SIE Missed Questions
If a bond is quoted at 103 3/8, this is equal to a price of:
$1,033.75 A bond's price is typically stated as a percentage of its par value. For example, a bond that's quoted at 100 is selling at 100% of its par value, or $1,000 (100% of $1,000). However, bond prices may be stated as a percentage along with a fraction. To make pricing easier, the fraction should be converted to a decimal (i.e., divide the numerator by the denominator). For example, 1/2 becomes .50, and 5/8 becomes .625. Therefore, a bond quoted at 103 3/8 is converted to 103.375% of par value, or $1,033.75 ($1,000 x 103.375%).
The annual limit for gifts or gratitudes that are made to employees of other member firms is:
$100
A customer buys 1 ABC Jan 35 put for a premium of $3 and simultaneously buys 100 shares of ABC stock for $35 per share. The customer will break even when the stock is selling at what price per share at expiration?
$38
The price for a treasury bond with a principal vale of $1,000 is 94-18. What's the dollar price of this bond?
$945.63 Treasury notes and treasury bonds are quoted as a percentage of par along with a fraction. The fractions are in 32nds. However, bond prices may be stated as a percentage along with a fraction. To make pricing easier, the fraction should be converted to a decimal (I.e., divide the numerator by the denominator). In this case, 94-18 (or 94 18/33) becomes 94.5625%. A bond priced at 94.6525% of par is equal to $945.63.
unsystematic risk
(also a diversifiable risk), business risk, liquidity risk, political risk
Letter of intent (LOI)
- Backdated for 90 days - Good for 13 months - No breakpoints for investment clubs Allows investors to purchase Class A mutual fund shares and qualifies them to obtain a sales charge reduction without initially depositing the amount required
Open-end mutual funds
- Primary market (issuer receives transactions) - Prospectus required ( comply with both investment company 1940 and the securities act of 1933, aka "prospectus act" aka "paper act") - Must redeem shares at the next computation of NAV per share (once per business day) (within 7 calendar days) (forward pricing) - Issues common stock only "one class of equity" ( cannot issue preferred stock and bonds) - No secondary trading - Price by formula (NAV + sales charge) - 8.5% max sales charge - Ex-date by BOD 1 business day after record date (selling dividends is a prohibited practice) - Can own preferred stock and bonds, but they CAN NOT ISSUE IT
Closed-end funds (NYSE and Nasdaq)
- secondary market - no prospectus after IPO - Shares are not redeemable. Shares sold in the secondary market - Issues common stock, preferred, and/or bonds - Secondary trading on exchange or OTC - price by supply and demand - Commissions - Ex-date set up by UPC 1 business day before the record date
_ day before the ex-dividend date is the last day an investor can purchase stock to be entitled to the dividend
1
As defined by FINRA, the term "correspondence" includes any written or electronic communication that's distributed or made available to:
25 or fewer retail investors within any 30 calendar-day period The term "correspondence" includes any written (including electronic) communication that's distributed or made available to 25 or fewer retail investors within any 30 calendar-day period. Communication that a member firm distributes exclusively to institutional investors or registered employees is not considered correspondence
Upon written request, how long can a broker-dealer hold the mail of a client who's engaged in extensive travel?
3 months Based on a customer's written request, a broker-dealer can hold her mail for up to three months. Mail can be held longer, but the client m
The computation of dollar prices and accrued interest on municipal bonds is normally on what calendar basis?
30/360 T+2 Trades in 8th
Customer complaints must be kept for _ years.
4
Records that relate to customer accounts must be maintained for a total of _ years after the account is closed. For the first _ years, the records must be in an easily accessible location.
6; 2
Federal regulations required that funds send payment for the redemption of mutual fund shares within
7 days
Max charge for a sale charge is
8.5%
If a registered representative is using the telephone to solicit for business, what time period is permitted?
8:00 a.m. to 9:00 p.m. local time of the person being called
If there's a decrease in foreign interest rates, what impact will this have on the U.S. dollar?
A lowering of foreign interest rates will strengthen the U.S. dollar. The lowering of foreign interest rates will increase the strength of the U.S. dollar, since lower interest rates abroad will cause more money to be invested in U.S. securities to obtain the higher yield. More money invested in the U.S. translates into a stronger dollar. Conversely, if interest rates in foreign markets are higher than they are in the U.S., money will be invested overseas which will lead to a weaker dollar.
A registered representative (R) who wants to place a mutual fund advertisement must obtain written approval from which of the following parties?
