KnopmanMarks SIE Study Questions

An investor owns XYZ 5% preferred with a $100 par value. What dividend payments should the investor expect to receive each quarter?

$1.25 .05(100)= $5/4= $1.25

An investor buys a 10 year, $1,000 par value bond with a 6% coupon. How much interest should the investor expect to receive in each payment?

$30 .06(1,000)= 60/2= 30

An investor buys a 10 year, $1,000 par value bond with a 6% coupon. How much interest should the investor receive if the bond is held until maturity?

$600 .06(1000)= 60(10)= 600

Are the following True or False regarding Mortgage-Backed Securities (MBS)? -MBS pay semiannual interest -MBS average life is often shorter than its stated maturity -Investors seeking dependable and consistent income should purchase MBS

- False (monthly) - True (most mortgagees paid off before full term) - False (CF vary each month)

Which type of risk applies - interest rate, call, reinvestment, inflationary, credit? - A client is concerned that the income his portfolio produces is insufficient to maintain the standard of living he is accustomed to -New bonds, similar to those in a clients portfolio, are being issued with lower coupons -New bonds, similar to the ones in the clients portfolio, are being issued with higher coupons -An issuer faces business difficulty and is downgraded

- Inflationary - call and reinvestment - interest rate - credit (liquidity)

What is the current yield for the following bonds when its nominal yield is 8%? -90 -100 -132

-8.9% (80/900) -8% (80/1000) -6.1% (80/1320)

If a market maker is quoting 92.16 x 92.24 for a security... -At what price must the market maker sell? -At what price must the market maker buy? -If client places a market order to buy, at what price will it be filled? -If client places a market order to sell, at what price will it be filled?

-92.64 -92.16 -92.64 -92.16

ABC's board declares a dividend and established a record date if Thurs, Nov 4. Who receives the dividend payments? -Regular way trade on Mon, Nov 1? -Regular way trade on Tues, Nov 2? -Regular way trade on Wed, Nov 3? -What happens to the price of the stock on the morning of the ex-date?

-Buyer -Buyer -Seller -Reduced by dividend (decreases)

Does the following characteristics describe common or preferred stock: -Right to vote for BOD -Pays a regular, fixed dividend payment -Higher appreciation potential -May be cumulative -Provides a claim on all residual assets and earnings

-Common -Preferred -Common -Preferred -Common

Are the following True or False? -A firm can increase its inventory in a stock ahead of a research report being published on that company -An investor can hype up the value of a company to inflate its stock price so the shares can be sold at a profit -A trader can enter orders to push prices higher or lower, with no intent of actually executing at the quoted price

-False -False -False

True or False? -A rep arrested of securities fraud 8 years ago is subject to a Statutory Disqualification -A rep convicted of felony assault 5 years ago is subject to s Statutory Disqualification

-False -True -Felony conviction (any type) -Misdemeanor conviction involving securities, investments, or fraud -Expulsions from other SROs -Violations of fed securities laws

How are the following fixed-income securities taxed; US Gov, Municipalities, and Corporations? -Tax-Free interest income -Taxed at federal level -Taxed as ordinary income

-Municipalities -US Gov -Corporations

A trader learns that an institutional client intends to buy 17,000 shares of XYZ in a block trade later that day. Can the reader do the following? Yes or No? -Enter a buy order in his personal account that represents less than 10% if the block trade -Call other clients and suggest they buy XYZ stock provided he does not disclose the block trade -Call other clients and suggest they sell put options -Enter a client order to buy XYZ stock that was received on an unsolicited basis

-No (frontrunning) -No (frontrunning) -No (frontrunning) -Yes

Does FDIC, SIPC, neither, or both protect the following holdings? -Stocks in IRA -Fixed annuities -T Bonds -Bank CDs -Gold coins -Gold ETF -Cash in high-yield checking account

-SIPC -Neither -SIPC -FDIC -Neither -SIPC -FDIC

The following are True or False regarding Eurodollar bonds... -Coupon payments are made in USD -Bonds are registered with SEC -Used by companies to make their securities more marketable

-True -False _True

Are the following statements True or False regarding REITs? - REIT owners hold an undivided interest in a pool of RE investments - REITs are more liquid than direct real estate ownership - REITs are investment companies - REITs are DPPs - REITs pass through gains and losses to investors

-True -True -False -False -False

A client is issued 10 ABC Corp warrants, with a $20 exercise price, that expires in 2025. Are the following statements true or false? -The client has the right to purchase shares of ABC for $20 per share -The value of the warrant is tied to the price of the underlying shares -The warrant was likely issued at an exercise price below the share price -The client can sell the warrant instead of exercising it

-True -True -False -True

Are the following True or False? -A trader may spit a customers order into multiple small orders for best execution -A trader can split a customers order into multiple orders to increase commission -A firm may pay an investment website to discuss a security it makes markets in -An issuer may make reasonable payments to a firm in exchange for the firms publishing quotes and serving as a market maker

-True: splitting -False: shredding -False: manipulation -False: no payment for market maker

Who wants a strong US dollar? Who wants a weak US dollar? Clue: Importers and Exporters

-US Importers and Foreign Exporters -US Exporters and Foreign Importers

Would the following party want a strong or weak dollar? -A US producer that exports the majority of its crops -A foreign company that imports goods from a US supplier -A foreign oil company selling into the US market -A US company that imports goods for resale in the US

-Weak -Weak -Strong -Strong

Do investors in ETNs face the following risks? Yes or No? -Credit Risk -Liquidity Risk

-Yes -Yes

Which are benefits of OCC listed options contracts? Yes or No? - Increased liquidity - Reduced credit and counterparty risk - Reduced market risk - reduced capital risk

-Yes -Yes -No -No

Does the following security have a legal obligation to make regular payments? Yes or No? -Secured Bonds -Unsecured Bonds -Subordinated Debt -Preferred Stock -Common Stock

-Yes -Yes -Yes -No -No

Can the following party open a brokerage account? Yes or No? -An individual person -Multiple person in one account -Business entities and corporations -Trusts -Minors -Investment clubs -Foreign entities

-Yes -Yes -Yes -Yes -No -Yes -Yes

Do REITs satisfy the following investment objectives? Yes or No? - Diversification - Income - Conservation of principal -Liquidity

-Yes: -Yes: distribute 90% of income taxed as ordinary income -No -Yes

All share classes have 12b-1 fees, but which class has the lowest? A. Class A B. Class B C. Class C D. Can be any of them depending on the price

A

If a rep places a trade on a discretionary basis without the clients knowledge, is the client responsible for all brokerage charges and fees associated with the trade? A. Yes B. Yes, once client confirms trade C. No, unless rep received pre-approval D. No

A

What best describes an economic policy that seeks to drive economic policy that seeks to drive economic growth by increasing government spending? A. Fiscal policy B. Monetary policy C. Laissez-faire policy D. Classical policy

A

What features make a bond more sensitive to interest rate risk? A. Low Coupon and Long Maturity B. Low Coupon and Short Maturity C. High Coupon and Long Maturity D. High Coupon and Short Maturity

A

What is the main investment objective for Money Market Instruments? A. Safety of principal and liquidity B. Keep Pace With Inflation C. Tax-free Interest Income D. Monthly Income and diversification

A

What is the main investment objective for Treasuries? A. Safety of principal B. Income C. Tax-free Interest Income D. Monthly Income and diversification

A

When do standard option contracts expire? A. 9 months after issuance B. 9 months after each trade C. 36 months after issuance D. on the last trading date of the month

A

Which risk is associated with asset allocation for stocks? A. Market risk B. Interest Rate risk C. Inflation risk

A

When assessing a commission, mark-up, or mark-down firms must: A. be fair and reasonable B. charge all clients the same fees C. deliver their services at cost D. charge less than 5%

A (Charging less than 5% is a guide not mandatory)

