SIE EXAM

An investor is looking for maximum profit potential and is bearish on ABC. Which of the following option positions would be best for this investor

long puts

which of the following is an example of funded corporate debt

long-term bonds

Each of the following can be passed through to an investor who has purchased REIT shares except

losses incurred on a sale

A customer buys 100 shares of XYZ at $60 per share and buys 1 XYZ October 60 out at 4. Which of the following statements is true

maximum profit - unlimited maximum loss - $400

if a preferred stock is cumulative, it means that the stock

must pay all dividends in arrears prior to the payment of dividends on common stock

Mr. Smith, your client, has maintained about 80% of his portfolio in fixed income securities. Interest rates are expected to decline over the next 12 month period. mr. Smith calls you because he is concerned about this prediction and his portfolio. Which of the following recommendations would be appropriate for you to give to Mr. Smith

Leave his portfolio the way it is now

The Trust Indenture Act of 1939 is a federal law that requires a qualified trustee to

represent bondholders

A preemptive Rights clause in a corporate charter includes all of the following characteristics except

requires the corporation to repurchase shares from existing shareholders at predetermined intervals

as interest rates change, existing bond prices will

rise when interest rates decline and will decline when interest rates rise

Which would NOT be a reason an investor buys a call option

sell stock at above the current market price

A customer would have an unlimited dollar risk if he was

short 1 WL Jan 50 put and short 100 shares of WL stock

which would not be considered a characteristic of a growth stock

stock price fluctuates within a narrow range

All of the following are defensive stocks except a. stocks of public utilities b. stocks in tobacco companies c. stocks in cyclical industries d. stocks in food companies

stocks in cyclical industries

Under Federal Tax laws, a corporation can pay dividends in all of the following except a. cash b. tax credits c. products d. stock

tax credits

If a bond has a coupon rate of 7% and a Basis of 6% the bond is trading at a

premium

Which of the following statements by an RR is TRUE regarding dividends

"An investor who owns an American Depositary Receipt can expect to receive dividends from their investment when declared and paid"

Corporate bonds are normally issued in denominations of

$1000.00

An investor is long 1 OEX Aug 500 put @ 10 when the index is at 550. The index closes at 450. The investor decides to exercise his option. What will he get at settlement??

$5,000 ($500 x 100) - ($450 x 100)

What is the amount of interest payable per year on a $1,000 par value 5% bond selling at 80 and redeemable at par in 10 years

$50

Order of asset distribution

1. Taxes 2. Secured Debt (generally bond backed by assets) 3. Unsecured Debt (debenture, general creditor) 4. Preferred Stockholders 5. Common Stockholders (most risky and always the last to be paid)

a round lot unit of trading in common stock is

100 shares

The Eskimo CUp Company announces a 20 cent dividend payable March 15th to owners of record Thursday, February 19th and declares a 5% stock dividend payable March 15th to owners of record Friday, February 13th. An investor buys 2,000 shares regular way on Monday, February 16th. He would expect a cash dividend of

20 cents per share on 2,000 shares

A corporation has authorized common stock of 10,000,000 shares. 8,000,000 shares have been issued and 4,000,000 shares are treasury stock. Which of the following is true?

4,000,000 shares are outstanding

which of the following is a corporate bond quote

75 1/2

The stock of a corporation is selling at $55 per share and the corporation pays a quarterly dividend of $1.30. The yield is?

9.5% ($1.30 x 4) / $55

Most CMOs carry which of the following credit ratings

AAA

A "series" of options is

All option contracts of the same class having the same expiration date. exercise price. and unit of trading

Which of the following is most likely to fluctuate in value during a period of stable interest rates?

convertible preferred

XYZ is currently trading at $40. An investor who is long 1,000 XYZ shares believes the shares will trade lower within the next six months. Which option strategy best protects the investor's long position

Buy 10 XYZ puts

Interest rate movements may affect all of the following regarding CMOs except

credit rating

A stock dividend would be paid on which of the following securities a. common stock b. preferred stock c. treasury notes d. treasury bills

Common stock

Corporate bonds normally pay a higher rate of interest (coupon rate) than other issuers of debt because

Corporate bond interest is fully taxable at the Federal, State and local levels

A customer receives an interest payment from a corporate bond with a coupon rate of 4.25%. The payment is only $21.25. How should this be explained to a customer?

Coupon rates tell the customer what they will receive on an annual basis, but interest payments on corporate bonds are paid semi-annually, leading to two payments of $21.25

Which of the following is NOT a characteristic of common stock?

