SIE Prep

an investor owns 5% preferred stock with a $100 par value. what dividend payments should the investor expect to receive each quarter

$1.25 $100(5%)=$5/4 quarterly payments =1.25

A client sells 100 shares of ABC short at $50 believing it is overvalued. What are the profits if ABC declines to $35 per share?

+1500

A client sells 100 shares of ABC short at $50 believing it is overvalued. What are the profits if ABC appreciates to $80 per share?

-3000

An investor buys 2 ABC Jan 30 calls for a premium of 3. What is the max loss on this position?

-600 =2*3*100

True or False: 1REIT owners hold an undivided interest in a pool of RE investments 2REITs are more liquid than direct real estate ownership 3REITs are investment companies 4REITs are DPPs 5REITs pass through gains and losses to investors

1 T 2 T 3F 4F 5F

Is the following person restricted from purchasing IPOs? 1.Broker-dealer firms ___________________ 2. Employees of broker-dealers ___________________ 3. Immediate family members of broker-dealer employees ________________________________________________ 4. Extended family members of broker-dealer employees

1 yes 2 yes 3 yes 4 no

An investor buys a 20-year, $1,000 par value zero-coupon bond for $350. 1. What is the annual interest received each year? ____________________ 2. To entice buyers, how are these bonds priced at issuance? ____________________ 3. What does the owner receive at maturity? ____________________ 4. What profit is earned if held until maturity? ____________________ 5. What is the investment objective for zeros? _______________________________________ 6. What risks are associated with zeros?

1 zero 2 at a deep discount 3 par value 4 650 5 long term no need for income ie 401k 6 higher interest rate risk and phantom

Who is an accredited investor under Reg D?

1. Officers and directors of the issuer 2. Institutional investors with over $5 million in total assets 3. High-net-worth individuals Net worth of at least $1 million (excluding home) or Income of at least $200K ($300K if married)

if xyz board resolves to skip a quarterly dividend payment to preferred shareholders, the next dividend payment would be recovered in court bc the security is in default $5 $2.50 $1.25

1.25--unpaid dividends are lost on non-cumulative

How many shares are purchased and sold upon exercise for an option contract?

100 shares per contract

An investor owns a 10% bond purchased at 99 that is callable at 102. If the bond is called away by the issuer on the coupon payment date, how much money does the investor receive? A. $990 B. $1,000 C. $1,020 D. 1070

1070 1020 par+call premium +one coupon

Under Reg D (Private Placements), 1who raises capital 2how much 3how often 4who can invest? 5can a public company raise capital with a private placement

1any business 2unlimited amounts 3no limit to how often 4any accredited investors and up to 35 non-accredited investors 5 yes, with a pipe

Which of the following are benefits of OCC listed options contracts? 1. Increased liquidity __________ 2. Reduced credit & counterparty risk ____________ 3. Reduced market risk ____________ 4. Reduced capital risk______

1yes 2yes 3no 4no

What is the new position post-split? a) 100 shares at $40 ; 2:1 split b.5,000 shares at $0.50; 1:5 reverse split

200 shares at $20 1000 at $2.50

a convertible bond with a 3% coupon has a conversion price of $40. How many shares will an investor receive on conversion if the bond is Bought at 80 ($800) ___________________________ B. Bought at par ($1,000) ___________________________ C. Bought at 110 ($1,100)

25 shares 25 shares 25 shares (conversion ratio does not change bc price)

a convertible bond with a 3% coupon has a conversion price of $40. What is the bond's conversion ratio?

25 shares=1000/40

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? A. $30 B. $60 C. $300 D. $600

30

John owns $10,000 of mutual fund A in an individual account. His spouse owns $20,000 of the same fund in her individual account. If John buys $5,000 of the fund, what sales charge will be assessed? Less than $25,000 5.75% $25,000 but less than $50,000 4.25% $50,000 but less than $250,000 3.75% $250,000 but less than $1 million 2.75% $1 million or more 0.0%

4.25% bc of rights of accumulation

When are most MF orders executed?

