FINRA Investment Company and Variable Contracts Products Representative Examination (IR) Sample Questions:

1. Which of the following securities laws regulates the organizational structure and day-to-day operations of
investment companies?

A) The Investment Company Act of 1940
B) The Securities Act of 1933
C) The Securities Exchange Act of 1934
D) The Investment Advisers Act of 1940

2. Sarah Slick is kicking herself for having bought the stock of Bounce, Inc.at a higher price than she needed
to have paid. She bought it at $50 a share on November 20th and watched its price drop during December.
Ms. Slick is confident that Bounce's stock price will bounce back (pun intended), but she decides that in
the meantime, she will sell her shares and use the realized capital loss to offset some of the capital
gains she has realized on other investments during the year. Thus, on December 30th, she sells her
shares of Bounce for $40 a share. During the first couple weeks of the new year, Sarah observes
Bounce's price creeping upward, and she buys the same number of shares she previously sold for $45 a
share on January 18th. Given this scenario, which of the following statements is true?

A) Because Sarah waited the requisite 30 days after purchase before selling her shares in Bounce, she
can deduct her realized capital loss of $10 a share when calculating her taxes for that tax year.
B) The SEC may file civil charges against Sarah for engaging in an illegal "wash sale."
C) Because Sarah did not wait the requisite 30 days after her sale of Bounce shares to repurchase them,
she cannot deduct her realized capital loss of $10 a share when calculating her taxes for that tax year.
D) Although Sarah did not wait the requisite 30 days after her sale of Bounce shares to repurchase them,
she can still deduct her realized capital loss of $10 a share when calculating her taxes for that tax year
since her repurchase of the shares didn't occur until the following tax year.

3. The stock of eBay, Inc. (EBAY) currently has a beta of 1.67. Based on this, which of the following
statements are necessarily true?
I. If the market is up 5%, an investor can expect the returns on eBay to increase by 1.67 times this amount,
or 8.35%.
II. eBay would be a particularly good investment for an investor with a short investment horizon.
III. The returns on eBay are more volatile than the returns on the market in general.
IV. eBay has more unsystematic risk than the market in general.

A) I only
B) I, II, III, and IV
C) I and III only
D) I and II only

4. The price at which an investor can sell a security to a market maker in the over-the-counter market is
called the:

A) put price.
B) bid price.
C) ask price.
D) sale price.

5. The American Funds family of funds offers numerous funds to investors. Among these are a U.S.
government bond fund, a high-yield corporate bond fund, a diversified emerging markets fund, and a large
stock growth fund. Of these four, the one that would expose the investor to the most social and political
risk is its:

A) U.S. government bond fund.
B) high-yield corporate bond fund.
C) large stock growth fund.
D) diversified emerging markets fund.

Solutions: