SIE Prep

When making recommendations to an advisory client, which of the following carry the most weight? I. The client's risk tolerance II. Past performance of the adviser representative's recommendations III. The client's investment needs and objectives IV. The client's previous investment experience with other advisers A) I and III B) II and IV C) II and III D) I and IV

A) I and III

A customer receives a cash dividend of $1,000 in his margin account. How much of the dividend will be credited to the special memorandum account (SMA)? A) $1,000 B) $250 C) $500 D) $0

A) $1,000

American-style options traded on the Chicago Board Options Exchange are priced higher than European-style options on the same underlying stock, having the same expiration, because A) American-style options can be exercised at any time until expiration, while European-style options can be exercised only at expiration. B) European-style options are not adjusted for stock splits and stock dividends. C) U.S. investors cannot use European-style options; thus, the demand is much less, leading to lower premiums. D) European-style option positions cannot be traded out of.

A) American-style options can be exercised at any time until expiration, while European-style options can be exercised only at expiration.

Your manager notifies you that a new municipal revenue bond issue you have been working on has been oversubscribed. How is the order acceptance priority for this issue determined? A) As outlined in the agreement among underwriters B) As outlined in the indenture C) On a first-come, first-served basis D) As outlined in the legal opinion

A) As outlined in the agreement among underwriters

When must a new options customer—who has not yet traded options—receive the Options Clearing Corporation's (OCC's) current disclosure document? A) At or before the time the account receives approval for options trading B) Within 15 days of the ROP's approval of the customer's account for options trading C) No later than 15 days after the ROP signs the options customer approval form. D) At or before the time the registered representative signs the customer approval form

A) At or before the time the account receives approval for options trading

Because municipal bonds do not trade on any exchange, there is frequently a concern about their marketability. According to most industry experts, which of the following bonds would be the most marketable? A) City of X, rated AAA with a 5% coupon maturing in 5 years B) City of Z, rated BBB with a 6% coupon maturing in 7 years C) City of Y, rated AAA with a 4% coupon maturing in 10 years D) City of A, rated BB with a 7% coupon maturing in 15 years

A) City of X, rated AAA with a 5% coupon maturing in 5 years

Which of the following statements regarding the third market is true? A. It is composed of listed securities traded OTC B. It is composed only of unlisted securities C. The services of a brokerage firm are not used D. It refers to the block trading of unlisted securities

A. It is composed of listed securities traded OTC

ABC Brokers, a FINRA member firm, filled a customer's buy order for DEF common stock and did not charge a commission. The firm most likely acted in what capacity? A) Market maker B) Broker C) Underwriter D) Agent

A) Market maker

Which of the following are excluded from the Trade Reporting and Compliance Engine (TRACE) reporting requirements? A) Money market securities B) Asset-backed securities (ABSs) C) Collateralized mortgage obligations (CMOs) D) Government agency bonds

A) Money market securities

A customer purchases $100,000 of original issue discount municipal bonds. How will this trade be considered for tax purposes when the bonds mature? A) No capital gain B) Fully taxable on capital gain C) Taxable as short-term gain D) Taxable as long-term gain

A) No capital gain

Which of the following is an equity security? A) Real estate investment trust (REIT) share B) Government National Mortgage Association pass-through certificate C) Mortgage-secured bond D) Collateralized mortgage obligation

A) Real estate investment trust (REIT) share

Which of the following statements regarding collateralized mortgage obligations (CMOs) is true? A) They can be purchased for as little as $1,000. B) There is no prepayment risk. C) Yield is locked in. D) There is no extended maturity risk.

A) They can be purchased for as little as $1,000.

All of the following documentation is necessary for a publicly subscribed limited partnership except A) a cash flow analysis. B) a partnership agreement. C) a subscription agreement. D) a certificate of limited partnership.

A) a cash flow analysis.

Your firm has just assigned you a new client. Wanting to do the best job you can, you review the current investment holdings of the client. Included are the following mutual fund accounts: $50,000 in Class B shares of the STU Growth Fund $25,000 in Class A shares of the STU International fund $15,000 in Class A shares of the TUV Utility Fund STU and TUV offer rights of accumulation and breakpoints at $25,000, $50,000, and $100,000. If the client wishes to invest $20,000 into the Class A shares of the TUV Technology Fund, the sales charge would be based on A) the $25,000 breakpoint. B) the next computed net asset value. C) the $50,000 breakpoint. D) the $100,000 breakpoint.

