SIE Test Q-Bank #2

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

$200. LO 3.g

The de minims exemption for MSRB rule G-37 would allow municipal financial professionals to make a contribution to a municipal candidate under certain conditions up to what dollar limit per election? A) $1,000 B) $500 C) $1,500 D) $250

$250 LO 32.g

Your client bought 100 ABC at $50 per share and later received a 10% stock dividend. What is her new cost basis per share how many shares does he now have? A) 100 shares at 45.45 B) 110 Shares at $55.00 C) 110 share at $45.45 D) 100 shares at $55.00

110 share at $45.45 LO 21.a

How long could a temporary hold be placed on distributions in a senior's account if exploitation is suspected? A) 45 days B) 15 days C) 30 days D) 60 days

15 days LO 29.f

What is the penalty for not taking the required minimum distribution (RMD) for the year? A) 50% of the amount short of what should have been taken B) 10% of the annual contribution limit C) 50% of the annual contribution limit D) 10% of the amount that should have been taken

50% of the amount short of what should have been taken LO 23.a

What is the penalty, if any, for overcontribution to an IRA? A) 6% B) 50% C) 10% D) No penalty

6% LO 23.a

For purposes of the rules against exploitation of seniors, seniors are defined as A) anyone over 59½. B) anyone over 70. C) anyone who is retired. D) 65 and older.

65 and older. LO 29.f

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

Aaa/AAA-rated debentures LO 2.f

The repayment or maturity date of a banker's acceptance is normally which of the following? A) As short as 1 month or as long as 6 months B) As short as 3 months or as long as 9 months C) As short as 1 day or as long as 270 days D) As short as 1 day or as long as 30 days

As short as 1 day or as long as 270 days LO 2.m

All else being equal, which of the following preferred would pay the highest dividend? A) Cumulative preferred B) Callable preferred C) Straight preferred D) Participating preferred

Callable preferred. LO 1.i

Which of the following would be unlawful regarding use of a mutual fund prospectus? A) Sending a prospectus to someone who has shown no interest in the fund B) Failing to highlight a small section the customer has specifically asked about C) Leaving a typographical error in the text unmarked D) Calling an investor's attention to a section that may be interesting

Calling an investor's attention to a section that may be interesting LO 4.i

Which class of shares have a front end sales charge? A) No load B) Class A shares C) Class B shares D) Class C shares

Class A shares

Which of the following strategies is a covered call? A) Short put, short call B) Short stock, long put C) Short call, long call D) Short stock, short call

Short call, long call LO 3.h

Regular way settlement for Treasury notes is A) T+3. B) T+2. C) same day. D) T+1.

T+1. LO 2.j

In the event that a customer complaint is received it is essential that the appropriate personnel are notified immediately. Which of the following need not be notified or only notified regarding specific scenarios? A) The branch manager in the location where the account is serviced B) The account's registered representative, if received by someone else C) The principal supervising the registered representative servicing the account D) The Financial Industry Regulatory Authority (FINRA)

The Financial Industry Regulatory Authority (FINRA) LO 32.c

An institution or a person responsible for making all investment, management, and distribution decisions in an account maintained in the best interests of another who has been legally appointed to provide these services is best described as A) a trustee. B) a market maker. C) an investment advisor. D) a prime broker.

a trustee. LO 8.c

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

at the money. LO 3.d

Preferred shares have A) characteristics of both equity and debt securities. B) only the characteristics matching those of debt securities. C) only the characteristics matching those of equity securities. D) characteristics of neither equity nor debt securities.

characteristics of both equity and debt securities. LO 1.i

A registered representative with discretionary authority has been doing two or three trades per week in her customer's discretionary account. The volume of transactions is not in keeping with the historic activity in the account and the trades don't all align very well with the account objectives. A principal noted that other than generating commissions, the trades seem to have little profit potential. This is likely a red flag for A) market manipulation. B) freeriding. C) front running. D) churning.

churning. LO 29.c

If a customer sold calls to open, which of the following transactions would be allowed if the options agreement was not returned signed within 15 days? A) Sell puts to close B) Buy calls to close C) Sell calls to open D) Sell puts to open

