SIE Practice Exam
If an investor purchases $1,000 face amount of an 8% corporate bond at 93, and the bond is scheduled to mature in 2028. What will the investor receive in maturity?
$1,080
All of the following accounts would be fully covered by the Securities Investor Protection Corporation (SIPC) in the event of a broker-dealer's failure except
$200,000 of Windmill Advisor Growth Fund and $300,000 in steel futures. (protect losses to cash and securities)
John, a customer, purchases 500 shares of the Sierra Verde Coffee Company at $22 a share in a margin account. What is John's initial margin requirement for this purchase?
$5,500
A quote of Seabird Airlines (SBRD) is 17 B 17 1/2 A 5x5. A customer would be able to sell how many share and at what price?
500 shares at $17 per share.
Your customer, Cecelia, is 40 years old. She is married and has four sons. Her third child, age 13, has committed to going to college at the prestigious Bookworm institute of LA in Southern California. Cecelia and her spouse have noted the rapid increase in the school's tuition over the past few years and are worried about their savings keeping pace with tuition costs. They also express discomfort with the uncertainties in market returns. Which of the following is the most suitable recommendation for the customer?
529 prepaid tuition plan
Paula has applied for a representative position with Great Sky Securities, a broker-dealer firm and a FINRA member. While in college, she was a bit of a trouble maker. Since completing her education four years ago, she's been a model citizen. Which of the following issues from her past may result in her disqualification from becoming a registered representative?
A charge six years ago of grand theft auto for the time she went joyriding in the dean's car in celebration of making the dean's list.
A company's net worth belongs to its owners (shareholders). The net worth for a company is computed as
Assets - liabilities
Rob takes a job with Seacoast Securities, a FINRA member broker-dealer firm, as a receptionist in a branch. Which of the following activities may violate the rules concerning activities of registered persons?
Directing a customer to a flyer for a specific mutual fund that Rob really likes.
Member Bank A wants to borrow from the Federal Reserve Bank's window. What would be the interest rate of this loan?
Discount rate
Your client asks about exchange-traded notes (ETNs) for her portfolio, and during the course of the conversation, she makes several statements. Which of the following is true?
ETNs are debt securities back by the issuer
All registered persons must complete a computer-based training session within 120 days of the person's second registration anniversary and every three years thereafter to comply with
FINRA regulatory element regulation
For tax purposes, which of the following is not associated with being reportable as ordinary income?
Gains from securities transactions.
Capital appreciation is another term for which of the following?
Growth
A client and her spouse own shares in ACE Fund as tenants in common. If each has a 50% ownership interest in the account, and the client dies, what happens to the shares in the account?
Half of the shares would belong to her spouse, and the remaining half would be distributed to her estate.
An investor owns a municipal bond fund. What is the tax status of distributions from the fund?
Income is tax free, but capital gains distributions are taxable.
Your customer receives a 10% stock dividend on 1,000 shares owned. Regarding this dividend, you correctly explain that the position will do what?
Increase by 100 shares, but the price per share will be adjusted downward
One of the ways in which closed-end investment companies differ from open-end investment companies is their ability to
Issue preferred stock
Which of the following is not reported on Form U4?
Marital status
Which of the following is among the items of information that must be entered on a new account form?
Names of all persons who will have access to the account.
Your customer, Rodrigo, is 40 years old. He is married and has four sons. Five years ago, he purchased a nonqualified variable annuity for $20,000. It has grown to $25,000 by the time he withdraws $10,000 to pay for his oldest son's college tuition. How will the withdrawal be taxed?
Ordinary income on $10,000
Under the Uniform Transfers to Minors Act (UTMA), Oscar wants to give some stock to his brother's son, whose father is the legal guardian over. However, if Oscar wants to name himself as the custodian, which of the following needs to be done?
Oscar must open the account and name himself as the custodian.
An investor purchased a corporate bond at 98 5/8 and sold the bond at 101 3/4. How much money did he make or lose on the transaction?
Profit $31.25
When a company liquidates assets, in which claims satisfied?
