FINRA Series 6 Exam Practice Questions (P. 2)
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Question #11
All government bonds and the majority of corporate bonds are traded:
- Aon the floor of the NYSE.
- Bvia electronic communication networks (ECNs).
- Con regional exchanges.
- Din the over-the-counter market.
Correct Answer:
D
All government bonds and the majority of corporate bonds are traded in the over-the-counter market.
D
All government bonds and the majority of corporate bonds are traded in the over-the-counter market.
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Question #12
Which of the following types of securities would not be traded in the over-the-counter market?
I. stock options -
II. government bonds -
III. corporate bonds -
IV. corporate stocks -
I. stock options -
II. government bonds -
III. corporate bonds -
IV. corporate stocks -
- AI only
- BI and IV only
- CIII and IV only
- DAll of the choices are traded in the over-the-counter market.
Correct Answer:
D
All of the choices listed-and more-are traded in the over-the-counter market: stock options, government bonds, corporate bonds, and corporate stocks. Additionally, securities such as warrants, rights, forward contracts, and foreign currencies also trade in the over-the-counter market.
D
All of the choices listed-and more-are traded in the over-the-counter market: stock options, government bonds, corporate bonds, and corporate stocks. Additionally, securities such as warrants, rights, forward contracts, and foreign currencies also trade in the over-the-counter market.
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Question #13
Which of the following are duties of the specialist on an exchange floor?
I. executing limit orders if/when the limit price specified is reached
II. minimizing any imbalance in supply and demand for the stock(s) that the specialist is assigned
III. determining an opening price for each assigned stock every day
IV. serving as an auctioneer for the shares of the assigned stocks
I. executing limit orders if/when the limit price specified is reached
II. minimizing any imbalance in supply and demand for the stock(s) that the specialist is assigned
III. determining an opening price for each assigned stock every day
IV. serving as an auctioneer for the shares of the assigned stocks
- AI and II only
- BI, II, and IV only
- CI and IV only
- DI, II, III, and IV
Correct Answer:
D
All of the choices listed are duties of the specialist on an exchange floor. The specialist maintains a limit order "book" and executes those orders if/ when the limit price is reached. The specialist is also charged with maintaining a fair and orderly market in the assigned securities, which means trading on his own account to ensure that the supply and demand of the stocks shares match. Additionally, the specialist is responsible for setting the opening price for the assigned stock each day and for serving as the auctioneer for the shares of the stock.
D
All of the choices listed are duties of the specialist on an exchange floor. The specialist maintains a limit order "book" and executes those orders if/ when the limit price is reached. The specialist is also charged with maintaining a fair and orderly market in the assigned securities, which means trading on his own account to ensure that the supply and demand of the stocks shares match. Additionally, the specialist is responsible for setting the opening price for the assigned stock each day and for serving as the auctioneer for the shares of the stock.
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Question #14
The price at which an investor can sell a security to a market maker in the over-the-counter market is called the:
- Asale price.
- Bput price.
- Cbid price.
- Dask price.
Correct Answer:
C
An investor can sell a security to a market maker in the over -the-counter market at the bid price, which is the price at which the market maker is willing to buy the security.
C
An investor can sell a security to a market maker in the over -the-counter market at the bid price, which is the price at which the market maker is willing to buy the security.
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Question #15
Mary is interested in buying shares of the Lambchops Corporation, which sells over-the-counter. The market maker with the best bid price--$3.15--is Veggie
Investments. The market maker with the best ask price--$3.27-is Carnivor Investments. Mary conducts trades in NYSE-listed stocks through her broker, Omnivor and Associates.
Given this scenario, which of the following statements is true?
Investments. The market maker with the best ask price--$3.27-is Carnivor Investments. Mary conducts trades in NYSE-listed stocks through her broker, Omnivor and Associates.
Given this scenario, which of the following statements is true?
- AMary can buy shares of Lambchops Corporation at the bid price of $3.15 by contacting Veggie Investments directly.
- BMary can buy shares of Lambchops Corporation at the ask price of $3.27 by contacting Carnivor Investments directly.
- CMary can buy shares of Lambchops Corporation at the bid price of $3.15 by contacting Omnivor and Associates.
- DMary can buy shares of Lambchops Corporation at the ask price of $3.27 by contacting Omnivor and Associates.
Correct Answer:
D
Mary can buy shares of Lambchops Corporation for $3.27 from the market maker with the best ask price, Carnivor, by contacting her broker, Omnivor and Associates, which will execute the transaction. The ask price is the price at which market makers in the over-the-counter market are willing to sell the stock, and over-the-counter transactions, like NYSE transactions, are executed by brokers.
D
Mary can buy shares of Lambchops Corporation for $3.27 from the market maker with the best ask price, Carnivor, by contacting her broker, Omnivor and Associates, which will execute the transaction. The ask price is the price at which market makers in the over-the-counter market are willing to sell the stock, and over-the-counter transactions, like NYSE transactions, are executed by brokers.
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Question #16
Noah Mete is interested in selling his shares of the Lambchops Corporation, which trades over-the-counter. The market maker with the best bid price--$3.15--is
Veggie Investments. The market maker with the best ask price--$3.27-is Carnivor Investments. Noah conducts trades in NYSE-listed stocks through his broker,
Omnivor and Associates.
