SIE previously wrong 2/22

LMN Corporation has a $60 par, 4% preferred stock currently trading at $45 per share. Its annual dividend is A) $2.40. B) $4.00. C) $24.00. D) $1.80.

A) $2.40.

Accrued interest on corporate bonds is calculated using A) 30 days in each month and 360 days in each year. B) actual days in each month and 360 days in each year. C) actual days in each month and actual days in the year. D) 30 days in each month and 365 days in each year.

A) 30 days in each month and 360 days in each year.

Which of the following investments would not require heightened suitability requirements before recommending them to your clients? A) A Utilities Mutual Fund B) An exchange-traded note (ETN) C) An oil and gas limited partnership D) A hedge fund

A) A Utilities Mutual Fund

Which of the following statements regarding put and call features on debt securities is not correct? A) A callable bond is likely to be called when interest rates are rising. B) A puttable bond is likely to be put back when interest rates are rising. C) Call features benefit the issuer. D) Put features benefit the bondholder.

A) A callable bond is likely to be called when interest rates are rising.

Shareholders that tender their shares in a tender offer experience which of the following tax consequences? A) A capital loss occurs if their cost basis is greater than the tender price. B) A capital gain occurs if their cost basis is greater than the tender offer. C) Investment income is received equal to the value increase of the new shares. D) There is no effect.

A) A capital loss occurs if their cost basis is greater than the tender price.

Your client, Mary Quinn, wants to place an order to sell a stock in her portfolio when the current price is 45, but she is only willing to sell if she can sell for at least 47. Which order should she place? A) A sell limit order B) A sell stop order C) A market order D) A sell stop limit order

A) A sell limit order

Which types of investments are most susceptible to interest rate risks? A) Bonds B) Options C) Common stocks D) Money market instruments

A) Bonds

Which of the following for call option contracts is true? A) Breakeven is the same for both parties. B) Maximum gain and loss are the same for both parties. C) Maximum gain is the same for both parties. D) Maximum loss is the same for both parties.

A) Breakeven is the same for both parties.

Which of the following preferred stocks allows the issuer to pay the shareholders par and cease dividend payments following a stated period? A) Callable B) Adjustable C) Redeemable D) Puttable

A) Callable

Your customer holds a callable bond currently trading at $935. Which of the following is true? A) Current yield (CY) is lower than yield to maturity (YTM). B) Yield to maturity (YTM) is higher than yield to call (YTC). C) Coupon (nominal) yield is higher than yield to maturity (YTM). D) Current yield (CY) is higher than yield to call (YTC).

A) Current yield (CY) is lower than yield to maturity (YTM).

In a defined contribution plan the benefit amount is fixed. the benefit amount is variable. the contribution amount is fixed. the contribution amount can vary. A) II and III B) II and IV C) I and IV D) I and III

A) II and III

The benefits of designating a brokerage account as transfer on death (TOD) are that the designation eliminates estate taxes. the designation avoids probate. the account holder no longer has to make investment decisions regarding the account. the account holder may still make beneficiary changes for the account. A) II and IV B) I and III C) II and III D) I and IV

A) II and IV

Which of the following are true regarding mutual fund sales charges? They are used to defray fund expenses, such as operating costs and salaries. They are set by the fund's transfer agent. They are not an expense to the fund, but to the investor. They are used to compensate the fund's underwriter and sales representatives. A) III and IV B) I and II C) II and III D) I and IV

A) III and IV

In order for a gain to be taxed as a long-term capital gain, the position must be held for how long? A) More than one year B) One year C) One year or more D) More than two years

A) More than one year

Which of the following securities is exempt from the Securities Act of 1933? A) Municipal note B) Common stock C) Debenture D) Preferred stock

A) Municipal note

For nonexempt securities being offered to the public for the first time by a corporate issuer, which of the following would be applicable? A) Securities Act of 1933 regulating issues that must be offered by prospectus B) Securities Act of 1934 regulating securities that must be offered by prospectus C) Securities Act of 1934 regulating issues that must be offered by prospectus D) Securities Act of 1933 regulating securities traded in the secondary market

A) Securities Act of 1933 regulating issues that must be offered by prospectus

A 40-year-old individual is not covered by a retirement plan at work. What is the maximum contribution this individual can make to a traditional IRA this year? A) The current maximum allowed by the IRS, which will all be deductible. B) The current maximum allowed by the IRS, and none of the contribution will be deductible. C) The current maximum allowed by the IRS plus the catch-up amount, and none of the contribution will be deductible. D) Nothing, because this individual has no retirement plan at work.

A) The current maximum allowed by the IRS, which will all be deductible.