Buy calls to close LO 3.j

With interest rates in the marketplace at 7%, it could be expected that in the secondary market, a bond carrying a 5% coupon would trade A) upward in price. B) only in accordance to supply and demand. C) downward in price. D) unaffected by the changing interest rates.

downward in price. LO 2.b

All of these are functions of the Office of Foreign Assets Control (OFAC) except A) prohibit broker-dealers from dealing with certain individuals and businesses. B) block assets of persons on the SDN list. C) fine financial service companies that do not comply with the regulations. D) maintain the Specifically Designated Nationals list.

fine financial service companies that do not comply with the regulations. LO 25.f

All of the following would generally be associated with a limited partnership (LP) except A) tax credits for specific programs. B) partners responsible for reporting to the IRS. C) the pass through of gains and losses. D) freely transferrable interests.

freely transferrable interests. LO 5.d

Your customer has a portfolio consisting entirely of municipal-issued securities. Therefore, the entire portfolio would have to consist of A) Treasury notes and general obligation bonds. B) general obligation and revenue bonds. C) Treasury STRIPS and bills. D) Treasury receipts and government agency bonds.

general obligation and revenue bonds. LO 2.h

An investor is short 1 XYZ January 60 put at 2. This investor A) can exercise the contract to sell XYZ stock at $60 per share. B) has received $200 for writing the put contract. C) can exercise the contract to sell XYZ stock at $2 per share. D) has the right to buy 60 shares of XYZ stock.

has received $200 for writing the put contract. LO 3.b

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 purchase 100 shares of the underlying stock. C) has the right to purchase 100 shares of the underlying stock. D) incurs an obligation to sell 100 shares of the underlying stock.

has the right to purchase 100 shares of the underlying stock. LO 3.b

All of the following statements about a home office are true except A) home offices are restricted to servicing existing customers only. B) the member firm must authorize the representative to open a home office. C) a home office may be widely advertised as a place of business. D) a home office is subject to a premise visit and review by principals of the firm and Financial Industry Regulatory Authority (FINRA) examiners.

home offices are restricted to servicing existing customers only. LO 32.h

When investors buy and sell securities to and from one another, these transactions occur A) in the secondary market. B) on exchanges only. C) in the over-the-counter (OTC) market only. D) in the primary market.

in the secondary market. LO 8.a

Limited partnerships A) must end on a predetermined date or can be dissolved earlier by vote. B) must end on a predetermined vote with no exceptions. C) can either exist in perpetuity or be designated to end on a specific date. D) must exist in perpetuity.

must end on a predetermined date or can be dissolved earlier by vote. LO 5.e

Efforts to push up the price of stock one owns by soliciting buy orders from customers so that the stock owned can be sold later at a higher price is a violation commonly known as A) pump and dump. B) churning. C) marking the open. D) marking the close.

pump and dump. LO 29.c

Jackson Raleigh, a registered representative in Memphis, TN, has a client who is a pension fund manager for the Tiger Pension Fund. Raleigh creates several flyers of informational literature about the funds available in the Tiger Pension Fund and emails them to the fund manager so that the fund manager can prints copies of the flyers and make them available to the participants in the pension fund. FINRA would classify these flyers as A) correspondence. B) institutional communications. C) retail communications. D) sales literature.

retail communications. LO 27.b

The first investors to get paid in corporate liquidations are holders of A) preferred stock. B) common stock. C) debentures. D) secured debt.

secured debt. LO 2.f

Treasury bills (T-bills) are A) intermediate-term debt obligations issued monthly. B) intermediate-term debt obligations issued weekly. C) short-term debt obligations issued monthly. D) short-term debt obligations issued weekly.

short-term debt obligations issued weekly. LO 2.j

When a corporation issues a mortgage bond, the issue's total value A) is unrelated to the value of the real estate because it is an unsecured debt instrument. B) must equal the value of the real estate by which it is backed. C) should be greater than that of the real estate it is backed by. D) should be less than that of the real estate it is backed by.