Dividends paid on common stock are typically a fixed percentage of the value at the time of issuance

Which of the following is synonymous with the term "Strike price"

Exercise price

which of the following have unlimited liability I. a general partner II. a limited partner III. a stockholder IV. a sole proprietor

I and IV

Which of the following are reasons why Direct Participation Programs are formed as Limited Partnerships? I. The partnership is taxed at a lower rate than the rate of the partners II. The advantages of limited liability for the limited partners III. The tax advantages of the pass-through of profits and losses to the limited partners

II and III

Place the following in order, highest to lowest, in terms of asset distribution if a corporation is liquidated I. preferred stockholders II. owners of secured debt instruments III. common stockholders IV. owners of unsecured debt instruments

II, IV, I, III

Which two of the following are characteristics of common stock? I. it has less upside potential than preferred stock II. it has priority claims over preferred stock on liquidation III. it represents equity ownership of a corporation IV. It has more upside potential than preferred stock

III and IV

Place the following types of bonds in order of highest coupon rate to lowest coupon rate, assuming all mature at the same time I. US Government Bonds II. AAA Municipal Bonds III. AAA Corporate Bonds

III, I, II

In what order do the following receive payments in the event of a corporate liquidation I. debenture holders II. preferred stockholders III. senior lien bondholders IV. taxes

IV, III, I II

ABC corp plans to issue subordinated notes that include warrants The warrants allow investors to purchase ABC common stock. Based on this information, which is most likely true of the notes?

It can pay lower interest (coupon) rate

If an investor writes a put and the option expires unexercised, the maximum potential gain on this position

Limited to the premium

Which of the following is correct regarding registered bond certificates

Ownership of the bond is transferrable only upon proper endorsement

A corporation is planning to distribute new shares of common stock to its existing shareholders. This would be described as a

Rights Offering

A client is evaluating purchasing corporate bonds versus purchasing municipal bonds. In their evaluation, the client wishes to evaluate the equivalent yield required by a corporate to compensate for the tax benefits of the municipal bonds. Which of the following is the formula used to determine tax-equivalent yield?

The client should divide the tax-exempt yield of the muni by (100% - their tax rate)

You are evaluating a number of preferred stocks with varying features. One of the preferred stocks that you are evaluating shows a pattern fo increased market value in relation to increases in the market value of the common stock of the company. Of the following preferred stock features, which is the most likely cause of this pattern

The preferred stock likely carries a conversion feature

An investor owns one XYZ call in a portfolio that contains other asset classes. The investor wants to learn more about ow the option's value changes. Which of the following will have the MOST impact on the premium value of the option?

The several months that remain until the option expires

A customer has been looking to buy a call option contract on a particular stock, but at this point, the customer has been unable to find options for this particular security. The customer's registered representative is able to find a seller of the option contract, but the trade will take place off of the floor of an exchange. Which of the following is TRUE in this scenario

The transaction in this case would be considered an over-the-counter trade, because the transaction is not being executed on an exchange

A customer wishes to sell stock just after the stock pays a dividend with a record date of Friday, October 20th. Assuming a regular-way settlement, the earliest that the customer could sell the stock and still receive the dividend is

Thursday, October 19th

Which fo the following securities would be brought to market using a competitive auction

Treasury bills offered by the US government

Which bond would be most suitable for an investor who invests for maximum liquidity

a bond with a one-year maturity

which of the following companies is most likely to pay a stock dividend

a company with a small cash balance and earning growing at 20% per year

when an investment grade corporate bond is downgraded to a junk bond, it is referred to as

a fallen angel

When evaluating investments for a client, a municipal bond portfolio would be most appropriate for which of the following investors

a middle-aged investor in a high tax bracket who is seeking income but looking to reduce tax burden

Compared with owning corporate stock, a person investing in a limited partnership would normally receive which one of the following

a more direct share in profits and losses

Of the following options transactions, which MUST be labeled either "uncovered" or "covered" on the ticket

a opening sale transaction

A customer interested in call protection on a bond would NOT purchase which of the following

a premium bond callable at par

For position limit rules on LEAPS Equity options on the same underlying stock all positions would be

aggregated

which fo the following are reasons for a corporation to repurchase its own stock a. to increase earnings per share b. to fund stock option plans c. to finance future acquisitions d. all of the above

all of the above

A structured debt security backed by a pool of assets such mortgages and auto loans where the securities are generally traded based on the Average Life of the security rather than a set maturity date is known as

an asset-backed security

If Ida has a significant portion of her portfolio invested in equity REITs, her portfolio would be most detrimentally affected by

an increase in interest rates as well as a significant increase in the number of available buildings in the are in which her REIT houls properties