A registered principal of the RR's firm
Which of the following outcomes are possible for the writer of a covered call option? A) Profit limited and loss limited B) Profit limited and loss unlimited c) Profit unlimited and loss limited D) Profit unlimited and loss unlimited
A) Profit limited and loss limited
sell stop order
An order to sell a security that is entered at a price below the current market price and that Is triggered when the market price touches or goes through the sell stop price.
Which of the following statements is true about all U.S. government agency issues? A) They are exempt from federal taxes. B) They are exempt from registration under the Securities Act of 1933. C) They are issued in bearer form only. D) They are general obligations of the federal government.
B) They are exempt from registration under the Securities Act of 1933.
All of the following risks apply to both foreign and domestic debt instruments except: A) political. B) exchange. C) repayment. D) interest rate.
B) exchange
The last transaction in XYZ 5.50s 2030 was at 102. This bond is selling at: A) par. B) a premium. C) a discount. D) asset value.
B) premium
To offer its shareholders a privilege to obtain its shares at a fixed price, which of the following products does a corporation issue? A) Puts B) Rights c) Futures D) Preferred stock
B) rights
In the over-the-counter market, the term "spread" refers to the difference between the:
Bid and asked prices.
Buyers of call options are __, Sellers of call options are __
Bullish (they want the value of the underlying stock to rise). Bearish (they want the value of the underlying stock to fall). Buyer has the right to buy the stock at the strike price; Seller, if exercised, has the obligation to sell the stock at the strike price. Exercise: Buyer buys stock from seller at a low strike price and sells on the market at a higher market price.
Company ABC announces a 20% stock dividend for its common shareholders. If a customer holds 1,000 shares at $50.00, what is the new price and number of shares following the payment of the stock dividend? A) 800 shares at $62.50 B) 1,000 shares at $41.67 C) 1,200 shares at $41.67 D) 1,200 shares at $50.00
C) 1,200 shares at $41.67 (1,000 * 20%) = 200 200 + 1,000 = 1,200 $50 * 1,000 = 50,000 50,000 / 1,200 = $41.67
Under the Securities Act of 1933, registration is required for which of the following securities? A) Eurodollar bonds B) Municipal securities C) American Depositary Receipts (ADRs) D) Securities issued by the federal government
C) American Depositary Receipts (ADRs)
In a period of low inflation and economic recession, the Federal Reserve is expected to take which of the following actions? A) Decrease taxes B) Raise the federal funds rate C) Buy bonds in the open market D) Require banks to increase reserves
C) Buy bonds in the open market
A member of a stock exchange responsible for providing liquidity in a security by being willing to buy and sell at all times is known as: A) a broker. B) an underwriter. C) a market maker. D) a transfer agent.
C) a market maker.
What measures the cost of a fixed basket of goods and services?
CPI - measure of inflation
The call provision of a bond stipulates which of the following factors?
Call date and call price
A CPA has indicated his willingness to instruct some of his clients to open accounts with a registered representative of a broker-dealer in return for a portion of the commissions generated in these accounts. The registered representative:
Cannot share any commissions with the CPA Payments of any form are prohibited when they're being paid to unregistered persons. A CPA is not considered a registered person; therefore, the CPA cannot be compensated for the referrals.
Upon expiration, all in-the-money S&P 100 index call options are settled by the delivery of which of the following?
Cash
Which of the following actions violates FINRA rules regarding selling away? A) Recommending to a customer the services of another broker-dealer (BD) B) Sharing commissions with another registered representative in the same BD C) Advising customers to buy mutual funds at amounts just below a discount level D) Engaging in private securities transactions without written prior consent of the employing BD
D) Engaging in private securities transactions without written prior consent of the employing BD
Under SEC Regulation S-P (Consumer Privacy), which of the following information must a firm include in its customer privacy and opt-out notices?) A) The address of the firm's website B) The fee to opt out from the privacy program c) The deadline by which to opt out from the privacy program D) The policies to protect the security of nonpublic information
D) The policies to protect the security of nonpublic information
From the issuer's perspective, when comparing serial bonds to term bonds, serial bonds have:
Declining interest payments and declining principal amounts Serial bonds have several (a series of) maturity dates with a lower amount of debt outstanding over time. Each series of bonds will have declining interest payments and declining principal amounts. In comparison, term bonds have one maturity date (i.e., the entire principal balance is paid on one date) and have stable interest payments.
Which of the following actions is required of a broker-dealer's anti-money laundering (AML) program?
Designating an AML compliance officer
Securities that are sold to the US investors are generally required to be registered with the SEC.