Which of the following is not required for a communication to be considered a recommendation? A) The intention to make a recommendation B) The opinion of a reasonable person that the communication is a recommendation C) The involvement of a security, investment, or investment strategy D) The suggestion of a course of action

A) The intention to make a recommendation

All of the following statements are true except A) a bond mutual fund may issue bonds. B) a bond mutual fund may not issue bonds. C) a closed-end company may issue preferred stock. D) a closed-end company may issue bonds.

A) a bond mutual fund may issue bonds.

A company has just conducted a stock offering, by prospectus, through an investment banker. The proceeds of the offering are used to purchase a portfolio of securities. The stock, now in the hands of the public, is freely traded in the secondary market, and the portfolio is managed to generate maximum profit according to a specific investment objective. The company must be A) a closed-end company. B) a fixed UIT. C) a mutual fund. D) a nonfixed UIT.

A) a closed-end company.

Limited partnerships sold publicly via a prospectus offering would be expected to have A) a large group of investors, each contributing a small sum. B) a small group of investors, each contributing a small sum. C) a small group of investors, each contributing a large sum. D) a large group of investors, each contributing a large sum.

A) a large group of investors, each contributing a small sum.

When choosing to issue additional bonds to the general public in order to raise more capital, a corporate issuer is engaging in A) a primary offering. B) a secondary offering. C) an initial public offering. D) a private securities offering.

A) a primary offering.

Hedge funds A) are not regulated under the Investment Company Act and no Securities and Exchange Commission (SEC) registration is required. B) are nonregulated but still require SEC registration. C) are highly regulated, starting with the requirement to be registered with the SEC. D) are regulated under the Investment Company Act of 1940 with no SEC registration required.

A) are not regulated under the Investment Company Act and no Securities and Exchange Commission (SEC) registration is required.

An investor owns one NMS June 40 call trading at 5. If the underlying value of NMS stock is 45, the contract is trading A) at parity. B) with no intrinsic value. C) at the money. D) out of the money.

A) at parity.

If a prospectus is being used to close a mutual fund sale, it must be given to the investor A) before or during the sales presentation. B) within three business days of purchase. C) within five business days of purchase. D) always before the sales presentation begins.

A) before or during the sales presentation.

A corporation deposits 20-year Treasury bonds into a trust in order to secure a loan. The loan for this type of arrangement would be facilitated by the corporation issuing A) collateral trust bonds. B) Treasury guaranteed bonds. C) mortgage bonds. D) equipment trust certificates.

A) collateral trust bonds.

Before effecting an initial penny stock transaction for a new customer, the registered representative must do all of the following except A) confirm that a margin account has been established. B) confirm whether the person is an established customer. C) obtain a signed suitability statement from the customer. D) obtain a signed risk disclosure document from the customer.

A) confirm that a margin account has been established.

A company very concerned about liquidity would want A) high current ratio. B) high price-to-earnings ratio. C) low current ratio. D) low price-to-earnings ratio.

A) high current ratio.

The seller of a put has A) the obligation to buy the stock. B) the right to buy the stock. C) the right to sell the stock. D) the obligation to sell the stock.

A) the obligation to buy the stock.

The maximum gain on a long call is A) unlimited. B) the premium. C) strike price - premium. D) strike price + premium.

A) unlimited.

An investor is long a January 30 call at 2. Maximum loss for this position is A) $320. B) $200. C) $280. D) $30.

B) $200.

A June 40 call is trading at 3.5. For this call to be trading at parity the underlying stock would have to be trading at A) 3.5 B) 43.5 C) 40 D) 36.5

B) 43.5

Which of the following is not true regarding convertible bonds? A) Coupon rates are usually lower than nonconvertible bond rates of the same issuer. B) Coupon rates are usually higher than nonconvertible bond rates of the same issuer. C) If the common stock is above parity, the convertible feature will affect the price. D) Convertible bondholders are creditors of the corporation.

B) Coupon rates are usually higher than nonconvertible bond rates of the same issuer.

Which regulator sets maintenance requirements for margin accounts? A) the SEC. B) FINRA. C) the OCC. D) the FRB.

B) FINRA.