A) the $25,000 breakpoint.

An investor purchases a newly issued convertible bond at par. The bond is convertible at $25. Three years later, the underlying common stock is trading at $33 per share. If the investor sells the bond at the parity price, A) there is a long-term capital gain of $320. B) the investor has no gain and no loss. C) there is a long-term capital gain of $8 per share. D) there is a long-term capital loss of $175.

A) there is a long-term capital gain of $320.

What federal law regulates the initial sale of securities to the public? A. The securities act of 1933 B. The securities exchange act of 1934 C. The investment company act of 1940 D. The truth investing act

A. The securities act of 1933

During the cooling off period, an Underwriter may do all of the following except... A. gather binding indications of interest B. distribute red herrings to interested parties C. perform due diligence D. file required forms for state registration

A. gather binding indications of interest

Many years ago, an investor bought a bond with a 5% coupon. At that time, the yield to maturity of the bond was 6.5%. When the bond matures, the investor will receive A) $1,065. B) $1,025. C) $1,050. D) $1,000 plus a call premium.

B) $1,025.

A customer is long 10 XYZ Jan 60 calls, and XYZ declares a 20% stock dividend. On the ex-date, the customer will have A) 10 XYZ Jan 60 calls (100 shares per contract). B) 10 XYZ Jan 50 calls (120 shares per contract). C) 10 XYZ Jan 50 calls (100 shares per contract). D) 12 XYZ Jan 60 calls (120 shares per contract).

B) 10 XYZ Jan 50 calls (120 shares per contract).

A registered representative has a customer looking to invest in stock for income. The customer is looking for the highest fixed rate of return available based on her risk profile. Which of the following would be least suitable? A) Callable preferred B) Convertible preferred C) Straight preferred D) Cumulative preferred

B) Convertible preferred

In a bull call spread, an investor I. buys the lower exercise price and sells the higher exercise price. II. buys the higher exercise price and sells the lower exercise price. III. anticipates the spread will narrow. IV. anticipates the spread will widen. A) I and III B) I and IV C) II and IV D) II and III

B) I and IV

A foreign company that exports its products to the United States wishes to protect itself during a time in which the U.S. dollar is expected to be devalued. The company should I. buy U.S. dollars. II. sell U.S. dollars. III. buy foreign currency. IV. sell foreign currency. A) III and IV B) II and III C) II and IV D) I and III

B) II and III

If a customer buys $10,000 worth of stock in a cash account, then sells the shares for $12,000 without first paying for the buy side, and then requests the $2,000 profit, which of the following statements are true? I. The $2,000 profit cannot be sent to the customer until she pays for the buy side in full. II. The $2,000 can be sent to the customer, but the account will be frozen for 90 days. III. If the customer pays for the buy side in full on or before the fourth business day following trade date, status as a frozen account is lifted. IV. Both trades must be switched to the customer's margin account, where buying and selling in this manner are acceptable practices. A) I and II B) II and III C) I and III D) III and IV

B) II and III

If a March 80 Canadian dollar call option is trading at 6, and the Canadian dollar is at $0.85, which of the following statements is true? A) The contract has no time value. B) The contract has intrinsic value. C) The contract is out of the money. D) The contract is at parity.

B) The contract has intrinsic value.

Which of the following is required to sign a new account form for a cash account? A) The registered representative B) The principal C) The spouse of the customer D) The customer

B) The principal

An investment company registered with the SEC under the Investment Company Act of 1940 that allows investors to sell their shares back to the company at net asset value on a quarterly basis is A) a unit investment trust. B) an interval fund. C) an open-end fund. D) a closed-end fund.

B) an interval fund.

Probably the most significant difference between a business development company (BDC) and any other investment company registered under the Investment Company Act of 1940 is that a BDC A) is required to file annual reports with the SEC. B) makes available significant managerial assistance to the investments in their portfolio. C) issues shares that trade actively in the secondary markets. D) qualifies for special tax treatment by distributing at least 90% of its net investment income to owners.

B) makes available significant managerial assistance to the investments in their portfolio.

A municipal revenue issue's flow of funds statement is contained in A) the legal opinion. B) the bond contract. C) the notice of sale. D) the agreement among underwriters.

B) the bond contract.

