Series 6

Study Question of the Week: May 7, 2014 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 52, Series 62, 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.

Study ? of the Week

Question (Relevant to the Series 6, Series 7, Series 52, Series 62, Series 65, and Series 66):

Concerning municipal bonds issued by the city of Baltimore, Maryland:

Answers:

A. If you live in the state of Maryland, you will pay state tax on the interest you earn

B. If you live in the state of Virginia, you will not pay state tax on the interest you earn

C. If you live in the state of Maryland, you will pay federal capital gains tax on any profits you realize when you sell the bonds

D. If you live in the state of Virginia, you will not pay federal capital gains tax on any profits you realize when you sell the bonds

Correct Answer: C. If you live in the state of Maryland, you will pay federal capital gains tax on any profits you realize when you sell the bonds

Rationale: Interest income earned on municipal bonds is not taxable at the federal level, and only taxable at the state level outside the state of their issuance. Capital gains realized upon the sale of such bonds are subject to capital gains tax regardless of the taxpayer’s state of residence.

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

Study Question of the Week: April 30, 2014 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.

Study ? of the Week

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

XYZ stock is trading at $10/share. ABC Co. makes a partial tender offer for XYZ stock at $11/share. John Johnson holds 1000 shares of XYZ stock. After ABC Co. announces the tender offer, John writes 10 calls of XYZ stock at $10.50/share. John then tenders as many shares of XYZ stock as he is legally permitted to. How many shares of XYZ does John tender?

Answers:

A. 0

B. 500

C. 1000

D. 2000

Correct Answer: A. 0

Rationale: John sold 10 calls after the tender offer was announced at a strike price lower than the tender offer price. As a result, the call is considered a short position for the purposes of calculating how many shares he can tender. John can tender up to his net long position in the stock, which is his long position (1000 shares) minus his short position (10 calls * 100 shares each = 1000 shares). 1000 – 1000 = 0, so John can tender 0 shares.

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

Study Question of the Week: April 16, 2014 Edition

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

Study ? of the Week

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

For the question below, assume that each of the answers is solely for the benefit of the recipient and are classified as gifts, not business entertainment.

Which of the following gifts would be a violation under Rule 3220:

Answers:

A. A $20 giftcard given to a salaried employee

B. A holiday fruit basket valued at $80 paid for, or provided by, a third party vendor

C. A vase valued at $120, given as a wedding present and paid for by the employee

D. A dinner cruise valued at $120, if written consent was provided by the recipient’s employer

Correct Answer: D. A dinner cruise valued at $120, if written consent was provided by the recipient’s employer

Rationale: FINRA Rule 3220 is a broad rule with few exceptions. In the above examples, a $20 gift card given to a salaried employee would not violate the rule because it is not over the $100 limit. Regardless of the entity that pays for it, an $80 fruit basket would not violate the rule because it is not over $100. A dinner cruise valued at $120, even if written consent was provided by the recipient’s employer, is a violation because a flat $100 standard is applied, whether or not the recipient’s firm deems it appropriate. Note that in prior years, employees of NYSE firms were able to make such gifts under this scenario.

Even though it exceeds the $100 standard, a vase valued at $120, given as wedding present and paid for the by the employee is not a violation because it falls outside of the Rule 3220 restrictions. If a gift is given in commemoration of a life event (wedding, birth, etc.) and it is paid for by the individual employee, it is classified as a personal gift that is not “related to the business“ of the recipient’s employer. It is important to recognize that if the giver is ultimately reimbursed by their firm for the price of the present, the gift would be reclassified as a business-related gratuity and would then be in violation of the Rule’s $100 limitation.

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

Study Question of the Week: April 9, 2014 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 52, Series 53, Series 66, Series 79, and Series 99. –ANSWER POSTED– Continue reading

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

Study ? of the Week

Question (Relevant to the Series 6, Series 7, Series 24, Series 26, Series 52, Series 53, Series 66, Series 79, and Series 99):

Which of the following are correct dollar minimums for the Bank Secrecy Act’s requirements for broker-dealers?

I. $3,000 or more received or transmitted must be recorded in a monetary instrument log (MIL)

II. $5,000 or more received or transmitted must be recorded in a monetary instrument log (MIL)

III. Cash transaction of $5,000 or more must be reported to the IRS

IV. Cash transaction of $10,000 or more must be reported to the IRS

Answers:

A. I and III

B. I and IV

C. II and III

D. II and IV

Correct Answer: B. I and IV

Rationale: In any one day, a transmittal of $3,000 or more or a cash transaction must be recorded in a monetary instrument log (MIL) and cash transaction of $10,000 or more must be reported to the IRS.