should be less than that of the real estate it is backed by. LO 2.f

Rule 144 stipulates that after holding restricted stock fully paid for six months, an affiliate may begin selling shares A) completely unrestricted. B) subject to the volume restrictions on any single day. C) at the discretion of the issuer's board of directors (BOD). D) subject to volume restrictions within any 90-day period.

subject to volume restrictions within any 90-day period. LO 1.g

There are several types of investment risks that will generally fall into two categories. These categories are known as A) systematic and nonsystematic. B) averse and nonaverse. C) high return and low return. D) investment and investor.

systematic and nonsystematic. LO 6.a

The broker loan rate charged by banks is also known as A) discount rate. B) the call loan rate. C) prime rate. D) federal funds rate.

the call loan rate. LO 13.d

When the Securities and Exchange Commission (SEC) clears securities for sale to the investing public, this is A) the effective date. B) the exudate. C) the time upon which the SEC approves the securities. D) the due date.

the effective date. LO 7.d

Considered the most volatile of the benchmark interest rates in the economy would be A) the broker call loan rate. B) the discount rate. C) the federal funds rate. D) the prime rate.

the federal funds rate. LO 13.d

Your client is buying municipal bonds and wants to know when payment is due. You should tell him A) trade date plus 2 business days. B) trade date. C) trade date plus 1 business day. D) trade date plus 3 business days.

trade date plus 2 business days. LO 19.a

Three brothers open a joint account instructing you that if they die, they want the cash and securities in the account to go to the remaining parties to the account. The account should be opened A) as a tenants in common (TIC) account. B) as a custodial account. C) as a transfer on death (TOD) account. D) with rights of survivorship.

with rights of survivorship. LO 29.g

Which of the following would most closely match the meaning of a red herring? A) A tombstone advertisement B) Prospectus C) A registration statement D) A preliminary prospectus

A preliminary prospectus LO 7.d

Distinguishing by the issue's term to maturity for those securities issued by the U.S. federal government, which of the following is correct? A) Bills represent short-term issues. B) Notes represent long-term issues. C) Bonds represent intermediate-term issues. D) Bonds and notes are both intermediate-term issues.

Bills represent short-term issues. LO 2.j

Which of the following would be considered earned income? A) The premium kept from an unexercised short put B) Bonus received from employment C) Interest received from a bond investment D) Dividends received from a stock investment

Bonus received from employment LO 20.f

A client calls a registered representative and states that they live in New York City and that they are looking for a bond that would be triple tax free in New York. The registered representative tells the client that his firm has some bonds in inventory that are from the Albany, NY, school district that would be triple tax free for the client. Which of the following would be the registered representative's best course of action? A) Determine suitability prior to the trade and mark the trade unsolicited. B) Determine suitability prior to placing the trade and mark the trade solicited. C) No suitability determination is required becasue the bonds will be tax free for the client and mark the trade solicited. D) No suitability determination is required because these bonds will be tax free for the client and mark the trade unsolicited.

Determine suitability prior to placing the trade and mark the trade solicited. LO 18.e

Which of the following statements regarding systematic risk as it relates to an investment portfolio is true? A) Diversification can be used to eliminate it completely. B) Diversification will not eliminate it. C) Diversification ensures that portfolios are not subject to it. D)

Diversification will not eliminate it. LO 6.a

Which of the following would lead to a standardized cost-base adjustment for stockholders? A) Dividend B) Takeover C) Spin-off D) Merger

Dividend LO 21.f

Which of the following prospectus delivery requirements for negotiable securities sold in the secondary markets is not accurate? A) For an IPO if listed on an exchange or Nasdaq the delivery requirement is 25 days. B) For an additional issue listed on an exchange or Nasdaq there is no delivery requirement. C) For an additional issue if the security is non-Nasdaq there is no delivery requirement. D) For an initial public offering (IPO) if non-Nasdaq the delivery requirement is 90 days.