When referring to call options, the term "outstanding long position" means

an option contract that has not yet either expired or been closed out through exercise or a liquidation sale

cash dividends paid to investors

are subject to federal, state, and local tax

at what time must a firm provide an options disclosure document (ODD) to a customer

at or before the approval of the account for options trading

Normally a stock will begin trading ex-dividend on the

business day prior to the record date

when trading equity options which two of the following would represent a bullish strategy

buying and call and selling a put

which of the following securities represent ownership in a corporation

callable preferred stocks

an investor is interested in owning REIT securities. He is aware of an upcoming offering of a new hybrid REIT. The investor is not an accredited investor and is able to invest a maximum of $2,000 only. The investor

can purchase the REIT

REITs can pass through all of the following to investors except

capital losses

Which of the following bonds would pay interest that is exempt from federal income tax

city of boston bond

All of the following are correct regarding common stock except

common shares may be called by the issuing corporation after a specified date

A corporation that issued several types of securities is being liquidated. investors who own which of the following securities will have the most junior claim to company assets

common stock

If an investors investment objective is capital appreciation what would you recommend as an investment opportunity?

common stock

Which of the following securities have over time best kept up with inflation

common stock

Which of the following would provide a corporate issuer the most inexpensive source of capital?

common stock

as inflation increases over time, the best hedge against it has historically been provided by which of the following types of securities

common stocks

of the following forms of bringing securities to market, which is most commonly used by the US Government for Treasury Securities

competitive bid auction

corporations usually issue warrants in connection with which of the following types of new issues

debentures, to secure a lower interest rate

Which of the following would be paid last in terms of priority by a corporation

dividend payments on a common stock

Regarding dividends paid to stockholders of a public company, the board of directors of the company is not responsible for setting which dates

ex-dividend date

Public utility common stocks generally experience greater rice volatility than the common stocks of industrial companies due to which of the following

fluctuations in interest rates

An emerging growth company is generally defined as a company with total annual

gross revenues of less than $1.07 for its more recent fiscal year

Of the securities listed below which would be classified as a fixed income security

preferred stock

when interest rates change which of the following securitie would have the greatest reaction a. rights b. warrants c. preferred stock d. common stock

preferred stock

Fixed income securities

preferred stock and bonds

Equity Real Estate Investment Trusts will usually invest in which of the following

income producing properties

The yield on a convertible bond will decrease when the price fo the underlying stock

increases

which of the following factors tends to affect the price of utility common stocks more than industrial common stocks?

interest rates

outstanding stock

issued stock - treasury stock the only shares which: vote, receive dividends, calculate EPS

The life of a standard listed equity option does not normally exceed

nine months

When a company does a Rights Offering, the rights are

only given to existing shareholders, proportionately to shares held

If a trader places an order to write a naked call, this transaction would be referred to as

opening uncovered

In terms of the market for Collateralized Mortgage Obligations (CMOs), CMOs usually trade in the

over the counter market with mark-ups and mark-downs

On the ex-date for a 20% stock dividend, a customer with a short position of 300 shares of common stock would

owe an additional 60 shares of common stock

All of the following would affect the price of an option except a. price of the stock b. position limits c. volatility of stock d. time remaining

position limits

All of the following comments would NOT apply to holders of preferred stock except

preferred shareholders typically see lower levels of price volatility than common shareholders

a bond selling at a premium to its par value means

the current yield will be lower than the nominal yield

which of the following is true of warrants

the market price of the stock is below the exercise price when they are issued

Concerning the taxation of Collateralized Mortgage Obligations (CMO's) which of the following decreases the yield of the bond

the return is taxable at the federal, state, and local levels

Bobbie purchased 100 shares of ABC common stock several years ago Which of the following rights does Bobbie have by owning common stock that preferred stockholders do not have?

the right to vote on important matters such as stock splits

Which of the following is true regarding a stock split?

the stockholder's percentage ownership remains unchanged

Which of the following is a characteristic of a corporate "junk bond"

they are issued by corporations with questionable credit strength

all of the following are examples of REITs except a. they are publicly traded securities and can be traded on an exchange or OTC b. they generally own income-producing properties like apartment buildings c. they distribute 90% of their income to shareholders d. they must be registered under the investment company act of 1940

they must be registered under the investment company act of 1940

all of the following pay dividends except a. preferred stock b. warrants c. mutual fund shares d. american depository receipts (ADR's)

warrants