The best protection for non-systematic risk (business/specific risk) is... A. Diversification B. Hedging

A. Diversification

A reg rep wants to know the situation when he can call an individual on the do-not-call list. Which of the following is not an exception to the rule? A. The individual on the do-not-call list is an existing client B. The individual on the do-not-call list is a referral from an existing client of the firm C. The individual on the do-not-call list has provided written prior consent to be called D. The individual on the do-not-call list has a personal relationship with the reg rep

B

If a customer claim exceeds the SIPC coverage limits, the customer: A. becomes a secured creditor of the BD B. becomes a general creditor of the BD C. may file a claim with FDIC D. may file a claim with FINRA

B

In a deflationary environment, which is most likely to be true? A. Interest rates increase B. Outstanding bonds will have higher coupons than new bonds C. Bond prices decrease D. CPI will increase

B

The point at which the price of a convertible bond equals the market value of stock received on conversion is known as the A. Conversion price B. Parity price C. Market price D. Purchasing price

B

What is the main investment objective for TIPS? A. Safety of principal B. Keep Pace With Inflation C. Tax-free Interest Income D. Monthly Income and diversification

B

What is the regular way settlement when trading listed options contracts? A. same day B. T + 1 C. T + 2 D. T + 3

B

What should be the primary consideration for an investor who is selecting a MF investment? A. fees B. investment objectives C. breakpoint schedule D. size of the fund

B

When are most MF orders executed? A. At Market Open B. At Market Close C. At time order is placed

B

When must firms deliver the Reg S&P privacy notice to their customers? A. At account opening B. At account opening and annually thereafter C. Accompanying each account statement D. Accompanying each trade confirmation

B

Which customer order will be automatically reduced on the morning of the ex-dividend date? A. market order B. buy limit order C. sell limit order D. buy stop order

B

Which risk is associated with asset allocation for bonds? A. Market risk B. Interest Rate risk C. Inflation risk

B

Which statement about money market mutual funds is most accurate? A. The NAV of a money market fund is always stable at $1 per share B. MM funds aim to maintain a net asset value of $1 per share, but the price can fluctuate above or below that amount C. MM funds aim to maintain a net asset value of $1 per share, but the price can fluctuate above but not below that amount D. MM funds aim to maintain a net asset value of $1 per share, but the price can fluctuate below but not above that amount

B

Which statement made by an industry professional is most accurate? A. "An objective of liquidity can best be realized through an investment in LT bonds" B. "An objective of growth would tend to place a lower priority on dividend-producing investments" C. "An objective of capital preservation demonstrates a relatively high risk tolerance"

B

A clients margin account is long $30,000 of stock. What is the accounts maintenance margin requirement? A. $2,000 B. $7,500 C. $9,000 D. $15,000

B Min maintenance for LONG is 25% (.25*30,000)

What risk would an investor with VTI shares face? A. Specific B. Market C. Credit D. Interest Rate

B VTI = Vanguard Total Stock Market ETFs

Holders of ADRs are exposed to all of the following risks except: A. Political risk B. Call risk C. Currency risk D. Inflation risk

B. Call risk

The best protection for systematic risk (market risk) is.... A. Diversification B. Hedging

B. Hedging

1035 Exchanges enable investors to: A. transfer assets from their 401(k) plan into an annuity B. transfer one annuity contract for another without facing surrender charges C. make tax-free transfer of one annuity contract for another D. transfer the assets from their annuity contract into an IRA

C

A client purchases $3,000 of stock in her margin account. What is the initial margin requirement? A. $300 B. $1,500 C. $2,000 D. $25,000

C

A client purchases $30,000 of stock in her margin account. What is the initial margin requirement? A. $1,500 B. $2,000 C. $15,000 D. $30,000

C

A client purchases $300 of stock in her margin account. What is the initial margin requirement? A. No requirement B. $150 C. $300 D. $2,000