In the partnership agreement of a limited partnership, all of the following would be disclosed except A) how the operating profits will be distributed. B) the procedures for the annual election of general partners. C) what matters the limited partners can vote on under the democracy provisions. D) how the general partners will be compensated.

B) the procedures for the annual election of general partners.

Whether funds should be allocated to support the debt service on a moral obligation bond in default is usually determined by A) the courts. B) the state legislature. C) the state governor. D) the trustee.

B) the state legislature.

Members of a syndicate receive notice of their share of the offering through A) the due diligence meeting. B) the syndicate letter. C) the official statement. D) the prospectus.

B) the syndicate letter.

Your client has a combined margin account. The market value of the long stock position has increased by $5,000, and the market value of the short stock position has dropped by $2,000. What is the net change to the equity in the account? A) $3,000 decrease B) $7,000 decrease C) $7,000 increase D) $3,000 increase

C) $7,000 increase

Ten municipal bonds were purchased with 9% nominal yield for settlement on February 1, 2015. The maturity date of the bonds is July 1, 2035. What is the number of days of accrued interest on the 10-bond trade? A) 29 B) 31 C) 30 D) 37

C) 30

While reviewing a new customer's investment profile, you determine that the customer is willing to tolerate a high degree of risk and does not anticipate utilizing the invested funds for at least 15 years. What would be a suitable recommendation regarding asset allocation for the customer's portfolio, given the customer's risk tolerance and time horizon criteria? A) 45% debt, 45% equities, and 10% money market instruments B) 25% debt, 25% equities, 25% money market instruments, and 25% real estate C) 70% equities, 20% debt, and 10% money market instruments D) 65% debt and 35% equities

C) 70% equities, 20% debt, and 10% money market instruments

Which of the following statements regarding a bond ladder strategy is correct? A) A laddered portfolio of bonds will provide lower yields than a portfolio consisting entirely of short-term bonds. B) A bond ladder strategy works best when interest rates are stable. C) A bond ladder strategy is a relatively easy way to immunize a portfolio against interest rate risk. D) A bond ladder strategy involves the purchase of very long-term and very short-term bonds.

C) A bond ladder strategy is a relatively easy way to immunize a portfolio against interest rate risk.

What is the spread on a stock quote? A) The profit margin for an individual trade B) The broker-dealer's commission charges for the transaction C) The difference between the bid price and the ask price or offer D) The range of prices the stock has shown over the course of one trading day

C) The difference between the bid price and the ask price or offer

The FINRA 5% policy deals with markups, markdowns, and commissions. When acting as a dealer, what prices are used to compute the member firm's markup or markdown? A) The highest bid and highest ask for all market makers B) The lowest bid and lowest ask for all market makers C) The highest bid and lowest ask for all market makers D) The lowest bid and highest ask for all market makers

C) The highest bid and lowest ask for all market makers

Your new client lists income as the primary investment objective for an account with your broker-dealer. Which of the following investments would not be suitable? A) Corporate preferred shares B) Ginnie Mae government securities C) Zero-coupon bonds D) Corporate debt securities

C) Zero-coupon bonds

A client's account shows no activity other than some dividends received. Based on this information, statements must be sent A) semiannually. B) annually. C) quarterly. D) monthly.

C) quarterly.

Public offerings of securities are regulated under A) Financial Industry Regulatory Authority (FINRA)'s communications with the public rules. B) the Securities Act of 1934. C) the Securities Act of 1933. D) the Consumer Protection Act.

C) the Securities Act of 1933.

Revenue bonds may be called for all of the following reasons except A) a provision in a sinking fund agreement is calling for a partial call. B) interest rates have fallen. C) the issuer has reached a statutory debt limit. D) the facility has been destroyed.

C) the issuer has reached a statutory debt limit.

The most stringent test of a corporation's ability to meet its current obligations is A) the price-to-earnings ratio. B) the current ratio. C) the quick ratio. D) the debt-to-equity ratio.

C) the quick ratio.