To register an associated person with Financial Industry Regulatory Authority (FINRA), a member firm will fill out and submit which of the following forms? A) Form U5 B) Form U4 C) Form 1040 D) Schedule C

B) Form U4

Who is responsible for meeting the desired returns on a defined contribution plan? A) The sponsor B) The employee C) The custodian D) The Pension Benefit Guaranty Corporation

B) The employee

The board of directors of the Windmill Growth Fund have declared a dividend. The ex-date for the dividend will likely be on which of the following days? A) Two business days before the record date B) The first business day after the record date C) The day of record D) The first business day before the record date

B) The first business day after the record date

A customer enters an order for ABC, Inc., common stock that includes instructions that it must be executed in its entirety when entered or canceled. This is known as A) a day order. B) a fill-or-kill (FOK) order. C) an immediate or cancel (IOC) order. D) an all-or-none (AON) order.

B) a fill-or-kill (FOK) order.

All of the following actions would cause the NAV per share of the mutual fund to increase except A) the liabilities of the fund decline. B) a large number of investors making deposits in the fund. C) the fund receives dividends. D) the fund receives interest.

B) a large number of investors making deposits in the fund.

Restricted shares, those that are unregistered, meaning that they were not attained in a public offering, may be sold by a nonaffiliate A) freely, with no holding period or volume restrictions. B) after holding them for six months and freely thereafter. C) after holding them for six months but then subject to volume restrictions. D) at any time but with volume restrictions.

B) after holding them for six months and freely thereafter.

An investor owns one NMS June 40 call trading at 5. If the underlying value of NMS stock is 45, the contract is trading A) with no intrinsic value. B) at parity. C) at the money. D) out of the money.

B) at parity.

An investor is looking to increase her purchase of put options. From this, you would surmise that the customer's market outlook is A) risk oriented. B) bearish. C) bullish. D) neutral.

B) bearish

The primary purpose of American depositary receipts (ADRs) is to facilitate the trading of A) foreign stocks in both domestic and foreign markets. B) foreign stocks in U.S. markets. C) U.S. stocks in foreign markets. D) domestic stocks in both foreign and domestic markets.

B) foreign stocks in U.S. markets.

Bondholders should expect that interest payments would always be forthcoming for all of the following except A) debentures. B) income bonds. C) convertible bonds. D) subordinated debentures.

B) income bonds.

When investors open a position by going long the security, they can close the position by A) buying the security. B) selling the security. C) selling the security short. D) opening a new position in the security.

B) selling the security.

The federal law requiring companies offering public equity or debt securities to provide a prospectus to investors is known as A) the Trust Indenture Act of 1939. B) the Securities Act of 1933. C) the Securities Investors Protection Act of 1970. D) the Securities Exchange Act of 1934.

B) the Securities Act of 1933.

An underwriter is placing a tombstone advertisement for a company's new issue. A prospective investor might expect to see all of the following information on the advertisement except A) the number of shares to be sold. B) the names of the company's officers. C) the names of the underwriting members. D) the type of security to be sold (stock or bond).

B) the names of the company's officers.

Isaac James has some call options in his account that he would like to exercise. He wants to know when the resulting purchase of the stock would settle. You would tell him A) trade date plus 3 business days. B) trade date plus 2 business days. C) trade date. D) trade date plus 1 business day.

B) trade date plus 2 business days.

Regarding the sale of a new issue, a customer is considered a restricted person if the person is A) working as a private investigator collecting information on the issuing firm's competitors. B) working as a salesperson who works for the issuing firm's underwriter. C) a grandparent of an associated person of a member firm. D) working as a salesperson for a supplier of the issuing corporation.

B) working as a salesperson who works for the issuing firm's underwriter.

A customer owns 1,000 shares of stock subject to a 2:3 reverse stock split. The position will now consist of A) more shares worth less per share with the same net position value. B) more shares worth more per share with an increased net position value. C) fewer shares worth more per share with the same net position value. D) fewer shares worth less per share with a decreased net position value.

C) fewer shares worth more per share with the same net position value.

When a company wants to issue additional shares of stock, the preemptive right given to existing shareholders allows those shareholders to A) pass on their proportionate ownership in the corporation to an heir. B) increase their proportionate ownership in the corporation. C) maintain their proportionate ownership in the corporation. D) decrease their proportionate ownership in the corporation.

C) maintain their proportionate ownership in the corporation.

The general partner of a limited partnership has responsibility for all the following except A) managing the day-to-day operations. B) paying partnership's debts. C) providing all of the partnership capital. D) organizing the business.

C) providing all of the partnership capital.

All of the following statements about a bond selling above par value are true except A) the current yield is higher than the yield to maturity. B) the yield to maturity is lower than the nominal yield. C) the nominal yield is lower than the current yield. D) the nominal yield always stays the same.

C) the nominal yield is lower than the current yield.

If long one equity call option, the owner A) has the right to sell 100 shares of the underlying stock. B) incurs an obligation to sell 100 shares of the underlying stock. C) incurs an obligation to purchase 100 shares of the underlying stock. D) has the right to purchase 100 shares of the underlying stock.