Given this scenario, which of the following statements is true?
Veggie Investments. The market maker with the best ask price--$3.27-is Carnivor Investments. Noah conducts trades in NYSE-listed stocks through his broker,
Omnivor and Associates.
Given this scenario, which of the following statements is true?
- ANoah can sell his shares of Lambchops Corporation at the bid price of $3.15 by contacting Veggie Investments directly.
- BNoah can sell his shares of Lambchops Corporation at the ask price of $3.27 by contacting Carnivor Investments directly.
- CNoah can sell his shares of Lambchops Corporation at the bid price of $3.15 by contacting Omnivor and Associates.
- DNoah can sell his shares of Lambchops Corporation at the ask price of $3.27 by contacting Omnivor and Associates.
Correct Answer:
C
Noah can sell his shares of Lambchops Corporation for $3.15 from the market maker with the best bid price, Veggie, by contacting his broker,
Omnivor and Associates, which will execute the transaction. The bid price is the price at which market makers in the over-the-counter market are willing to buy the stock, and over-the-counter transactions, like NYSE transactions, are executed by brokers.
C
Noah can sell his shares of Lambchops Corporation for $3.15 from the market maker with the best bid price, Veggie, by contacting his broker,
Omnivor and Associates, which will execute the transaction. The bid price is the price at which market makers in the over-the-counter market are willing to buy the stock, and over-the-counter transactions, like NYSE transactions, are executed by brokers.
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Question #17
Which of the following represents a secondary market transaction?
- AAn investor buys Treasury bills in the regular Monday auction.
- BAn investor buys 300 shares of Electromed (ELMD) at its IPO offer price of $4.00 a share.
- CAn investor sells her shares of Sunvalley Solar, Inc. (SSOL), which sells on the OTC Bulletin Board for $0.059 a share.
- DA home buyer obtains a mortgage through his savings and loan.
Correct Answer:
C
When an investor sells her shares of Sunvalley Solar that is listed on the OTC Bulletin Board, it is a secondary market transaction since shares are being bought and sold between investors. All the other selections involve a new issue of securities, which makes them primary market transactions.
C
When an investor sells her shares of Sunvalley Solar that is listed on the OTC Bulletin Board, it is a secondary market transaction since shares are being bought and sold between investors. All the other selections involve a new issue of securities, which makes them primary market transactions.
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Question #18
Which of the following statements about primary market transactions is true?
- AA primary market transaction is defined as a transaction that is executed on either the NYSE or NASDAQ. Transactions that take place on ECNs are secondary market transactions.
- BIn a primary market transaction, the issuer of the security receives the proceeds from the sale of the security.
- CA primary market transaction refers to the trading of stocks; a secondary market transaction is defined as a transaction that involves bonds.
- DBoth A and B are true statements.
Correct Answer:
B
In a primary market transaction, the issuer of the security receives the proceeds from the sale of the security. A secondary market transaction involves the purchase and sale of a security between investors, and the seller of the security receives the proceeds from the sale. Both stocks and bonds are initially introduced to the market as primary market securities and are then traded in the secondary market.
B
In a primary market transaction, the issuer of the security receives the proceeds from the sale of the security. A secondary market transaction involves the purchase and sale of a security between investors, and the seller of the security receives the proceeds from the sale. Both stocks and bonds are initially introduced to the market as primary market securities and are then traded in the secondary market.
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Question #19
A new issue of common stock can be classified in which of the following categories?
I. primary market -
II. money market -
III. secondary market -
IV. capital market -
I. primary market -
II. money market -
III. secondary market -
IV. capital market -
- AI only
- BIII only
- CI and IV only
- DII and III only
Correct Answer:
C
Only Selections I and IV are correct. A new issue of common stock will be sold in the primary market. It is also a capital market security since it has no maturity, and capital market securities are securities with greater than one year to maturity.
C
Only Selections I and IV are correct. A new issue of common stock will be sold in the primary market. It is also a capital market security since it has no maturity, and capital market securities are securities with greater than one year to maturity.
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Question #20
Which of the following securities would be exempt from SEC registration requirements?
I. a 15-year bond issued by the state of Colorado
II. an issue of preferred stock that has an aggregate par value of $5 million
III. an issue of commercial paper that has a 5-month maturity
I. a 15-year bond issued by the state of Colorado
II. an issue of preferred stock that has an aggregate par value of $5 million
III. an issue of commercial paper that has a 5-month maturity
- AI only
- BIII only
- CI and III only
- DI and II only
Correct Answer:
C
Only Selections I and III are exempt from SEC registration requirements. The bond issued by Colorado is exempt because bonds issued by a government body are exempt from registration. The issue of commercial paper is exempt because securities with less than 270 days to maturity are exempt from registration.
C
Only Selections I and III are exempt from SEC registration requirements. The bond issued by Colorado is exempt because bonds issued by a government body are exempt from registration. The issue of commercial paper is exempt because securities with less than 270 days to maturity are exempt from registration.
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