For an additional issue if the security is non-Nasdaq there is no delivery requirement. LO 7.g

Which of the following best describe a wrap account? The firm offering the account would need to be registered as both a broker-dealer and an investment advisor The account fee covers both transactions and advice The wrap fee for the account covers only where the firm acts as a broker or acts as a dealer The firm may only be registered as a broker or dealer A) I and II B) I and IV C) II and III D) III and IV

I and II LO 18.h

Municipal revenue bonds do not require voter approval. generally have a higher rating than general obligation (GO) bonds from the same issuer. are not subject to statutory debt limits. are backed and supported by ad valorem (property) taxes. A) I and III B) II and III C) II and IV D) I and IV

I and III LO 2.h

An exception report would be most likely generated by which of the following observations? I. Seeing activity in the account of a deceased person II. Noting that a customer's telephone area code matches the ZIP code provided III. Receiving an execution for 300 shares when the order was for only 100 IV. Receiving a written complaint from a customer A) I and II B) II and III C) I and III D) II and IV

I and III LO 29.e

Which of the following describes the consequences of a stock split? If the number of shares goes up, the price goes down. If the number of shares goes up, the price goes up. If the number of shares goes down, the price goes down. If the number of shares goes down, the price goes up. A) II and IV B) I and III C) I and IV D) II and III

I and IV LO 21.a

A bond with 10 years to maturity and callable in five years at par is sold at a discount. Rank the following yields from lowest to highest. Nominal yield Current yield Yield to call (YTC) Yield to maturity (YTM) A) I, II, III, IV B) II, I, IV, III C) I, II, IV, III D) IV, II, III, I

I, II, IV, III LO 2.b

Which of the following is a lagging indicator? A) Increase in hours worked B) Increase in the consumer loans to personal income ratio C) Raw materials orders D) Decrease in industrial production

Increase in the consumer loans to personal income ratio LO 11.b

Which of the following is true for mutual funds and those who invest in them? A) Mutual fund investors are required to attest that they have researched the securities in a portfolio before purchasing a fund's shares. B) Investors must be provided with specific information when purchasing mutual funds. C) All securities purchases entail risk, which is the only disclosure that need be made for mutual funds. D) There are no disclosure requirements regarding information to investors for mutual funds.

Investors must be provided with specific information when purchasing mutual funds. LO 4.i

Craig and Judy have just married. It is a second marriage for both of them and they both have kids from a prior marriage. Craig would like his portion of their account to go to his kids when he dies and Judy would like her portion to go to her kids when she dies. As new partners in marriage, while they are both alive they would both like to have full access to the account. What type of account(s) should they set up? A) Each should set up their own individual transfer on death (TOD) account with limited power of attorney (POA) B) A partnership account C) Joint tenants in common (JTIC) D) Joint tenants with rights of survivorship (JTWROS)

Joint tenants in common (JTIC) LO 22.a

Which of the following acts requires the registration of most new issues? A) The Securities Investor Protection Act of 1970 B) The Securities Act of 1933 C) The Securities Exchange Act of 1934 D) The Securities Market Improvement Act of 1975

LO 7.d

Why is a fixed annuity not considered to be a security? A) The portfolio may be indirectly managed. B) The fixed annuity buyer assumes no investment risk. C) Inflation protection for the purchaser is guaranteed. D) Although it is an insurance company product, it is not life insurance.

The fixed annuity buyer assumes no investment risk. LO 4.c

Which of the following best describes how a market order to buy would fill if placed when the market price of the stock was at 40? A) The next available price below 40 B) Only at 40 C) The next available price D)term-12 The next available price above 40

The next available price LO 16.b

If an officer of a bank with the authority to purchase and sell securities on behalf of the bank wants to purchase new issues, which of the following statements is true? A) The officer may not purchase a new issue unless the amount he wishes to purchase is considered small in relation to the total offering. B) The officer may purchase a new issue because no banking rules prohibit it. C) The officer may not purchase a new issue because he is considered a restricted person. D) The officer may purchase a new issue because anyone is allowed to purchase new issues.

The officer may not purchase a new issue because he is considered a restricted person. LO 7.b

In a 20% stock dividend, what happens to the number of shares and the share price? A) The share price goes down and the number of shares goes up. B) The share price goes down and the number of shares goes down. C) The share price goes up and the number of shares goes up. D) The share price goes up and the number of shares goes down.

