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.

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 7Series 62Series 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 6Series 7Series 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 6Series 7Series 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.

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. 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 7Series 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

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.  The trade-off is that you avoid reinvestment risk along the way.

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

Study Question of the Week: December 20, 2012 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):

A Oregon hazelnut farm exports all of their hazelnuts to China and a Chinese trampoline manufacturer exports all of their trampolines to the U.S. Which of the following is true?

Answers:

A: Both the hazelnut farm and the Chinese trampoline manufacturer prefer a strong dollar

B: Both the hazelnut farm and the Chinese trampoline manufacturer prefer a weak dollar

C: The hazelnut farm prefers a strong dollar and the Chinese trampoline manufacturer prefers a weak dollar

D: The hazelnut farm prefers a weak dollar and the Chinese trampoline manufacturer prefers a strong dollar

Correct Answer: D

Rationale: To get this kind of question correct, think about where the goods are being sold. Groups that sell goods in the U.S. prefer a strong dollar. Foreign exporters and U.S. importers both sell goods in the U.S. so they prefer a strong dollar. In contrast, groups that sell goods in a foreign country prefer a weak dollar. Foreign importers and U.S. exporters sell goods in a foreign country so they prefer a weak dollar. The hazelnut farm is selling their goods outside of the U.S. so they prefer a weak dollar. The Chinese trampoline manufacturer is selling their goods in the U.S. so they prefer a strong dollar.

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

 

Study Question of the Week: November 8, 2012 Edition

This week’s exam study question from the Solomon Online Exam Simulator question database is now available. This week’s exam question is relevant to the Series 6, Series 7, Series 24, Series 26, 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. Be sure to submit your answers in the comments section below.

Question (Relevant to the Series 6, Series 7, Series 24, Series 26, Series 62, Series 65, Series 66, and Series 82):

A couple has just had a baby and they want to start saving for college. What option does NOT offer the opportunity for their investment to grow free of federal taxes?

Answers:

A: Education Savings Account

B: UGMA/UTMA Account

C: 529 College Savings Plan

D: 529 Prepaid Tuition Plan

ANSWER & RATIONALE

Correct Answer: B

Rationale: Unlike the other options, UGMA/UTMA (Uniform Gifts to Minors Act/Uniform Transfers to Minors Act) accounts are subject to federal income and capital gains taxes.

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

ANSWER – Study Question of the Week: October 23, 2012 Edition

As a follow up to yesterday’s licensing exam study question, here is your question PLUS answer and rationale. Relevant to Series 6, Series 7, Series 65, Series 66, Series 24, Series 26 and Series 99. Continue reading

As a follow up to yesterday’s licensing exam study question, here is your question PLUS answer and rationale:

Question (Relevant to Series 6, Series 7, Series 65, Series 66, Series 24, Series 26 and Series 99):

Which of the following is true of UGMA/UTMA accounts?

I. Only family members may contribute to a UGMA/UTMA
II. Annual contribution limit of $13,000 per year, per child
III. Assets may only be used for education expenses
IV. Earnings reported under adult custodian’s tax identification

Answers:

A: I, II

B: III, IV

C: II, III

D: None of the choices listed

Correct Answer: D

Rationale: Anyone may contribute to a Uniform Gifts to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA) account and there are no contribution limits. Assets in UGMA/UTMA accounts may be used for any purpose and earnings are reported on the minor’s social security account, not the custodian’s.

*Questions featured in the weekly study question series are sampled from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: October 23, 2012 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available (Relevant to Series 6, 7, 65, 66, 24, 26 and 99). Be sure to submit your answers in the comments section and check back tomorrow for the correct answer and rationale. Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available. Be sure to submit your answers in the comments section and check back tomorrow for the correct answer and rationale. Happy studying!

Question (Relevant to Series 6, Series 7, Series 65, Series 66, Series 24, Series 26 and Series 99):

Which of the following is true of UGMA/UTMA accounts?

I. Only family members may contribute to a UGMA/UTMA
II. Annual contribution limit of $13,000 per year, per child
III. Assets may only be used for education expenses
IV. Earnings reported under adult custodian’s tax identification

Answers:

A: I, II

B: III, IV

C: II, III

D: None of the choices listed