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FINRA Investment Company and Variable Contracts Products Representative Examination (IR) Sample Questions:
1. A feature that gives a bondholder or the owner of preferred stock of a corporation the option to exchange
his security for shares of the common stock of the firm is called a:
A) warrant.
B) call feature.
C) right.
D) convertible feature.
2. Tex Payor bought 1,500 shares of the Bonds4U Mutual Fund, a no load fund, on June 12th for $28 a
share and sold the shares the following year on June 11th for $40 a share. This will result in which of the
following tax consequences for Tex?
A) Tex will have to pay tax on $18,000, taxed as ordinary income at his marginal tax rate.
B) Tex will have to pay tax on $18,000 of capital gain income, taxed at the preferential rate for long-term
capital gains.
C) Tex will have to pay tax on $40,000, taxed as ordinary income at his marginal tax rate.
D) Tex will have to pay tax on $40,000 of capital gain income, taxed at the preferential rate for long-term
capital gains.
3. Which of the following must be true for a fund to be called a "no load" fund?
I. The fund can have no front-end load.
II. The fund can have no contingent deferred sales charge.
III. The fund can charge no 12b-1 fees.
IV. The fund cannot charge investors an exchange fee.
A) Only I must be true.
B) I, II, III, and IV must all be true.
C) Only I and II must be true.
D) I, II, and III must all be true.
4. Giant Investments is introducing a new fund to its family of funds that it plans to name the Asian Fund.
Giant may do so only if:
A) Giant may do so only if both B and C are true.
B) the fund has a policy to invest at least 80% of its assets in investments that are economically tied to
Asian countries.
C) the fund's prospectus provides the specific criteria that will be used by the fund to select its
investments.
D) no other family of mutual funds has a fund with this name.
5. Fidelity Investments has two money market funds that is available to most investors. The Fidelity Cash
Reserves fund (FDRXX) is currently yielding 0.10% while its Fidelity Municipal Money Market fund
(FTEXX) is yielding 0.01%. One reason for this significant difference is that:
A) the Municipal Money Market fund pays interest that is free from state and local taxes.
B) the Municipal Money Market fund pays interest that is free from federal taxes.
C) the Municipal Money Market fund is insured by the FDIC, and this is not true of the Cash Reserves
fund.
D) interest earned on the Cash Reserves fund is subject to the alternative minimum tax.
Solutions:
| Question # 1 Answer: D | Question # 2 Answer: A | Question # 3 Answer: C | Question # 4 Answer: A | Question # 5 Answer: B |

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