4pm

An investor buys a 10 year, $1,000 par value bond with a 6% coupon. How much interest will the investor receive if the bond is held until maturity? A. $30 B. $60 C. $300 D. $600

600

8% coupon bond, 1000 par value what is the current yield for the following bond quotes? 90 100 132

8.9%=80/900 8%=80/1000 6.1%=80/1320

10% March & September corporate bond is traded on Monday, June 2. How many days of interest accrued? is the accrued interest taxed for recipient? A bond that trades with no accrued is said to

93 days accrued yes as ordinary income it does not impact the bonds cost basis trade flat

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

A 30-year, zero-coupon bond

DO REITs satisfy the following investment objective? A diversification B income C conservation of principal D liquidity

A yes B yes C no D yes

which of the following should be the primary consideration for an investor who is selecting a mutual fund investment? A. Fees B. Investment objectives C. Breakpoint schedule D. Size of the fund

A. Fees

When do standard option contracts expire? A. Nine months after issuance B. Nine months after each trade C. 36 months after issuance D. On the last trading day of the month

A. Nine months after issuance, on the 3rd friday of their expiration month

In the event of a dissolution of a limited partnership, what is the priority of claims? A. Secured lenders, general creditors, limited partners, general partners B. Secured lenders, general partners, limited partners, general creditors C. General partners, limited partners, secured lenders, general creditors D. General partners, secured lenders, general creditors, limited partners

A. Secured lenders, general creditors, limited partners, general partners

Is ABC 50 call @ 4pm ITM, ATM, or OTM if at 3pm the MV is $50?

ATM

What is Rule 144- Restricted Stock?

Allows holders of unregistered securities to sell to the public after a 6month holding period

Which of the following is not a money market instrument? A. US Treasury bill B. American depositary receipts (ADRs) C. US Treasury bond with 10 months remaining until maturity D. Commercial paper

American depositary receipts (ADRs)

What does intrastate business mean?

Any of the following: 80% of revenues are in state 80% of assets are in state 80% of net proceeds will be used in-state majority of employees are based in state

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

B T+1

Which of the following statements made by an industry professional is the most accurate? A. "An objective of liquidity can best be realized through an investment in long-term 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." D. "An objective of current income can best be achieved through investments in equities

B. "An objective of growth would tend to place a lower priority on dividend-producing investments."

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

B. A 10-year, 3%-coupon bond

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. Money market funds aim to maintain a net asset value of $1 per share, but the price can fluctuate above or below that amount. C. Money market funds aim to maintain a net asset value of $1 per share, but the price can fluctuate above that amount, though not below. D. Money market funds aim to maintain a net asset value of $1 per share, but the price can fluctuate below that amount, though not above.

B. Money market funds aim to maintain a net asset value of $1 per share, but the price can fluctuate above or below that amount.

Consider a 5-year 9% coupon bond. Can the bondholder sell the bond after two years, and if so, at what price? A. Yes, at par value B. Yes, at market price C. No, unless the issuer gives consent D. No, bonds must be held until maturity.

B. Yes, at market price

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. parity price.

ABC's common stock trading at $10 and paying a $0.10 quarterly dividend. what is the current yield? A. 1.5% B. 3.0% C. 4.0% D. 10.0%

C 4% .40/10

ABC's 8% debentures trading at 100 that mature in 2030. What is the current yield? A. 3.6% B. 4.0% C. 7.3% D. 8.0%

C 7.3% 80/1100=.073

For an investor concerned with liquidity risk, which of the following investments is most appropriate? A. Exchange-traded notes (ETNs) B. Penny stocks C. Real estate investment trusts (REITs) D. Direct participation programs (DPPs)

C REITs

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

C corporations

An investor buys 2 ABC Jan 30 calls for a premium of 3. At what market value will the position break even? A. $24 B. $27 C. $33 D. $36

