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Exam Series 6 All Questions

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Exam Series 6 topic 1 question 250 discussion

Actual exam question from FINRA's Series 6
Question #: 250
Topic #: 1
[All Series 6 Questions]

Which of the following would not be a characteristic associated with stocks in which a growth fund might invest?

  • A. high earnings growth
  • B. high price-earnings (P/E) ratio
  • C. high cash dividends
  • D. beta > 1.0
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Suggested Answer: C 🗳️
The choice that would not be a characteristic of stocks in which a growth fund might invest is high cash dividends. Growth stocks offer returns in the form of capital appreciation (aka price increases.) In order to achieve this growth, the firms reinvest their earnings in their firms rather than distributing the earnings as dividends. Growth firms are those that are experiencing high earnings growth, and as a result, investors who are expecting great things from these firms are paying even higher prices, resulting in high P/E ratios. Growth firms are usually riskier than the average stock and have a beta greater than 1.0 to reflect this.
by lolojepu at April 6, 2025, 1:28 a.m.

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