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

Study Question of the Week: April 2, 2014 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 79, and Series 82. –ANSWER POSTED– Continue reading

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

Study ? of the Week

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

CMOs were primarily created to distribute the amount of ___________________ risk to investors with various risk tolerances. Choose the BEST answer.

Answers:

A. default

B. credit

C. prepayment

D. interest rate

Correct Answer: C. prepayment

Rationale: Unlike a traditional mortgage backed security that has a single coupon rate and maturity date, a collateralized mortgage obligation is a pool of mortgage-backed securities and/or individual mortgages which is structured into several classes of bondholder, each with a different interest rate and term. With a CMO, streams of interest and principal payments are sliced up and distributed to different classes of investors in separate tranches (slices, in French). CMOs were first introduced in 1983 to offer MBS investors a greater variety of maturities and certainty of cash flow. By redistributing prepayment risk away from some tranches and toward others, CMOs allow investors to choose how much of this type of risk they are willing to accept over a given time horizon. Tranches with the lowest exposure to prepayments offer lower yields to investors wanting to reduce their risk exposure. Tranches that accept higher prepayment risks attract investors seeking higher yields.

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

Study Question of the Week: March 19, 2014 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.

Study ? of the Week

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

Which of the following statements concerning REITs (real estate investment trusts) and RELPs (real estate limited partnerships) are true?

I. REITs pass through income, but not losses, to shareholders

II. RELPs pass through both income and losses to shareholders

III. REITs are highly illiquid

IV. RELPs are highly liquid

Answers:

A. I and III

B. II and IV

C. I and II

D. I, II, III and IV

Correct Answer: C. I and II

Rationale: Statements I and II are both true, but statements III and IV are reversed. Limited partnership investments are almost always illiquid, while REITs are highly liquid.

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

Testimonial Tuesday: February 18, 2014 Edition

“…Thanks again for all the help and good quality material that your company has…” Continue reading

“I thought you might appreciate knowing that I passed the test with a 90 today. Thanks again for all the help and good quality material that your company has. I am very glad to have used your materials and will certainly refer others to Solomon Exam Prep. (Series 6 & 63)” -Matthew Baird, Gloversville, NY

Read more reviews here: Solomon Exam Prep Reviews

Study Question of the Week: February 12, 2014 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.

Study ? of the Week

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

Carlos, age 58, is in the 25 percent marginal income tax bracket. If he takes a $10,000 distribution from his IRA to pay off credit card debt, Carlos will be subject to a total payment of:

Answers:

A. $0

B. $3,250

C. $2,500

D. $3,500

Correct Answer: D. $3,500

Rationale: Carlos will have to pay ordinary income tax of 25% on his distribution, plus a 10% penalty for early withdrawal because he is under age 59 1/2. $10,000 (distribution amount) x 35% (tax + penalty) = $3,500 total payment for both tax-and-penalty. Perhaps Carlos should look at the $1,000 he will be paying in penalty and compare that to the total anticipated interest payments he will be making on his credit card over the next year and a half.

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

Study Question of the Week: February 5, 2014 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 24, Series 26, Series 52, 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.

Study ? of the Week

Question (Relevant to the Series 6, Series 24, Series 26, Series 52, Series 62, Series 79, and Series 82):

When must a Suspicious Activity Report be filed under the Bank Secrecy Act?

Answers:

A. Within 15 days of the transaction

B. Within 15 days of discovery

C. Within 30 days of the transaction

D. Within 30 days of discovery

Correct Answer: D. Within 30 days of discovery

Rationale: The Bank Secrecy Act requires that money service businesses file Suspicious Activity Reports (SARs) within 30 days of becoming aware of any suspicious transaction that is required to be reported. In the securities business, suspicious transactions are required to be reported if they involve $5,000 or more. A copy of the report must be kept for five years.

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

Study Question of the Week: January 22, 2014 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 52, and Series 65. –ANSWER POSTED– Continue reading

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

Study ? of the Week

Question (Relevant to the Series 6, Series 7, Series 52, and Series 65):

The Fed (Federal) Funds rate refers to:

Answers:

A. The rate banks have to pay when borrowing from the Federal Reserve

B. The rate broker-dealers pay when borrowing on behalf of customers

C. The rate that the most credit worthy customers pay when borrowing

D. The rate banks charge each other for overnight loans over $1,000,000

Correct Answer: D. The rate banks charge each other for overnight loans over $1,000,000

Rationale: The Federal Funds Rate refers to the rate that banks charge each other for short-term loans.

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