C

A company believes that its stock is undervalued and decides to repurchase shares in the open market. Which of the following statements about the repurchased shares is not accurate? A. The repurchased shares are now referred to as treasury stock B. The repurchased shares do not receive dividends C. The repurchased shares cannot be reissued to the public D. The repurchased shares do not have voting rights

C

A market participant who buys a security in one market and then immediately resells it in another market for profit has engaged in which of the following activities? A. Arbitrage, a prohibited form of market manipulation B. Trading ahead, a prohibited form of market manipulation C. Arbitrage, a permitted trading strategy D. Trading ahead, a permitted trading strategy

C

All equity investments will have heightened sensitivity to changes in interest rates except: A. Utility stocks B. REITs C. Growth stocks D. Preferred stocks

C

For an investor concerned with liquidity risk, which of the following investments is most appropriate? A. ETNs B. Penny stocks C. REITs D. DPPs

C

How much time may elapse while an individual is not affiliated with a member firm before a top-off Series Exam credential will lapse? A. 30 days B. 1 year C. 2 years D. 4 years

C

The yield on a convertible bond as compared to a similar non-convertible would be: A. higher B. similar C. lower D. non-correlated

C

What is the main investment objective for Convertible Bonds? A. Safety of principal and liquidity B. Income C. Equity Upside D. Monthly Income and diversification

C

What is the main investment objective for Municipal Bonds? A. Safety of principal B. Income C. Tax-free Interest Income D. Monthly Income and diversification

C

When must market makers post its firm, 2-sided quotes? A. 8am-9pm B. 8am-6:30pm C. 9:30am-4pm D. 24 hours per day

C

Which of the following business structures do not pass through gains and losses to investors? A. Limited liability companies B. Limited partnerships C. C corps D. S corps

C

Which of the following debt instruments would appreciate the most in a time of falling interest rates? A. 10 year, zero coupon bond B. 10 year, 3% coupon bond C. 30 year, zero coupon bond D. 30 year, 3% coupon bond

C

Which risk is associated with asset allocation for cash and cash equivalents? A. Market risk B. Interest Rate risk C. Inflation risk

C

How frequently must firms send account statements? A. With each transaction B. Monthly C. Quarterly D. Annualy

C A= trade confirmation B= penny stocks and options D= risk documents/disclosures

How often are MF investors required to receive shareholder reports? A. monthly B. quarterly C. semiannually D. annually

C Also BS, IS, and Portfolio Holdings

Which account would be least appropriate for a buy and hold investor? A. Cash account B. Discretionary account C. Fee-based account D. Commission based account

C Fee based is for a lot of trades

A clients margin account is short $30,000 of stock. What is the accounts maintenance margin requirement? A. $2,000 B. $7,500 C. $9,000 D. $15,000

C Min maintenance for SHORT is 30% (.3*30,000)

ABC Corp is looking to raise capital overseas and avoid SEC registration. The exempt transaction they should use is: A. Regulation A B. Regulation M C. Regulation S D. Regulation T

C Reg A: small business Reg M: manipulation Reg S: offshore Reg T: margin

An investor places an order to buy 100 shares if VTI. The shares will be sold at their: A. NAV B. POP C. Market price D. Unit price

C VTI = Vanguard Total Stock Market ETFs

An investor holding a preferred stock would expect a return based on: A. Market performance B. Interest rates C. Fixed quarterly payments D. Capital gains

C. Fixed quarterly payments

How much time may elapse while an individual is not affiliated with a member firm before a Securities Industry Essential credential will lapse? A. 30 days B. 1 year C. 2 years D. 4 years

D

If a rep is associated with BD A and leaves and begins to work for BD B what regulatory filings must be completed? A. Form U4 B. Form U5 C. Form U4 then Form U5 D. Form U5 then Form U4

D

If policy makers are aiming to increase money supply, what goal are they most likely pursing? A. Raise more tax rev B. Increase interest rates C. Control inflation D. Stimulate growth

D

MF can invest in which of the following asset classes? A. Stocks B. Bonds C. Money Market D. All of the above