The share price goes down and the number of shares goes up. LO 21.a

Which of the following best describes the trade execution of American depository receipts (ADRs)? A) Trades are executed domestically in U.S. dollars. B) Trades are executed overseas in U.S dollars. C) Trades are executed overseas in a foreign currency. D) Trades are executed domestically in a foreign currency.

Trades are executed domestically in U.S. dollars LO 1.h

Which of the following is a debt instrument that pays no periodic interest? A) Treasury notes B) Corporate bonds C) Treasury bonds D) Treasury STRIPs

Treasury STRIPs LO 2.j

Electronic delivery of documents requires all of the following except A) a recording of the customer verbally agreeing to such receipt. B) procedures to show that delivery took place as intended. C) assurance of confidentiality of the documents and personal information. D) procedures to deliver the information in paper form upon request.

a recording of the customer verbally agreeing to such receipt. LO 29.g

A select pair or group of companies organized to underwrite corporate or municipal securities is best known as A) a syndicate. B) a market maker. C) an investment club. D) an introducing broker-dealer.

a syndicate. LO 7.c

Who benefits more from a defined contribution plan? A) Employees with fewer years left to work B) Older employees C) Younger employees D) All benefit the same

Younger employees LO 23.b

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) the fund receives dividends. C) the fund receives interest. D) a large number of investors making deposits in the fund.

a large number of investors making deposits in the fund. LO 4.g

A balloon maturity for an issuer's debt securities is most accurately described as A) a serial issue of bonds on which the interest rate periodically changes over the life of the issue for all bonds remaining outstanding. B) an obligation granting the bondholder the right to require the issuer to purchase the bonds at par at a certain time before maturity. C) a later final maturity within a serial issue of bonds that contains a disproportionately large percentage of the principal amount of the original issue. D) bonds comprising all of a particular issue that come due in a single maturity.

a later final maturity within a serial issue of bonds that contains a disproportionately large percentage of the principal amount of the original issue. LO 2.a

The Securities Act of 1933 requires that A) a new issue, unless specifically exempted from the Act, be registered with the Securities and Exchange Commission (SEC) before public sale. B) registration with the Securities and Exchange Commission (SEC) before public sale can be made be an option for all new issues. C) all new issues be exempted from registration with the Securities and Exchange Commission (SEC) so that they may be sold to the public. D) both exempt and nonexempt new issues be registered with the Securities and Exchange Commission (SEC) before public sale.

a new issue, unless specifically exempted from the Act, be registered with the Securities and Exchange Commission (SEC) before public sale. LO 7.b

Class B mutual fund shares are also known as A) contingent-deferred shares. B) back-end load shares. C) partially loaded shares. D) deferred-load shares.

back-end load shares. LO 4.d

Each of the following activities would require prior written notification by an associated person to the employing broker-dealer except A) becoming a limited partner in an oil and gas drilling program. B) offering to sell a limited partnership interest in an oil and gas drilling program. C) acting as a real estate sales agent, limited to the sales of individual homes only. D) part-time work parking cars on the weekend at a local racetrack.

becoming a limited partner in an oil and gas drilling program. LO 32.d

An investor owns MMS call options. This investor is A) bullish, hoping the stock will rise. B) bearish, hoping the stock will fall. C) bullish, hoping the stock will fall. D) bearish, hoping the stock will rise.

bullish, hoping the stock will rise. LO 3.b

Before submitting an application to enroll, part of the process for an associated person to engage in the investment banking or securities business, is to have the member firm that sponsors them ascertain the individuals A) highest level of education. B) past 5 years of business/employment history. C) business reputation, character, education, and experience. D) past 10 years of residential history.

business reputation, character, education, and experience. LO 30.a

A clearing corporation agent or depository for securities transactions A) can never be a corporation. B) can be a bank or corporation only if they are also a broker-dealer. C) must be a broker-dealer. D) can be a commercial bank.

can be a commercial bank. LO 8.c