D) has the right to purchase 100 shares of the underlying stock.

In a split offering, A) shares are sold by existing shareholders only. B) shares are issued to existing shareholders only. C) all shares are issued to the public from existing shareholders. D) shares are issued from the corporation and sold by existing shareholders.

D) shares are issued from the corporation and sold by existing shareholders.

All of the following describe mutual funds except A) the portfolio is professionally managed. B) funds simplify tax calculations for investors by supplying Form 1099. C) various withdrawal plans may be offered for redemption of shares. D) shares may be sold either on an exchange or over the counter (OTC).

D) shares may be sold either on an exchange or over the counter (OTC).

All of the following describe mutual funds except A) the portfolio is professionally managed. B) various withdrawal plans may be offered for redemption of shares. C) funds simplify tax calculations for investors by supplying Form 1099. D) shares may be sold either on an exchange or over the counter (OTC).

D) shares may be sold either on an exchange or over the counter (OTC).

Regarding the registration statement filed with the Securities and Exchange Commission (SEC) when new securities are to be issued, all of the following are true except A) the names and addresses of company officers and directors, their salaries, and a five-year business history of each must be shown. B) a description of how the proceeds raised from the sale will be used must be disclosed. C) underwriters may assist the issuer in preparing and filing the registration statement. D) the accuracy and adequacy of the registration documents is the responsibility of the underwriters.

D) the accuracy and adequacy of the registration documents is the responsibility of the underwriters.

A registration statement disclosing material information about a new issue must be filed with the Securities Exchange Commission. The accuracy and adequacy of the registration statement is the responsibility of A) the underwriters. B) the Securities Exchange Commission (SEC). C) the exchanges where the shares will trade. D) the issuer.

D) the issuer.

An individual owning shares of a corporation's common stock would have all of the following rights except A) to vote for those who will serve on the board of directors (BOD). B) to review a list of stockholders. C) to vote when unable to be present at a shareholder meeting. D) to declare dividends.

D) to declare dividends.

A member firm is assigned an exercise notice by the Options Clearing Corporation (OCC). The member firm may assign the exercise notice to one of its short customers by any of the following methods except A) on a random-selection basis. B) to the customer having the oldest short position. C) in any way that is fair and reasonable. D) to the customer having the largest short position.

D) to the customer having the largest short position.

MOS stock is trading at 55. A March 55 call contract would therefore be trading A) with intrinsic value. B) at par. C) in the money. D) at the money.

D) at the money.

An investor enters a sell stop limit order at 60. Following the order entry, trades occur at 62, 60, 59, 61, and 63. The investor will most likely receive A) 59. B) 63. C) 61. D) 60.

C) 61.

Which of the following is considered an investment-grade debt rating? A) BB B) Ba C) Baa D) B+

C) Baa

Your customer notes the amount of commission they paid your broker-dealer firm for their purchase of 500 shares of DEF, Inc., common stock. On this trade your firm most likely acted in what capacity? A) Market maker B) Dealer C) Broker D) Underwriter

C) Broker

Which of the following are the most likely to make monthly or quarterly payments for the life the investor? Fixed annuity Unit investment trust (UIT) Mutual fund Variable annuity A) I and II B) III and IV C) I and IV D) II and III

C) I and IV

Which of the following best describes the calculation for gains or losses for tax purposes? A) Proceeds minus dividend, plus cost basis B) Proceeds plus dividends, minus cost basis C) Proceeds minus cost basis D) Proceeds plus cost basis

C) Proceeds minus cost basis

Who is responsible for meeting the desired returns on a defined contribution plan? A) The custodian B) The sponsor C) The employee D) The Pension Benefit Guaranty Corporation

C) The employee

A customer of a broker-dealer makes it known that they would like to trade options in their account. The first step to accommodate the request is which of the following? A) The firm's registered options principal (ROP) should approve the account so trades can occur immediately. B) Options Clearing Corporation (OCC) should be apprised to see if other options accounts are maintained at other broker-dealers. C) The registered representative should determine the suitability of options trading for the customer. D) The registered representative should provide the customer with the options disclosure document (ODD).

C) The registered representative should determine the suitability of options trading for the customer.

For ETFs, the phrase "tax efficiency" can best be described by which of the following concepts? A) ETFs generally have reportable tax gains passed on annually. B) All transactions in ETFs are commissionable, and sales charges do not apply. C) Usually, for ETFs, there are no tax consequences for investors until the shares are sold. D) These exchange-traded products can be purchased on margin, allowing for a smaller initial investment.

