SIE Simulated exam 3 Missed questions
A fund's expense ratio is expressed as which of the following? A) A percentage of the fund's net assets B) A dollar amount based on monthly costs C) A dollar amount based on annual costs D) A percentage of the fund's total assets
A) A percentage of the fund's net assets A fund's expenses are expressed as a percentage of net assets.
Which of the following would decrease the U.S. balance of payments deficit? A) An increase in purchases of U.S. securities by foreign investors B) U.S. investors seeking better returns in overseas markets C) A decrease in exports of domestic goods from the United States D) An increase in imports of foreign goods into the United States
A) An increase in purchases of U.S. securities by foreign investors Foreign investors placing their money in the United States or investing more in the United States will decrease the U.S. deficit.
In a limited partnership, which of the following best describes who is responsible for tax consequences of the business? A) The investors B) The general partners C) The business D) The limited partners
A) The investors All tax consequences of the business flow through proportionality to the investors. All partners will have some tax impact, not just the general or just the limited partners.
A variable annuity (VA) is an investment product designed to provide which of the following? A) A supplement to retirement B) A short-term savings vehicle C) Speculative gains D) A tax-free income source
A) a supplement to retirement VAs are designed to provide a supplement to retirement income. Most VAs have surrender charges that make them unsuitable for short term investments. These investments are tax deferred, not tax free. Subaccounts are investment company products and are not speculative in nature.
How often must a representative complete the firm element continuing education (CE) requirement? A) After the third anniversary of licensure and every two years thereafter B) Annually C) After the second anniversary of licensure and every three years thereafter D) Biennially
B) Annually Firm element CEs are an annual requirement. Regulatory element CEs are required after the second anniversary and every three years thereafter.
Which of the following may be purchased on a stock exchange? A) Common shares of an open-end investment company B) Common shares of a closed-end investment company C) Face-amount certificates D) Units of a unit investment trust
B) Common shares of a closed-end investment company Closed-end investment companies are often called publicly traded funds
Under the Investment Company Act of 1940, which of the following is not considered an investment company? A) Management company B) Hedge fund C) Face-amount certificate company D) Unit investment trust
B) Hedge fund Investment companies include face-amount certificates, unit investment trusts, and management companies (both open- and closed-end). Hedge funds are organized as private investment companies, which are excluded under the definition of an investment company under the Investment Company Act of 1940.
Antonia strongly dislikes First Mate Coffee and is very bearish on the company's stock. She is currently short 1,000 shares of the company stock and owns 10 put contracts on the stock. What is her possible gains for these positions? A) Unlimited gain on the stock and limited gain on the option position B) Limited gains on both positions C) Unlimited gains on both positions D) Limited gain on the stock and unlimited gain on the option position
B) Limited gains on both positions Both short stock and a long put are limited gain positions. A stocks value may only fall to zero, capping the profit for both bearish positions.
Which of the following transactions, if any, cannot be done in a cash account? A) Buy 100 ABC to open B) Sell 100 ABC to open C) Sell 100 ABC to close D) Any of these could be done in a cash account
B) Sell 100 ABC to open Selling to open (a short sell) can only be done in a margin account. It cannot be done in a cash account.
The Securities and Exchange Commission (SEC) requires that notice of corporate actions be given for all of the following except A) dividend payments on the issuer's common stock. B) interest payments on the issuer's debt instruments. C) the issuance of warrants to be attached to a bond offering. D) a reverse split on the issuer's common stock.
B) interest payments on the issuer's debt instruments. Payment of bond interest is an obligation and therefore not considered a special corporate action notice.
Under the Uniform Transfers to Minors Act (UTMA) a custodian has control over the account and can do each of the following except A) liquidate, trade, or hold securities. B) sell short and write uncovered call options. C) buy or sell securities. D) exercise right or warrants.
B) sell short and write uncovered call options. Selling short and writing uncovered options may only be effected in a margin account. The UTMA forbid the establishment of a margin account. Furthermore, these investment strategies, though legal and appropriate in other settings, provides unlimited risk and is inappropriate in an account held for a minor and therefore not permitted.
The ratings on the debt instruments of a foreign country with outstanding loans from a number of other countries worldwide have been downgraded. The impact felt due to the risk of possible default is known as A) legislative risk. B) sovereign risk. C) political risk. D) interest-rate risk.
B) sovereign risk. While it can be noted that sovereign risk is a type of political risk, the risk of default by a country on its debt instruments is specifically recognized as sovereign risk.
If after a registered representative terminates the firm learns of something that should have been reported to the Central Registration Depository, how long does the firm have to make an amendment if that information would cause statutory disqualification? A) 20 days B) 30 days C) 10 days D) 45 days
C) 10 days The rule requires notification within 10 days if the information involves statutory disqualification.
Which class of shares have a 12b-1 fee as the primary sales charge? A) No load B) Class A shares C) Class C shares D) Class B shares
C) Class C shares Class C shares charge a level load built into the expense ratio, usually as a 12b-1 fee. Class B shares have back-end loads that reduce over time (contingent deferred sales charge, or CDSC). Class A shares charge an upfront load. No load funds have no sales charge.
A potential customer asks about investing in a German car maker. You find that the company's stock trades on an exchange in Germany and has ADRs. What is the easiest way for the U.S.-based customer to make this investment? A) Open an account with a broker-dealer in Germany to make the purchase B) Open an account with a U.S. broker-dealer that has a seat on the Frankfurt exchange C) Purchase American depositary receipts for the company that trade in the U.S. markets D) Find an equivalent U.S. company and invest in that company instead
C) Purchase American depositary receipts for the company that trade in the U.S. markets Purchasing ADRs eliminates the currency exchange issue and gets the stock of the company the investor wants.
