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FINRA Investment Company and Variable Contracts Products Representative Examination (IR) Sample Questions:
1. Ken has a variable life policy and recently learned that he can borrow against its cash value to help pay
for some of the expenses he's incurring while pursuing a graduate degree. Which of the following
statements about the loan he can get is true?
A) Ken has been misinformed. He cannot borrow against the cash value of a variable life policy because
the cash values of these policies fluctuate constantly.
B) Ken never has to repay the loan, but if he chooses not to do so, his wife, Barbie, won't get as much
when he dies.
C) Ken can borrow at most only 50% of the cash value, and only as long as he's had the policy for at least
three years.
D) Since Ken is essentially borrowing his own money, the loan is interest-free.
2. Which of the following is not a function performed by an investment banker as part of a full commitment
underwriting?
A) purchases the securities from the issuing firm
B) provides advice to the issuing firm on what type of security should be issued in order to raise the funds
C) provides advice to the issuing firm on the projects in which it should invest the money raised
D) provides short-term price support for the security after it begins trading in the secondary market
3. Ms. Scatty is a registered representative with a well-known family of mutual funds. When selling one of
the funds, she forgets to give her buyer a prospectus. Which of the following statements is true?
A) Ms. Scatty can be held civilly liable under the Securities Act of 1933.
B) Since mutual funds are not covered under the Securities Act of 1933, there is no liability in this
instance.
C) Ms. Scatty can be held criminally liable under the Securities Act of 1933.
D) Both A and B are true statements.
4. Which of the following plans allows the contributor to withdraw both his earnings and contributions
tax-free if certain conditions are met?
A) money purchase plan
B) 401(k) plan
C) traditional IRA
D) Roth IRA
5. As her college graduation present, Jennifer's grandmother gave her 200 shares of the stock of IBM. Her
grandmother had purchased the shares for $54 a share in October 2002, and the stock was selling for
$ 132 a share on the day of Jennifer's graduation eight years later. Eight months after her graduation,
Jennifer decides to sell the shares to get money to help with the down payment on a condo she is
purchasing. If IBM is selling for $125 on the day of the sale, what are the tax consequences of this sale for
Jennifer?
A) Jennifer will have a loss of $1,400, which will be treated as a short-term capital loss for tax purposes.
B) Jennifer will have taxable income of $14,200, which will be taxed as long-term capital gain income at a
tax-preferred rate.
C) Jennifer will have taxable income of $15,600, which will be taxed as long-term capital gain income at a
tax-preferred rate.
D) Jennifer will have taxable income of $14,200, which will be taxed as long-term capital gain income at a
tax-preferred rate.
Solutions:
Question # 1 Answer: B | Question # 2 Answer: C | Question # 3 Answer: A | Question # 4 Answer: D | Question # 5 Answer: B |
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