C. $33

AcquisitionCo launches a tender offer to purchase 10 million TargetCo shares at a price of $22.50 per share. The shareholders of TargetCo collectively tender 100 million shares of stock. If Emily, a shareholder of TargetCo, tendered 10,000 shares, how many of her shares will actually be accepted by AcquisitionCo? A. 10 shares B. 100 shares C. 1,000 shares D. 10,000 shares

C. 1,000 shares (10% of shares bc 10 million/100 million=10% of shares accepted)

Kevin is considering purchasing a Series I bond and is interested in learning more about his investment. Which of the following statements does not accurately describe this bond? A. A Series I bond is a US government savings bond. B. A Series I bond pays a combination of fixed and variable interest. C. A Series I bond can be traded on the secondary market. D. A Series I bond is a non-marketable instrument

C. A Series I bond can be traded on the secondary market.

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. lower. bc the bondholder has equity upside

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

D issuance of listed options

A married couple earns steady incomes of $225,000 and $50,000 annually. They have a net worth of $1,250,000, including a home valued at $350,000. Are they accredited? A. Yes, they satisfy the net worth test B. Yes, they satisfy the income test C. Yes, because they satisfy both tests D. No, they are not accredited

D no, they are not accredited net worth =1.25M-350K=900K (exclude home)

what is the total return if An investor buys 100 ABC shares at $20 on May 1, ABC declares a .20 dividend on May 15, and the investor sells shares at $23 on May 30? A. 1.0% B. 13.9% C. 15.0% D. 16.0%

D. 16% (20+300 dividends /2000) =16%

Which of the following statements regarding a shelf registration is most accurate? A. A shelf registration is valid for up to two years and can be used for both IPOs and follow-on offerings. B. A shelf registration is valid for up to two years and can be used for follow-on offerings, but not IPOs. C. A shelf registration is valid for up to three years and can be used for both IPOs and follow-on offerings. D. A shelf registration is valid for up to three years and can be used for follow-on offerings, but not IPOs.

D. A shelf registration is valid for up to three years and can be used for follow-on offerings, but not IPOs.

Which statement about a summary prospectus is not accurate? A. It includes highlights and pertinent information 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. All investment companies must provide one to investors.

Which of the following mutual fund orders will receive a different execution price than the others? A. An order placed on Sun. at 2:00 pm B. An order placed on Mon. at 7:00 am C. An order placed on Mon. at 3:00 pm D. An order placed on Mon. at 6:00 pm

D. An order placed on Mon. at 6:00 pm

Which of the following activities will decrease a mutual fund's NAV? A. New shares are sold to investors. B. Investors redeem shares. C. Mutual fund receives dividends from a portfolio company. D. Dividends are distributed to shareholders of the fund

D. Dividends are distributed to shareholders of the fund

Following an issuer's declaration of a stock split, which of the following remains unchanged for an investor? A. Number of shares owned B. Price per share C. Number of votes D. Economic ownership

D. Economic ownership

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

D. It offers appreciation potential.

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. Tax-free interest income

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

ETFs are more liquid and typically have lower fees for investors. CEF & ETF cant trade mutual funds during the trading day so not as liquid lower fees because ETFs managed passively and so no manager to pay necessary

Is ABC 50 call at 4 ITM, ATM, or OTM if at 10am the market value is $52?

ITM (has intrinsic value)

Investors who sell the fund will receive the: A. NAV. B. POP.

NAV

Is ABC 50 put at 4pm ITM, ATM, or OTM if at 10am the MV is $52?

OTM

IS ABC 50 call at 4pm ITM, ATM or OTM if at 2pm the MV is $48?