Under the intrastate offering rule (rule 147) when may a resident purchaser of securities resell them to a nonresident? A. Three months after the sale made in that state B. Six months after the last sale made in that state C. At least six months after the date of that purchase D. None of these

C. At least six months after the date of that purchase

Which of the following may purchase an IPO at the POP? A. Jim, a registered representative for seacoast securities B. Jim's brother Robert, a contractor C. Jim's niece Amber, a chef D. Jim's Father Roy, a retired engineer

C. Jim's niece Amber, a chef

Seabird Airlines is selling shares to the public for the first time. The company intends to use the proceeds from the sale of it's stock to purchase several new passenger aircraft. This offering is an example of ... A. a secondary offering B. a rights offering C. an intentional public offering D. a subsequent primary offering

C. an intentional public offering

An investor goes long an XYZ May 30 put for 4¼ points. What is the investor's maximum gain, maximum loss, and breakeven point? A) Maximum loss is unlimited; maximum profit is $2,575; breakeven point = $25.75 per share. B) Maximum loss = $425, maximum profit = $2,575; breakeven point is $34.25 per share. C) Maximum loss is $425, maximum profit is unlimited; breakeven point is $25.75 per share. D) Maximum loss = $425; maximum profit = $2,575; breakeven point = $25.75 per share.

D) Maximum loss = $425; maximum profit = $2,575; breakeven point = $25.75 per share.

In general, investors pay a commission to purchase and are charged a commission when selling which of the following investment companies? A) Open-end investment company Class A shares B) Unit investment trusts C) Open-end investment company Class B shares D) Closed-end management investment companies

D) Closed-end management investment companies

Which of the following statements concerning international investing is not correct? A) U.S. investors can invest internationally through mutual funds or closed-end funds. B) Emerging market funds may concentrate in the securities from a single country. C) Global funds tend to invest in firms with international operations that are located throughout the world including the United States. D) Global funds avoid currency risk.

D) Global funds avoid currency risk.

Which of the following real estate limited partnerships allows tax credits to the investor? A) Existing property B) New construction C) Raw land D) Historic rehabilitation

D) Historic rehabilitation

An investor has decided that engaging in a short sale of 500 shares of Elfin Industries common stock offers significant profit potential. This short sale may be made I. at the market open. II. at the market close. III. anytime during the trading day. IV. in a cash account with a sufficient deposit of funds. A) I and II B) III and IV C) I and III D) I, II, and III

D) I, II, and III

Which of the following statements regarding Treasury receipts are true? I. Interest is paid annually. II. Interest is paid at maturity. III. Interest is taxed annually. IV. Interest is taxed at maturity. A) I and IV B) II and IV C) I and III D) II and III

D) II and III

Which of the following debt instruments trades with accrued interest? A) Bankers acceptances B) Treasury bills C) Zero-coupon issues D) Negotiable CDs

D) Negotiable CDs

An investor owns a convertible debenture with a conversion price of $10. If a 10% stock dividend is paid on the company's common stock, which of the following is true? A) The investor will receive 1 share of the common stock. B) The investor will receive 10 shares of the common stock. C) The conversion price will be adjusted to $11.00. D) The conversion price will be adjusted to $9.09.

D) The conversion price will be adjusted to $9.09.

Which of the following accounts are billed a single fee annually for a group of services? A) Cash account B) Margin account C) Option account D) Wrap account

D) Wrap account

The price paid for a listed REIT is most similar to the pricing of A) a collateralized mortgage obligation. B) a real estate limited partnership. C) an open-end investment management company. D) a closed-end investment management company.

D) a closed-end investment management company.

Reinvestment risk is the chance that, after purchasing a bond, interest rates A) become volatile. B) remain stable. C) rise. D) fall.

D) fall.

An investor has purchased a number of securities, including municipal bonds on margin. The margin interest paid to borrow the funds to purchase the municipal bonds is A) partially deductible. B) only deductible if the investor has investment income. C) fully deductible. D) not deductible.

D) not deductible.

Under FINRA rules, if a member firm receives an order to buy a new equity issue on behalf of an undisclosed principal from a bank, the member must A) determine the identity of the purchaser. B) reject the order. C) accept the order. D) obtain a representation from the bank that the purchaser is not restricted.

D) obtain a representation from the bank that the purchaser is not restricted.

A corporation has gone out of business and the assets are being liquidated. Investors of the corporation have claim to those assets, including common stockholders. All the following terms apply to the common stockholders' claim except A) junior. B) last. C) residual. D) senior.

D) senior.

A stock power may be used in place of A) a trade authorization. B) the transfer agent's signature. C) a lost stock certificate. D) the customer's signatures on the certificate.

D) the customer's signatures on the certificate.

How many primary offerings can a corporation issue? A. one primary offering B . two primary offerings C. three primary offerings D. unlimited

D. unlimited