Finra Series-6 Exam - 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

Limited Time Offer

25%

Off

Get Premium Series-6 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Estrella

4 months ago

Municipal bonds might not be necessary with their low tax rate.

upvoted 0 times

...

Annelle

4 months ago

Agree, they need liquidity for future family expenses!

upvoted 0 times

...

Tamar

4 months ago

Wait, how can purchasing power risk not be an issue?

upvoted 0 times

...

Ernest

4 months ago

I think they should definitely consider stocks over bonds.

upvoted 0 times

...

Irving

5 months ago

They have $50,000 total to work with, that's a solid start!

upvoted 0 times

...

Sherill

5 months ago

I feel like purchasing power risk is always a concern, but I'm not entirely sure how it applies here. Option D seems off to me.

upvoted 0 times

...

Eva

5 months ago

I practiced a similar question where diversification was key. I think option C could be the right approach for them.

upvoted 0 times

...

Johanna

5 months ago

I remember discussing the importance of liquidity for young families, so maybe option A makes sense for them.

upvoted 0 times

...

Sherman

5 months ago

I'm not sure about municipal bonds; I thought they were more beneficial for higher tax brackets. Could option B be misleading?

upvoted 0 times

...

Christiane

5 months ago

Hmm, I'm a bit unsure about this. I think it might be devicepnp.cisco.com, but I'm not 100% sure. I'll have to double-check the documentation.

upvoted 0 times

...

Nicolette

5 months ago

I'm a bit confused on this one. I know the Roadmap is important, but I can't quite remember which phase it's generated in. I'll have to review my notes.

upvoted 0 times

...

Clarinda

5 months ago

I think this is asking for the specific option name in the sshd configuration file that controls which users can log in. I'll need to review the sshd config file structure and options to find the right one.

upvoted 0 times

...

Maryanne

10 months ago

Purchasing power risk not an issue? Yeah, right. Inflation is gonna eat those savings alive if they're not careful. Definitely gotta go with C on this one.

upvoted 0 times

Katlyn

9 months ago

Yeah, they should definitely consider allocating more to stock funds for long-term growth.

upvoted 0 times

...

Micaela

10 months ago

I think diversifying with stock funds is a good idea to combat purchasing power risk.

upvoted 0 times

...

Della

10 months ago

I agree, inflation can really erode savings over time.

upvoted 0 times

...

Gilberto

10 months ago

Woah, $50,000 in savings? That's like a million bucks to me! I'd just stuff it all under my mattress and call it a day.

upvoted 0 times

Vonda

8 months ago

They should definitely seek professional advice to make the most of their savings.

upvoted 0 times

...

Ressie

8 months ago

Putting all that money under the mattress would be a missed opportunity for them.

upvoted 0 times

...

Dacia

8 months ago

I agree, they have a great opportunity to start building wealth for their future.

upvoted 0 times

...

Reena

8 months ago

You should consider investing that money wisely to make it grow over time.

upvoted 0 times

...

Rory

8 months ago

True, they have a good opportunity to start building wealth for their future.

upvoted 0 times

...

Tresa

8 months ago

Maybe they should look into investing in a mix of stocks and bonds for long-term growth.

upvoted 0 times

...

Albert

9 months ago

I agree, putting it in a savings account won't help it grow much.

upvoted 0 times

...

Helaine

9 months ago

You should consider investing that money to make it grow over time.

upvoted 0 times

...

Mariann

10 months ago

Option B sounds tempting, but with their marginal tax rate at 15%, the benefit of municipal bonds might not be as significant. I'd go with C as well.

upvoted 0 times

...

Tegan

10 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.

upvoted 0 times

Broderick

9 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.

upvoted 0 times

...

Latrice

9 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.

upvoted 0 times

...