Correspondent firms would be likely to have relationships with which of the following types of broker-dealers? A) Market maker B) Introducing C) Self-clearing D) Fully disclosed
C) Self-clearing A self-clearing (or carrying) firm holds funds and securities of the fully disclosed or introducing firm's customers and performs related functions, such as sending confirmations and statements for them.
A trade of an equity index option settles when? A) The trade date B) The day after the trade C) The next business day D) Two business days
C) The next business day An option trade settles the next business day (as opposed to the broader "next day").
A customer enters an order that must be executed in its entirety when entered or canceled immediately. This is known as A) a day order. B) an immediate or cancel (IOC) order. C) a fill-or-kill (FOK) order. D) an all-or-none (AON) order.
C) a fill-or-kill (FOK) order. A FOK order must be canceled immediately if it cannot be filled in its entirety when entered. In this situation, there can be no partial executions. The entire order must be filled immediately, or it must be killed. An IOC order allows for partial executions, and an AON order can remain working as a good-till-canceled order if it cannot be filled immediately when entered.
The Options Clearing Corporation (OCC) assigns exercise notices to broker-dealers with short positions A) on a FIFO basis. B) using any method that is considered fair and reasonable. C) using a random selection method. D) on a LIFO basis.
C) using a random selection method. The OCC assigns exercise notices to short broker-dealers (those with customers who are short) on a random basis. It is the broker-dealers who may then assign exercise notices to their short customers on a random basis; on a first in, first out (FIFO) basis; or any other method that is fair and reasonable.
A broker-dealer that accepts funds and securities from customers and its correspondent member firms would most likely be which of the following? A) An investment company B) A fully disclosed introducing firm C) A carrying firm D) A depository trust
C) a carrying firm most firms choose to introduce their customers to another member firm known as a clearing or carrying firm to handle back-office tasks, such as clearing trades, sending trade confirmations, settlement and reporting compliance, trade execution, and custody of customer funds and securities.
A broker-dealer may extend credit under Regulation T for which of these transactions? A) A mutual fund purchase B) The purchase of an IPO that went public 25 days ago C) A variable annuity purchase D) A closed-end investment company purchased on the NYSE
D) A closed-end investment company purchased on the NYSE Regulation T governs customer payment and the extension of credit to clients in margin accounts. A closed-end fund is an existing listed security and is eligible for purchase on credit. I
Which of the following regarding capital and money markets is true? A) Money markets provide long-term financing. B) Capital markets provide short-term financing. C) Money markets provide intermediate to long-term financing. D) Capital markets provide intermediate to long-term financing.
D) Capital markets provide intermediate to long-term financing. The capital market serves as a source of intermediate to long-term financing. The money market, on the other hand, provides short-term financing.
Which of the debt issued listed here would produce tax-free interest at all levels? A) Piute County, Utah, general obligation bond B) 30-year T-bond C) City of San Francisco, California, general obligation bond D) City of San Juan, Puerto Rico, general obligation bond
D) City of San Juan, Puerto Rico, general obligation bond Issues from a territory of the United States (like Puerto Rico) produce interest that is tax free at the federal, state, and local leve
Which of the following statements regarding a Rule 415 shelf registration is false? A) It requires a supplemental prospectus to be filed before each sale. B) It is good for three years if the issuer meets certain requirements. C) It is good for two years. D) It requires a prospectus to be filed only once.
D) It requires a prospectus to be filed only once. Once filed, a shelf registration is good for two years and allows the issuer to sell portions of a registered shelf offering over the two-year period without having to reregister the security. However, a supplemental prospectus must be filed with the SEC before each sale. A well-known seasoned issuer (WKSI) may have a three-year period.
A mutual fund has been in existence for 25 years. The prospectus must disclose the fund's performance A) for each year over the last 10 years. B) over the last 1, 5, 10, 15, 20, and 25 years. C) broken out as an average over the last 10 years. D) over the last 1, 5, and 10 years.
D) over the last 1, 5, and 10 years. The prospectus of a mutual fund must show the fund's performance over the last 10 years or the life of the fund, whichever is shorter. The data must be shown as the last year's performance, the performance over the last five years, and the performance over the last 10 years.
Advantages to the investor offered by investment companies include I. ability to invest small amounts in many different securities. II. special securities prices available only to investment companies. III. elimination of market risk through pooling of investments. IV. increased purchasing power in the marketplace.
I and IV Investors who can only invest relatively small amounts of money can nevertheless purchase interest in many different securities through investment companies. By the same token, they also gain access to increased purchasing power by pooling their investments with others.
An investor owning 500 shares of stock worth $40 per share receives notice that the stock will undergo a split. When the split is completed, the investor owns 400 shares of stock worth $50 per share. The split must have been I. a forward split. II. a reverse split. III. an uneven split. IV. an even split.
II and III This split reduced the number of shares, which makes it a reverse split. This investor now owns 400 shares when previously they had 500 shares, which would be expressed as a 4:5 split. Because neither number in the ratio is 1, it is an uneven split.
Which of the following records must be kept for only three years? I. Customer statements II. Customer new account forms III. Customer confirmations IV. Customer order tickets
III and IV The buy and sell and quantity information on the order tickets and confirmations statements will show up on the customer's monthly or quarterly statements. Monthly and quarterly statements must be kept for six years. The confirmations and order tickets must be kept for three years.
The benefits of designating a brokerage account as transfer on death (TOD) are that I. the designation eliminates estate taxes. II. the designation avoids probate. III. the account holder no longer has to make investment decisions regarding the account. IV. the account holder may still make beneficiary changes for the account.
The transfer on death (TOD) designation allows the account holder to name a specific beneficiary (or beneficiaries) to receive the account's assets upon death. Those named persons may be changed whenever the account holder wishes.