D

Regarding minor accounts, what statement is not accurate? A. Minors social security number is listed on the account B. Minor is liable for any taxes on the gains in the account C. Any gifts to the minors account are irrevocable D. The custodian cannot be the same individua that donates the assets to the account

D

The MSRB regulates each of the following entities except: A. municipal dealers B. municipal advisors C. municipal finance professionals D. municipal issuers

D

What is the main investment objective for Corporate Bonds? A. Safety of principal and liquidity B. Keep Pace With Inflation C. Tax-free Interest Income D. Income

D

What is the main investment objective for Mortgage-Backed Securities? A. Safety of principal B. Keep Pace With Inflation C. Tax-free Interest Income D. Monthly Income and diversification

D

What is the primary investment objective when investors buy municipal bonds? A. Tax-deferred interest income B. Sovereign diversification C. Tax-free capital gains D. Tax-free interest income

D

When can a BD charge a customer both a commission and a mark-up/down in a single trade? A. For hard-to-locate securities B. If the total fees remain under 5% C. For foreign securities D. Firms cannot charge both

D

When comparing MF and ETFs, it is accurate to state that: A. MF are more liquid but higher fees for investors B. MF are more liquid and lower fees for investors C. ETFs are more liquid but higher fees for investors D. ETFs are more liquid and lower fees for investors

D

Which MF order will receive a different execution price than the others? A. order placed at 2pm Sunday B. order placed at 7am Monday C. order placed at 3pm Monday D. order placed at 6pm Monday

D

Which activity will decrease a MF's NAV? A. new shares sold to investors B. investors redeem shares C. MF receives dividends from a portfolio company D. dividends are distributed to shareholders of the fund

D

Which is true regarding a raw land limited partnership? A. offers depletion tax benefits B. offers depreciation tax benefits C. offers regular income D. offers appreciation potential

D

Which one is most accurate regarding shelf registration? A. valid up to 2 years and can be issued for both IPOs and follow-on offerings B. valid up to 2 years and can be used for follow-on offerings but not IPOs C. valid up to 3 years and can be used for both IPOs and follow-on offerings D. valid up to 3 years and can be used for follow-on offerings but not IPOs

D

Which would have the smallest impact on a corps. capital structure? A. Issuance of common stock B. Issuance of preferred stock C. Issuance of debt securities D. Issuance of listed options

D

MF can engage in which of the following activities? A. sell securities short B. buy securities on margin C. provide investment advice D. pursue a non-diversified investment objective

D (Not C because they cant provide advice but their objectives)

Which statement about summary prospectus is not accurate? A. include highlights and pertinent info from the full prospectus B. if provided, it must be delivered to investors by the time of sale C. if provided, the full prospectus must still be made available D. all investment companies must provide one to investors

D Only MF

When the US dollar is in periods of moderate deflation, Interest rate _________ (increases or decreases), the US dollar _________ (strengthens or weakens), and Bond prices ________ (increases or decreases).

Decreases, weakens, increases

Investors who sell a MF will receive the: NAV or POP

NAV

Are stock splits/dividends taxable to investors? Yes or No

No

Investors who purchase a MF will pay the: NAV or POP

POP

When the US dollar is in periods of moderate inflation, Interest rate _________ (increases or decreases), the US dollar _________ (strengthens or weakens), and Bond prices ________ (increases or decreases).

Rise, strengthens, decreases

True or False Common Shareholders vote on the following: -Board of Directors ____ -Management (CEO, CFO) ____ -Dividend Distributors ____ -Corporate Events (mergers) ____

True False False True

A sell order is executed on Fri, May 12. When does the trade settle?

Tues, May 16

A company established Thurs, May 25, as its record date. When would the investor need to buy to receive this dividend?

Tues, May 23

A trade is executed on Mon, May 1. When does the trade settle?

Wed, May 3

Are cash dividends taxable to investors? Yes or No

Yes

Do Penny stocks have voting rights? Yes or No

Yes