C) Usually, for ETFs, there are no tax consequences for investors until the shares are sold.

An investor holding a corporate-issued mortgage bond is holding a debt security that is A) backed by mortgage paper and therefore considered unsecured. B) backed by real estate and therefore considered unsecured. C) backed by real estate and therefore considered secured. D) backed by mortgage paper and therefore considered secured.

C) backed by real estate and therefore considered secured.

The allowable deduction for equipment used in an oil and gas direct participation program is taken as A) a credit applied at the end of the program. B) a one-time expense applied at the end of the program. C) depreciation over the life of the program. D) depletion applied when the equipment is sold.

C) depreciation over the life of the program.

Options contracts A) give both parties the right to buy or sell the underlying security. B) obligate both parties to purchase the underlying security. C) obligate both parties to sell the underlying security. D) give one party the right to buy or sell the underlying security.

D) give one party the right to buy or sell the underlying security.

Which of the following debt securities has interest that is subject to federal income tax but not state income tax? A) 30-year general obligation (GO) bond B) 30-year debenture C) 30-year revenue bond for a toll bridge D) 10-year STRIP

D) 10-year STRIP

Unless otherwise specified, the size of a firm quote is A) 10,000 shares. B) 1,000 shares. C) 500 shares. D) 100 shares.

D) 100 shares.

The Big Shoe Sneaker Company is a small manufacturer of athletic shoes. It is selling $100 million of its stock. This will be its first public offering. It will use the money to enhance both marketing and production with a plan to grow the business and obtain a Nasdaq listing in two or three years. After the initial sale of the new shares, buyers of the stock in the over-the-counter market should expect to receive the final prospectus for how many days? A) 25 B) 40 C) Buyers in the secondary market are never entitled to the IPO prospectus D) 90

D) 90

Which of the following is an unsecured debt instrument? A) Junior lien mortgage bonds B) Collateral trust certificates C) Equipment trust certificates D) Aaa/AAA-rated debentures

D) Aaa/AAA-rated debentures

Which of the following points to a general decline in prices occurring during severe recessions and the unemployment rate is rising. A) Contraction B) Stagnation C) Stagflation D) Deflation

D) Deflation

Which of the following securities would most likely have the lowest expense ratio? A) Mutual fund B) Qualified variable annuity C) Nonqualified variable annuity D) Exchange-traded fund (ETF)

D) Exchange-traded fund (ETF)

Which regulator sets maintenance requirements for margin accounts? A) the OCC. B) the SEC. C) the FRB. D) FINRA.

D) FINRA.

Your client has $250,000 to invest. His objective is a life-time monthly income that he can receive after he retires. Part of his customer profile stresses that he has had uncomfortable experiences in the past with the stock market and is not inclined to invest in anything that is subject to market fluctuations. Based on the client's profile, which of the following would be the best recommendation? A) Treasury bond fund B) Variable annuity (VA) C) Mutual fund portfolio consisting of blue-chip stocks D) Fixed annuity

D) Fixed annuity

In a defined benefit plan the benefit amount is fixed. the benefit amount is variable. the contribution amount is fixed. the contribution amount can vary. A) I and III B) II and IV C) II and III D) I and IV

D) I and IV

In a proxy contest, which of the following must register with the Securities and Exchange Commission (SEC)? All shareholders who have been approached by solicitors All persons participating in proxy solicitation The upper management of the corporation who are also shareholders All persons providing shareholders with unsolicited advice A) I and IV B) II and III C) I and III D) II and IV

D) II and IV

Which of the following allows investors to purchase partial shares as part of a primary offering? A) Corporations B) Unit investment trusts C) Closed-end funds D) Mutual funds

D) Mutual funds

An account that is titled "customer name d/b/a business name" would be which of the following? A) Partnership account B) Limited liability corporation C) Corporate account D) Sole proprietor account

D) Sole proprietor account

Which of the following is true regarding taxation of dividends paid by American depositary receipts? A) Any funds withheld may be paid to the investor by the foreign government. B) The dividends may be subject to withholding by the U.S. government. C) Dividends are received tax free by U.S. investors. D) The dividends may be subject to withholding by the foreign government.

D) The dividends may be subject to withholding by the foreign government.

Which of the following is a true statement regarding warrants? A) Warrants are issued to existing shareholders on a basis of one right for one existing share. B) The warrant allows the holder to exercise and purchase the stock at a price lower than the market. C) Warrants are short-term instruments, typically 30 to 45 days. D) Warrants are normally issued along with a bond offering as a unit.

D) Warrants are normally issued along with a bond offering as a unit.