Euro dollars are bonds that pay interest in US dollars, but they're sold to foreign investors. As a result, they don't need to be registered with the SEC. Both municipal bonds and bonds that are issued by the US government are exempt from registration with the SEC.
U.S. dollars that are held in foreign banks and available for settling transactions between companies on an international scale are referred to as:
Eurodollars Eurodollar is a term that refers to any U.S. dollar being held outside of the U.S. banking system. A Eurodollar bond is a bond that's denominated in U.S. dollars, but is issued by a foreign entity and held overseas. A banker's acceptance is an instrument which represents a promised future payment by a bank.
The report or document which examines whether a project is needed and whether it's a sound economic investment is referred to as the:
Feasibility study
A registered representative has been the subject of a disciplinary action and a client has received an award through arbitration. Information regarding the action and award will be reported on:
Form U6 Disciplinary actions and arbitration awards are reported on Form U6.
An investor who sells a call:
Has the obligation to provide the underlying security at a predetermined price The seller of a call must agree to provide the security at the preset (strike) price if the owner chooses to exercise the call.
1-10 reverse split.
If it's a reverse split then it's less shares at a higher price
For an order to be executed at a specific price or better, it must be entered as a __.
Limit order
Which of the following terms is associated with an entity that sells securities from its own inventory?
Market maker When a firm is selling securities from its own inventory, it's referred to as a dealer or market maker and the transactions are considered principal transactions. Dealers/market makers are entitled to markups/markdowns. On the other hand, brokers act as facilitators for buyers and sellers and execute agency transactions. Brokers are entitled to commissions. An investment adviser charges a fee for advice and doesn't execute trades. A dark pool is a system which allows institutional investors and high-frequency traders to trade large blocks of stock anonymously.
POP (public offering price) formula
NAV / (100% - sales charge %)
The redemption value of an open-end investment company's shares is based on the:
NAV computed after the order is received.
What organization guarantees the obligations, but not the price, of listed options contracts?
OCC The Options Clearing Corporation (OCC) issues, guarantees, and clears options contracts. The guarantee for the options contract is that both parties will adhere to the contract terms and conditions, but it's not a guarantee of price or market performance.
Which type of preferred stock gives the holders the possibility of bonus payments above and beyond the stated dividend?
Participating preferred Participating preferred stock allows the holders to potentially receive extra payments (if declared by the board). The extra payments are typically a reflection of the profitability of the company.
Changing investments in a 529 account is:
Permitted twice every 12 months Under federal law, the owner of a 529 college savings account is permitted to change the manner in which the funds are invested twice each calendar year. A change is also permitted whenever the beneficiary is changed.
Primary v. Secondary
Primary - issuer is receiving the proceeds Secondary - previous owner is receiving the proceeds
Roth 401(k) and Roth individual retirement account (IRA) plans share which of the following features?
Qualified distributions are excluded from federal income tax
Rights of accumulation refers to an investor's ability to:
Receive a lower sales charge on the next investment that puts the investor at or beyond the next breakpoint level
Call protection is most valuable to a bond owner when bond prices are generally:
Rising
As it relates to a negotiated settlement, which of the following is also referred to as a delayed delivery?
Seller's option Delayed delivery is an option whereby the delivery of securities is done on a later date than the usual settlement date. This is also referred to as seller's option because the seller either cannot or chooses not to deliver on a regular-way basis. With seller's option, the delivery date can be anywhere from the third business day after the trade to a date that's specifically written in the contract.
When is interest on Treasury notes paid?
Semiannually
OPTION contracts themselves settle
T + 1
The resulting EXERCISE of equity options is T + 2
T + 2
For trades involving either corporate stocks or bonds, the Regulation T payment date is:
T + 4 According to the Federal Reserve board, the regulation T payment date is no later than the fourth business day following the trade date (I.e., T + 4). Keep in mind, regular-way settlement for corporate securities is T + 2 business days and the customers regulation T payment is required to be made by no later than two business days after the settlement.
Cash dividends are _ Stock dividends are _
Taxable; not taxable
XYZ Broker-dealer is a subsidiary of ABC Financial Services. XYZ Broker-Dealer executes trades based on inside information and manages to avoid losses of $300,000 due to those trades. What's the maximum civil penalty that may be imposed on ABC Financial Services due to the insider trading?
The maximum civil penalty that may be imposed on a person who maintains control over another person that commits insider trading is the greater of $1,000,000 or three times the profit gained or loss avoided. It's important to note that the controlling person is not liable unless the SEC determines that the controlling person recklessly disregarded indications that the employee would engage in insider trading or the firm did not have procedures and controls in place to detect insider trading. For the individual who commits the violation, the penalty is capped at three times the profit gained or loss avoided.