OTM (no intrinsic value)

Investors who purchase the fund will pay the: A. NAV. B. POP

POP (NAV+sales charge)

Mutual funds may 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

Pursue a non-diversified investment objective

A client is issued 10 ABC Corp warrants, with a $20 exercise price, that expire in 2025. Are the following statements true or false? The client has the right to purchase shares of ABC for $20 per share. _________ 2. The value of the warrant is tied to the price of the underlying shares. _________ 3. The warrant was likely issued at an exercise price below the share price. _________ 4. The client can sell the warrant instead of exercising it.

T T F T

What is reconstitution?

The process of updating an ETF portfolio as companies are added or subtracted from the underlying index

what are eurodollar deposits

US dollars held in a bank abroad

What is a convertible bond?

a bond that can be converted to common stock at the bondholder's option

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

all of the above

What is Rule 144 control stock

allows insiders such as the executive board, board members, and large shareholders to sell their holdings of company stock every 90 days

what is the coupon yield?

annual interest established at issuance; percentage of par and does not change

Is ABC 50 put at 4pm ITM, ATM, or OTM if at 3:30pm the MV is $50

atm

AcquisitionCo launches a tender offer to purchase 10 million TargetCo shares at $25 per share, subject to a minimum tender of 5 million shares. If only 2.5 million shares are tendered the tender will: A. proceed for 2.5 million shares. B. proceed for 5 million shares. C. proceed for 10 million shares. D. be cancelled and no shares tendered.

be cancelled and no shares tendered. Tender offers are conditional

dividends on preferred stock must be paid before bond interest payments before dividends to common stock with dividends on common stock after dividends on common stock

before dividends to common stock

Common stockholders vote on which of the following: board of directors management (CEO) Dividend Distributions Corporate events (mergers)

board of directors and corporate events

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

buyer buyer seller reduced by amount of dividend bc any buyer on t aht date

holders of ADRs are exposed to all of the following except political risk call risk currency risk inflation risk

call risk

all share classes have 12b-1 fees, which class has the lowest

class A shares

common or preferred stock? higher appreciation potential

common

common or preferred stock? right to vote on board

common

provides a claim on all residual assets and earnings

common

what is the current yield?

coupon yield divided by market price aka annual interest/current market value

How do you calculate current yield?

current yield=annual income/current market price

If a 9% bond is sold two years later when prevailing interest rates are 12%, the bond will sell at a: A. premium. B. par. C. discount. D. $600.

discount

what is the best protection against non-systematic risk

diversification

what is preferred stock?

equity security providing regular steady income

what is the main investment object for convertible bonds

equity upside

T/F preferred stock has voting rights

false

true or false: investors seeking dependable and consistent income should purchase MBS

false--not steady returns and vary every month

true or false: mbs pay semiannual itnerest

false-interest paid monthly bc that is when people pay mortgages

an investor holding preferred stock would expect a return based on market performance interest rates fixed quarterly payments capital gains

fixed quarterly payments

what is the best protection against systematic risk

hedging using options

An active fund manager who believes there will be a short-term market decline would allocate into what asset?

hold cash; buy the dip

what is the main investment object for corporate bonds

income

What is a QIB

institutions with at least 100Million discretionary assets (qualified institutional buyer)

Is ABC 50 put at 4pm ITM, ATM, or OTM if at 2pm the MV is $48?

itm--buy at 48, sell it at 50

in a bankruptcy, common stockholders are repaid first before bondholders before preferred stockholders last

last

What can an investor do with any options position prior to expiration?

liquidate the position

What are some disadvantages of DPP investments?

liquidity risk (very limited secondary market) legislative risk (change in tax laws can significantly reduce value) capital risk (can lose entire investment)

What features make a bond more sensitive to interest rate risk?

low coupon and long maturity

what is the main investment object for TIPS

maintain purchasing power when there is inflation

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

market price

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

market risk

what is the main investment object for MBS

monthly fluctuating income and diversification

what is a money market mutual fund?

mutual fund holding money market securities

Which party is responsible for holding and safekeeping a mutual fund's cash and securities? A. Mutual fund's investment adviser B. Mutual fund's custodian C. Mutual fund's transfer agent D. Mutual fund's sponsor

mutual funds custodian

Are stock splits or stock dividends taxable to investors

no

are eurodollar bonds registered with the SEC?

