Series 6 Questions
Key Topics and Questions You Must Know
Understanding Products and Their Risks
Mutual Funds
Question: What is the primary difference between a closed-end fund and an open-end fund?
Answer: Closed-end funds issue a fixed number of shares and trade on an exchange like a stock, whereas open-end funds continuously issue and redeem shares based on investor demand. Closed-end funds can trade at a premium or discount to their net asset value (NAV), while open-end funds are bought and sold at NAV.
Question: Explain the concept of a "prospectus" in the context of mutual funds.
Answer: A prospectus is a detailed document provided to investors that outlines the investment objectives, strategies, risks, and costs associated with a mutual fund. Series 6 Questions It is a critical tool for investors to make informed decisions.
Variable Annuities
Question: What is a variable annuity and how does it differ from a fixed annuity?
Answer: A variable annuity is an insurance contract that allows investors to allocate their premiums among a variety of investment options, with returns varying based on the performance of these investments. In contrast, a fixed annuity provides guaranteed returns and predictable payouts.
Question: Describe the significance of the "surrender charge" in a variable annuity.
Answer: A surrender charge is a fee imposed when an investor withdraws funds from a variable annuity before a specified period, known as the surrender period. This fee is designed to discourage early withdrawals and compensate the issuer for lost potential earnings.
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