Series 6 Exam

Front 1

In promoting a variable life insurance contract to a customer, which of the following statements would be permissible?

A) Variable life insurance gets you a higher death benefit for less money.
B) If you already have a variable annuity, you can exchange it for this type of insurance with no adverse tax
consequences.
C) This product is a good investment for anyone wishing to provide for retirement.
D) This product gives you the possibility of a greater death benefit in exchange for accepting investment risk.

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D) This product gives you the possibility of a greater death benefit in exchange for accepting investment
risk.

Variable life insurance may be sold only as an insurance device, not as a retirement device. Under Section 1035,
insurance may be exchanged for an annuity without adverse tax consequences, but not the reverse.

Front 2

Which of the following situations are potential Conduct Rule violations?

I. A registered representative executes an order for a discretionary account without informing the customer
beforehand.
II. A registered representative recommends a municipal bond to a risk-averse customer in a low tax bracket.
III. A registered representative recommends Class A mutual fund shares to a customer who wishes to make a
large, long-term investment.
IV. A registered representative recommends investment products without regard to commissions or sales charges.

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II. A registered representative recommends a municipal bond to a risk-averse customer in a low tax bracket.
IV. A registered representative recommends investment products without regard to commissions or sales charges.

Municipal bonds are not appropriate for low tax-bracket investors, since the low yield would not be made up by tax
savings. Registered representatives must also take all factors into account when making an investment
recommendation, including the expenses associated with the investment. Discretionary accounts, on the other hand,
allow the registered representative to execute orders without conferring with the customer first, and Class A shares
would allow an investor with a large, long-term investment to pay the minimum in sales charges and expenses.

Front 3

A client who purchased a variable life insurance policy is not pleased with his decision. He has the right to:

A) cancel the policy and receive a full refund of all premiums paid within the first 24 months of issue.
B) cancel the policy and receive a full refund of all sale charges paid within the first 24 months of issue.
C) convert the policy into any form of term insurance currently offered by the company.
D) convert the policy into a whole life policy using the original policy issue date.

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D) convert the policy into a whole life policy using the original policy issue date.

A unique feature of variable life insurance is the ability to convert or exchange the policy into a whole life policy as of the original policy issue date for a period of no less than 24 months (two years) from the date of issue. For those
insurance companies that do not offer whole life policies, the prospectus will indicate the available exchange policy,
frequently universal life.

Front 4

An investor has contributed $50,000 to a nonqualified variable annuity over the years. She dies before retirement, when the total value of the annuity is $75,000. On how much must her beneficiary pay income tax?

A) $50,000.00
B) $25,000.00
C) It depends on the payout option.
D) $75,000.00

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B) $25,000.00

If an annuitant dies during the accumulation period, the annuity goes to the beneficiary, who must pay tax on the growth and accumulation portion of the total. In this case, the annuitant paid $50,000 in after-tax money and
experienced growth of $25,000. The beneficiary is taxed on the $25,000.

Front 5

The net asset value per share of a mutual fund will fluctuate in value relative to the:

A) value of the fund's portfolio.
B) law of supply and demand.
C) number of shareholders.
D) S&P 500 Market Index.

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