Secured bondholders, debentures, preferred stockholders, common stockholders.
The Conduct Rules
Set out fair and ethical trade practices that member firms and their representatives must follow.
A registered representative wants to give employees of another broker-dealer located in the same office building $20 boxes of chocolates for the holiday season. Which of the following is true?
The gifts are permitted if no condition of sales or reciprocal business is expected, and the RR's employing firm gives prior approval.
Your Client, Sven, has an extensive portfolio of stocks and bonds. Last year, he had an income of $36,000, of which $200 a month was frim a part time job and the rest frim his portfolio. How much can he contribute to a Roth IRA for the previous year?
The indexed maximum, which is not deductible from his ordinary income
A customer enters an order to buy 1,000 shares of XYZ at 21. Which of the following is true regarding these order instructions?
The order can be executed at 21 or lower.
Which of the following transactions may be made on margin?
The purchase of the NYSE-listed closed-end fund shares
You quote ABC stock to a customer 72 bid for $1,000 shares, 700 offered at 72.10. Which of the following is true?
The quote's inside spread is $0.10.
Under the Uniform Practice Code, regular-way transactions for common stock settle on
The third business day following the trade date. (Cash settlements occur same day, Regulation T settlements occur 5 days after trade date)
A customer enters a market order. This type of order can be
a buy or sell order to be executed at the next available price.
Regarding preferred stock, all of the following are true expect
a corporation issuing common stocks must issue at least one class of preferred shares.
A person who is vested with legal rights and powers to be exercised for the benefit of another is known as
a fiduciary
Any sale of securities outside an associated person's or the employing member firm's regular business is recognized as
a private securities transaction
Money laundering is defined as
a process used to make funds obtained from illegal activities appear to have come from an original source.
In the event of a corporate bankruptcy, which of the following is true?
a shareholder's liability is limited to the amount invested when shares were purchased.
BakeCo, an NYSE-listed food company, has decided to split off its cooking making corporation. Current shareholders will receive one share of the new company, BigCookieCo they own as of the record date. This action is an example of
a spin-off
A customer enters an order that must be executed in its entirety when entered or canceled immediately. This is known as
an immediate or cancel order (IOC).
For common shareholders, which of the following is true?
an increase in the value of shares owned represents growth or capital appreciation
A Penny Stock is defined as
an unlisted security trading at less than $5 per share
How often must a representative complete the firm element continuing education (CE) requirement?
annually
An investor is selling shares of Rule 144 restricted stock after holding it he required length of time. The buyers of these shares are purchasing shares of stock that
are now considered registered and no longer held to a holding period
A municipal bond has a coupon of 6.25%, and at the present time, its yield to maturity (YTM) is 6.75%. From this information, it can be determined that the municipal bond is trading
at a discount
An investor is looking to increase her purchases of put options. From this, you would surmise that the customer's market outlook is
bearish
A municipal finance professional wants to make a political contribution to a candidate for mayor in the town that she resides in. Under the MSRB pay-to-play rule, a contribution to this candiate
cannot exceed $250
Which of the following terms best describes a corporate debt instrument secured by a pledge by the issuer of property that consists of stocks or bonds of other corporations?
collateral trust certificate
An investor owns 4% preferred stock participating to 6%. This means the investor
could receive an additional 2% over the stated 4% dividend if the board declares it.
Which of the following is not true regarding convertible bonds?
coupon rates are usually higher than nonconvertible bond rates of the same issuer.
BuyMore Inc., is a NYSE-listed retailer. The company has a long history of steady growth and has paid dividends every quarter for five decades. They recently announced that they will expect steady growth in the same store sales and will continue paying dividends into the foreseeable future. They have also announced plans to expand into Central and South America. BMOR stock is an example of
emerging market stock
When shares are held in street name, this refers to the shares being
held in the name of the broker-dealer for the beneficial owner.
All of following statements regarding the different securities offering types are true expect
in an additional primary offering (APO), underwriting proceeds go to existing stockholders. (Proceeds go to the corporation in IPO and APO, proceeds go to stockholders in secondary offering/additional issuing.)
