series 6, Series 7, Series 65, and Series 66):

Which of the following situations would avoid the 10% penalty on an early withdrawal from an annuity?

I. Setting up a SEPP program and staying on it for at least 5 years

II. Utilizing IRS rule 72(t)

III. Withdrawal for first time home purchase up to $10,000

IV. The annuitant turning 55 1/2 years old

Answers:

A. II

B. I and II

C. III and IV

D. I, II, and IV

Answer: B

Rationale: Setting up a SEPP (Substantially Equal Periodic Payment) program and staying on it for 5 years and utilizing IRS rule 72(t) are essentially the same thing. When an individual takes a series of substantially equal and periodic payments for a minimum of 5 years or until the individual turns 59 1/2, whichever comes last, he is not subject to the 10% penalty for an early withdrawal. An investor does not get a 10% penalty for withdrawing up to $10,000 for a first home purchase out of an IRA, but this is not true for a withdrawal from an annuity.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Exam Alert: FINRA revises inspection rule

Effective February 25, 2013, FINRA will modify its rule that covers its ability to request information and inspect books and records. Continue reading

Effective February 25, 2013, FINRA will modify its rule that covers its ability to request information and inspect books and records. The rule will:

-specify that FINRA may inspect and copy information that is in a person’s “possession, custody, or control” if the person is subject to FINRA’s jurisdiction

-identify that books and records are subject the rule if they relate to a broker-dealer’s business or to a person’s association with a member

-describe how FINRA will contact unregistered associated persons at either a business or home address

-permit FINRA to provide an inspection request to a person’s attorney, assuming the person is being represented by the attorney in responding to the request

Source: Regulatory Notice 13-06: SEC Approves Amendments to Rule 8210

This alert applies to the Series 6, Series 7, Series 24, Series 26, Series 62, Series 79, and Series 82.

Study Question of the Week: January 24, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Question (Relevant to the Series 6, Series 7, Series 62, Series 65, and Series 82):

“Phantom tax exposure“ is a characteristic of:

I. T-bonds

II. Treasury STRIPS

III. Zero-coupon bonds

IV. Municipal revenue bonds

Answers:

A. I, II and III

B. I and IV

C. II and III

D. None of the choices listed

Correct Answer: C. II and III

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.