The economy has entered a recessionary period and interest rates have been falling. If a par bond was previously issued with a 6% coupon, which of the following statements is TRUE regarding the nominal yield, current yield, and yield-to-maturity on this bond?
The nominal yield will be the highest of the three yields.
Which of the following statements is true regarding a customer account held as tenants in common?
The ownership of the decedent's assets is governed by their will or state law
A registered representative's client wants to buy securities, but needs some extra money to complete the transaction. The representative indicates that he's willing to provide her with funds on a short-term basis from his personal account. What are the ramifications of this action?
The representative would be in violation of a prohibited activity by loaning the money to the client. A representative is not permitted to either loan money to a client or borrow money from a client. To do so is a prohibited activity, unless: 1. the customer and the RR are immediate family members; 2. the customer is a financial institution that's in the business of lending money; 3. both persons are registered at the same firm; 4. the loan is based on a personal relationship between the two parties; or 5. the loan is based on a business relationship that's independent of the broker-dealer relationship.
Customer trade confirmations must be sent by no later than:
The settlement date
When selling a fixed amount of a base currency to purchase a counter currency, which of the following factors is primarily used to determine how much of the counter currency the customer will receive?
The spot exchange rate
A corporation is holding an election for several new directors. If a customer cannot attend the meeting to vote in person, she:
Will receive a proxy to vote or may sign over the vote to another person
Which of the following investments is NOT protected under SIPC? a) Commodities b) Mutual funds c) Individual retirement accounts (IRAs) d) Call options
a) Commodities SIPC is designed to protect investors from the bankruptcy of a broker-dealer. In most circumstances, SIPC will protect cash and securities (e.g., options, mutual funds, stocks, bonds, etc.). However, commodities are not considered securities and are not covered by SIPC protection. SIPC will insure the securities that are included in an IRA.
Which of the following is NOT a characteristic of a closed-end fund? a) It continually offers new shares. b) Only full shares may be purchased or sold. c) Its shares trade on an exchange. d) Investors buy and sell the shares in the open market.
a) It continually offers new shares. Closed-end funds are a type of investment company that offer a fixed number of shares to investors. Shares of the closed-end fund then trade on an exchange and this serves as the vehicle for investors to buy and sell their positions after the initial public offering. Unlike mutual funds /open-end) that allow the purchase of fractional shares, only full shares may be bought or sold. Investors who want to either buy or sell shares may do so in the open market. This is different from mutual funds, which can never trade in the secondary market.
A non-registered employee of a brokerage firm is allowed to do each of the following, EXCEPT: a) Prequalifying potential customers before passing them on to a registered representative b) Asking whether a potential customer wants to speak with a registered representative c) Calling prospective customers to determine whether they want to receive some investment literature d) Sending invitations to events being held by the brokerage firm
a) Prequalifying potential customers before passing them on to a registered representative The amount of interaction that non-registered employees can have with existing and potential customers is limited. They're permitted to send invitations to firm-sponsored events, call potential customers to determine whether they want to receive investment literature, and ask whether they want to speak with a registered representative. However, they cannot prequalify potential customers as it relates to their financial status, investment history, or objectives.
During the underwriting of a new offering, which of the following firms doesn't assume any liability? a) Selling group b) Co-managers of the offering c) Syndicate members d) Underwriting manager
a) Selling group The selling group are firms that don't assume any liability in an underwriting. Instead, they act in an agency capacity and stand ready to sell if needed.
The Options Clearing Corporation (OCC) is responsible for each of the following activities for listed options, EXCEPT: a) Settling transactions with customers b) Issuing options c) Clearing options d) Guaranteeing options.
a) Settling transactions with customers The Options Clearing Corporation (OCC) issues, guarantees, and clears option contracts; however, it doesn't settle trades with customers. Instead, customers settle option trades with broker-dealers and these broker-dealers settle the trades directly with the OCC.
The exchange privileges allow
an investor to replace shares of one fund with shares of another fund as long as they're both of the same fund family. The new shares can be purchased at the NAV rather than the POP. That benefit encourages the investor to remain invested in the same fund family and has nothing to do with account value.
Which of the following does a municipal variable rate demand obligation (VRDO) offer to investors that a municipal auction rate security (ARS) does NOT? a) Adjustable interest b) Put option c) Long-term maturity d) Tax-free income
b) Put option A municipal VRDO provides investors with the ability to put the security back to the issuer at par value on any date that the interest is adjusted. On the other hand, a municipal ARS allows the investor to sell the security at the auction when the interest is reset, but doesn't guarantee the sale. Both VRDOs and ARS provide tax-free income, a long-term maturity, and adjustable interest.