Purchases of common stock may generally look to all of the following risks associated with the investment except
interest rate risk
ABC Corporation's stock is trading at $35. A client has purchased a 50 call. The option's current value is made up of
intrinsic value only
If Interest rates are changing, which of the following terms would best describe the relationship between prices and yields of corporate bonds?
inverse
The Securities Exchange Act of 1934 covers all of the following except
issuance of corporate securities
When an investor wants to sell shares short, first the shares must be
located in order to be borrowed.
An investor with no other positions in LMN stock purchases 600 shares at the market. The investor is
long LMN stock and bullish
If a bond is purchased at a premium, the yield to maturity is
lower than the nominal yield
A common shareholder's preemptive right is the right to
maintain a proportionate share of ownership in the corporation.
The Windmill Alternative Energy Fund offers its shares to the public at the fund's net asset value (NAV) based on the next calculation of that figure. Based on this, you can say the fund is
no-load fund
A preferred stock dividend is stated as a percentage of
par value
You are recommending the purchase of the XYZ Growth Fund to one of your clients, and you explain that the fund operates pursuant to a 12b-1 plan. Under the terms described in the prospectus, the fee is
part of the expanse ratio of the fund
A company that has issued cumulative preferred stock
pays in arrears and current preferred dividends before paying dividends on common stock
A customer with no other mutual fund investments wishes to invest $47,000 in the XYZ Technology Fund. If the Class A shares are eligible for a breakpoint sales charge discount at the $50,000 investment level, the action least appropriate for an agent is to
place the order as instructed.
The first stage of money laundering is
placement
Sandal manufacturing Achilles, Inc., had registered to sell shares of its stock to the public for the first time. The company has several different uses for the money to be raised - first among them is the building of a new manufacturing plant outside of Troy, MI. This sale would be part of
primary market
A new registered rep. working for a broker-dealer is taking a part-time job at a restaurant on evenings and weekends to supplement current income. Regarding this activity,
prior written notice must be made to the member firm, who could reject or restrict the affiliation.
In a prime brokerage account, the prime broker
provides custody and clearing services, while other broker provide execution services.
The forward pricing rule applies to
purchases and redemptions of the shares of open-end investment companies
A corporation enlists the service of a transfer agent, who would be expected to handle all of the following functions expect
registering the corporation's securities with the state.
A client buys stock on Monday, May 2, in a cash account. Under Regulation T, when is the client's payment due?
same
A major difference between an open-end management investment company and a closed-end company is that the open-end investment company
sells shares through a continuous primary offering
In a split offering
shares are issued from existing shareholders only
The City of Philadelphia issued $100M in GO debt three years ago. The bonds were issued with a 20-year maturity and carry a 5% coupon. Your client, who purchased one of these bond on the initial offering, calls you to get a current quote. You respond that the bonds are selling at a slight premium. This means that
the nominal yield is higher than the yield to maturity.
A registered representative is introducing options terminology to a client. Of the following, which explanation regarding owners and writers of listed equity option call contracts would be true?
the owner of the call has the right to exercise that contract, and the writer would then be assigned and obligated to sell shares to the owner at the strike price
For an owner to be paid a dividend, his name should be recorded on the stock record book of the issuer's agent by
the record date
A breakpoint sale is
the sale of investment company shares in dollar amounts just below the point at which the sales charge is reduced on quantity transactions to incur the higher sales charge.
Capital markets can be characterized by all of the following expect
they are utilized by the public sector only
As participants in a firm commitment underwriting agreement, the underwriters know that
they, the underwriters, will be acting as principals buying the securities from the issuer.
If a representative possesses material inside information about a publicly traded company, under which the following circumstances may he communicate this information to a customer?
under no circumstances
An investor purchases a call. She has
unlimited upside and limited downside
Supply-side economist believe that the government should
use taxation to increase or decrease the money supply.
An investor interested in quarterly income should invest in
utility company stock
All of the following are money market instruments except
warrants expiring within three months
An IRA can be funded using all of the following except
works of art