no

could the writer/seller of an option contract choose to exercise, let option expire, or close the position?

no, no, yes

Does ITM or OTM show profitability?

no--only tells us if they have intrinsic value

how long is a short term debt instrument

one year or less

what is the expense ratio

operating expenses/average value of fund assets

what is the conversion ratio

par value/conversion price

what do investment companies do?

pool money from many investors and deploy it based on specific investment goals

common or preferred stock? may be cumulative

preferred

common or preferred stock? pays regular, fixed dividend payments

preferred

what is a PIPE

private investment in public equity

What is Reg D?

private placement, a way for companies to raise capital without registering their securities

investors can find information about shareholder meetings and vote their shares using which document?

proxy statement

ABC Corporation 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.

regulation S (overseas offerings)

what is the investment objective of a short term money market debt instrument

safety and liquidity

what is the main investment object for Money Market Instruments

safety and principle of liquidity

what is the main investment object for treasuries

safety of principle and full backing by US govt

How often are mutual fund investors required to receive shareholder reports? A. Monthly B. Quarterly C. Semiannually D. Annually

semiannually

What are some of the risks associated with each asset class?

stocks: market risk bonds: interest rate risk, credit risk, call risk, reinvestment inflation risk cash and cash equivelents: inflation risk

what is the main investment object for muni bonds

tax free interest income esp for high tax bracket investors

what investments are in the money market?

tbills, commercial papers, CDs, bankers acceptances

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? the repurchased shares are now referred to as treasury stock the repurchased shares do not receive dividends the repurchased shares cannot be reissued to the public the repurchased shares do not have voting rights

the repurchased shares cannot be reissued to the public

what is the purpose of a registration statement under the securities act of 1933?

to provide all material information about the offered securities

The following describes investments in the money market, true or false? A. Highly liquid ___________ B. Very safe ___________ C. Low returns ___________ D. Long-term investment ___________ E. Stable income ___________

true true true false false

true or false: MBS average life is often shorter than its stated maturity

true--most mortgages are paid off before their full term

shareholder owns 100 shares of xyz co and has recently received a proxy statement that indicates shareholders will be voting on 3 board seats. she wants to understand how voting differ under statutory method compared to comulative method. which is true: under statutory voting she can cast up to 300 votes for each seat under statutory voting she can pool 300 total votes together and allocate them as she wants under cumulative voting she can cast up to 100 votes for each seat under cumulative voting she can pool 300 total votes together and allocate them as she wants

under cumulative voting she can pool 300 total votes together and allocate them as she wants

What is the maximum loss on a short position?

unlimited

Are cash dividends taxable to investors

y, even if reinvested (DRIP--dividend reinvestment plan)

Can MF orders be placed throughout the day (Y/N)?

yes

are eurodollar bonds' coupon payments made in USD?

yes

do penny stocks have voting rights?

yes

An investor buys $700 of mutual fund shares, receives a $100 cash dividend distribution, and instructs the mutual fund company to reinvest the dividends. 1. Does the investor pay tax on the $100 reinvested dividend? ____________________ 2. Does the investor pay a sales charge on the $100 reinvested dividend? ____________________ 3. What is the investor's adjusted cost basis in the fund? ____________________ 4. If the shares were sold for $950, what are the taxable capital gains?

yes no 800 150

Does the following security have a legal obligation to make regular payments? secured bonds unsecured bonds subordinated debt preferred stock common stock

yes yes yes no no

Do investors in Exchange Traded Notes face the following risks: credit risk liquidity risk

yes & yes

Could the owner (buyer) of an options contract choose to exercise, let option expire, or close position ?

yes, yes, yes

are eurodollar bonds used by companies to make their securities more marketable?

yes,, if the issuer country's home currency is unstable