Which of the following statements is true regarding the concept of an annuity contract? a) Payouts of an investment in a nonqualified annuity are all income-tax-free. b) The kind of annuity selected partly determines the payment amounts to the annuitant c) In the case of life annuity contracts, the age and sex of the annuitant do not affect the payment amounts. d) The amounts of the periodic payments to the annuitant are determined by the performance of the insurance company's investment returns.
b) The kind of annuity selected partly determines the payment amounts to the annuitant
Which of the following is MOST susceptible to inflation-rate risk? a) short-term bonds with low coupons b) long-term bonds with low coupons c) long-term bonds with high coupons d) short-term bonds with high coupons
b) long-term bonds with low coupons Long-term bonds are more susceptible to inflation rate risk than short-term bonds. In addition, long-term bonds with low coupons are subject to greater inflation rate risk than similar bonds with high coupons.
Buyers of put options are __, Sellers of put options are __.
bearish (they want the value of the underlying stock to fall). Bullish (they want the value of the underlying stock to rise). buyer has the right to sell the stock at the strike price; Seller if exercised, has the obligation to buy the stock at the strike price. Exercise: Buyer buys stock on market at a low market price and sells to seller at a higher strike price.
The primary purpose of a syndicate desk in the context of an equity offering is to:
build an order book and allocate the stock
The owner of which of the following products is most exposed to inflationary risk? a) utility stocks b) treasury bills c) treasury bonds d) blue chip industrials
c) Treasury Bonds
Ownership (junior to senior)
common stock (have voting rights) Preferred stock (usually don't but have a fixed dividend) Unsecured debt (debenture bonds) Secured debt (mortgage bonds)
A brokerage client begins to make strange cash deposits of $9,900 every Monday and Tuesday. Which of the following reports is it appropriate for the broker-dealer to file? a) No reports are necessary b) BCTR c) CMIR d) SAR
d) SAR A Suspicious Activity Report (SAR) must be filed for any transaction of $5,000 or more for which the firm is suspicious (e.g., suspects any evasion or other criminal activity). The BCTR is the Currency Transaction Report that must be filed if more than $10,000 is deposited on one business day. CMIR filings are required when money is being deposited from overseas in amounts exceeding $10,000.
Each of the following is a characteristic of an ETN, EXCEPT: a) They're subject to the credit risk of the issuer b) They trade on an exchange c) They can be inverse or leveraged d) They make regular interest payments
d) They make regular interest payments Exchange traded notes (ETNs) are debt securities which are issued by a financial institution. ETNs are forms of unsecured debt and subject to the credit risk of the issuer. They can be linked to virtually any asset and offered in both regular, leveraged, and inverse structures. Unlike other forms of debt, ETNs don't make regular interest payments; instead, they pay a return which is based on the performance of a benchmark asset.
At issue, which of the following debt securities mature in one year or less? a) FNMA bonds b) GNMA bonds c) treasury notes d) money market instruments
d) money market instruments
You can either buy them or sell them, so that means we have four basic option positions
long call - is a choice to buy the stock Short call - is an obligation to sell the stock at the strike price Long put - is a choice to sell the stock Short put - is an obligation to buy the stock
Warrants
long-term and exercisable above the CMP
Systematic risk
market risk, interest-rate risk, inflation risk, non-diversifiable risk
Stability in the value of a debt portfolio is greatest when:
maturities of the debt securities are short
2-1 split then you have
more shares for a lower price
SIPC
passed in 1970. protect persons w brokerage accts from loss due to failure of their bd. firms dealing in otc and exchange stocks must be members. - securities investor protection act of 1970 - coverage is $500,000, of which no more than $250,000 can be cash per separate customer
Rights
short-term and exercisable below the CMP Warrants
Voting rights
statutory - get the number of votes per owned share cumulative - multiply the # of shares you have by the things you vote on. It protects minority shareholders
Mutual funds have to comply with
the investment company act of 1940
If the value of a country's currency falls relative to other currencies, it's considered to be:
weakening If the value of a country's currency falls relative to other currencies, it's considered to be weakening. In other words, the currency is no longer worth as much in comparison to the currency of other countries. The devaluation of the currency typically leads to an increase in exports as that country's products are less expensive. This will reduce the country's trade deficit and improve its balance of payments.
in-the-money
when the market price of the underlying security is higher than the strike price.
