Finra Exam Series-6 Topic 6 Question 41 Discussion

Actual exam question for Finra's Series-6 exam

Question #: 41
Topic #: 6

Your nephew has asked you to help him formulate a financial plan for his family. Scott is 27 years old and has been employed as an associate with a law firm for two years. Sarah, his wife, is 26 years old and works in the human resources department of a large corporation. The couple is childless now, but they plan to begin a family in a few years. Together, they have accumulated $10,000 in a savings account and recently inherited $40,000 cash. They expect to be able to start saving at least $5,000 annually since their incomes more than meet their current needs. They each have employer-provided health insurance and retirement plans. Both have excellent upward mobility potential in their careers. They currently pay taxes at the marginal rate of 15%. Scott tells you that although they regularly read some of the more popular financial investment magazines, neither feels particularly knowledgeable about the world of investments.

Based on this information, which of the following statements is true?

AA greater than average percentage of their money should be invested in money market mutual funds to meet their needs for liquidity.

BA greater than average percentage of their money should be invested in municipal bonds to minimize their currently high tax bill.

CAlthough some money should be allocated to bond funds for diversification purposes, bond funds should be underweighted in favor of stock funds.

DPurchasing power risk is not an issue in their situation.

Show Suggested Answer

Suggested Answer: B

The true statement is that reinvested dividends and capital gain distributions count toward reaching a breakpoint under the rights of accumulation. The rights of accumulation are not something that all mutual funds with front-end loads must offer. There is no time limit on the accumulation period. The rights of accumulation and the letter of intent are two separate animals; neither has anything to do with the other.

by Barrett at May 04, 2022, 01:42 AM

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2 months ago

I think option C is the correct answer. They have a good amount saved up and are still young, so they can afford to be more aggressive with their investments and allocate a larger portion to stock funds.

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Broderick

1 months ago

I think you're right. It's important for them to have a diversified portfolio, but they can definitely afford to have more in stock funds at this stage in their lives.

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Latrice

1 months ago

I agree with you, option C seems like the best choice for them. They can take on more risk with their investments since they are young and have a good amount saved up.

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