SIE Practice Exam

The Bank Secrecy Act of 1970 requires financial institutions to assist US government agencies in detecting and preventing money laundering by filing reports of cash transactions exceeding what daily amount?

$10,000

Rob owns 200 shares of Epsilon stock, which recently announced that it will pay a 4% stock dividend. How many shares will Rob have after the dividend has been paid?

208 shares (200 * 4%) = 8 200+8 = 208

What calculates the required amount of an employer's annual contribution to a defined benefit plan to ensure that current and future plan benefits are available to the participants?

Actuary

In addition to the federal securities laws, each state has its own set of securities laws, commonly referred to as ______, which are designed to protect investors against fraudulent sales practices and activities

Blue Sky Laws

What is a correct reason to purchase a particular investment for a client's portfolio?

Blue chip common stocks because they provide a hedge against inflation

A note issued in which the government borrows money to finance a project and then repays lenders with revenue generated by the same project is called

RAN (Revenue Anticipation Note)

The statement of cash flows is separated into what categories?

cash flow from financing activities cash flow from investing activities cash flow from operating activities

Used to generate income and growth, marketable, historical above-inflation return, can preserve purchasing power in a portfolio

common stock

Match the state of the business cycle with the description that follows for questions 19-22 A. Trough B. Expansion C. Contraction D. Peak _______ Recession

contraction

The difference between a bond's price and the conversion parity price is referred to as

conversion premium

Fixed return, may lose value if not held until maturity, fixed interest payments

corporate bond

What occurs when the supply of goods and services exceeds their demand?

deflation

Common stock is referred to as _______ because the owner of the stock is also an owner of the corporation and may participate in its capital and income growth

equity

An unconditional contract between a bond issuer and a bond holder that specifies the terms of the bond is called a

indenture

All are characteristics of a REIT EXCEPT

it is a publicly traded open-end investment company (it is closed-end)

A large interest rate change has the most significant effect on a _______ bond

low coupon

If real GDP declined the last 3 quarters, how many more consecutive quarters of decline would be needed to be classified as an economic depression?

3 quarters

William, age 56, recently retired from Epsilon Inc., and would like to take a distribution from a retirement plan to pay for medical expenses. What plan would allow William to take a penalty free withdrawal?

401(k) from Epsilon Inc

Investment advisors that have custody of client assets or require prepayment of advisory fees _______ or more in advance, and in excess of ______ for each client, must file an audited balance sheet with the SEC as of the end of the investment adviser's fiscal year

6 months; $500

The standard expiration period for a put or call option is _____. Long-term equity anticipation securities (LEAPS) have an expiration period________

9 months, longer than 1 year

What is correct regarding stock splits and reverse stock splits?

A 3-for-1 stock split will decrease a stock's market price per share A reverse stock split is intended to increase a stock's market price per share

An IRA must be created and funded by ________ of the calendar year following the year in which the contribution applies.

April 15

What is true regarding dividends paid by growth stocks and value stocks?

Because they are growing and expanding, growth stocks typically do not pay large dividends

A free tool provided by FINRA that is intended to help consumers research the professional backgrounds of brokers and brokerage firms, as well as investment advisor firms and advisors?

BrokerCheck

Which is the largest options exchange in the US, and focuses on options contracts for individual equities and indexes?

CBOE (Chicago Board Options Exchange)

What is a type of broker that acts as a liaison between an investor and a clearing corporation by helping to ensure that trades are settled appropriately and transactions are successfully completed?

Clearing broker

The three categories of firm communications that are defined and regulated by FINRA Rule 2210 are

Correspondence Institutional communication Retail communication

An investor who believes that an economic recession is imminent should purchase which type of stock?

Defensive stock because they tend to outperform during economic downturns

Who is responsible for maintaining fair and orderly markets for an assigned set of listed firms? They operate both manually and electronically to facilitate price discovery during market opens, closes, and during periods of trading imbalances and instability.

Designated Market Makers

A type of public offering auction in which the price of the offering is set after taking in all bids to determine the highest price at which the total offering can be sold is called the

Dutch Auction

A fixed income security is subject to what risks?

Exchange rate risk purchasing power risk default risk liquidity risk reinvestment risk

_______ Recovery

Expansion

What is a self-regulatory organization (SRO)?

FINRA NYSE SIPC

A currency transaction report is a report that US financial institutions are required to file with

FinCEN (Financial Crime Exchange Network)

What is a type of exchange rate system in which a country ties its currency to a basket of other currencies or to another measure of value, such as gold?

Fixed exchange rate system

A mutual fund that invests in securities both inside and outside the US is known as

Global fund

What refers to sing property to secure payment of a loan, which includes mortgages, pledges, and putting up collateral, but the borrower retains possession?

Hypothecate

What is true regarding the Federal Reserve?

It derives its authority from Congress It operates and oversees the US payment system It supervises and regulates banks

The Federal Reserve Board performs what actions?

It sets monetary policy, but does not set tax policy

What is true regarding the Central Registration Depository (CRD)?

It was developed by NASAA and the NASD It consolidated a multiple paper-based state licensing and regulatory process into a single, nationwide computer system Its computerized database contains the licensing and disciplinary histories on more than 650,000 securities professionals and 5,200 securities firms

What can an investor sign which allows him or her to receive breakpoint discounts based upon a commitment to buy a specified number of mutual fund shares over a period of time, usually 13 months

Letter of intent

Liquid, easily converted to cash, low default risk, low real return

Money market fund

Diversification smooths price volatility, historical above-inflation return, can preserve purchasing power in a portfolio

Mutual Fund

How is the net asset value (NAV) of a mutual fund calculated?

NAV=(Total value of investment - liabilities) / shares outstanding

An advertisement used by register investment companies that advise readers to obtain a full prospectus is called ________ It is not permitted to include an application to invest, and it must contain specific caveats pursuant to SEC Rule 482

Omitting prospectus

________ GDP at its highest point

Peak

A fraudulent investment operation where the operator provides fabricated reports and generates investment returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profits of financial trading is called a

Ponzi scheme

What is considered a hybrid security?

Preferred stock (it has both common stock and fixed-income investments)

An unconditional promise to pay a sum of money to a payee, either at a fixed or determinable future time, under specific terms is called a

Promissory note

Not liquid, generally adequate inflation hedge

Real estate

What are examples of funds that are permitted investments in an IRA?

Real estate money market funds common stock bond funds

What is the formula to calculate an investment's real return?

Real return = Nominal return - inflation

The right to demand the repayment of monies paid if there has been a bad delivery of a stock or security is called

Reclamation

What passes capital gains, dividends, and interest earned on fund investments directly to shareholders so that it is taxed only at the personal level, and double taxation is avoided?

Regulated investment company

What regulation was adopted to update short sale regulations and to address concerns regarding potentially abusive naked short selling?

Regulation SHO

An offering of shares to existing stockholders on a pro-rata basis is called a

Rights offering

Which act created the SEC and empowered it with broad authority over all aspects of the securities industry?

Securities Exchange Act of 1934

Which corporate voting procedures entitles a shareholder to one vote per share, and votes must be divided evenly among the candidates being voted on?

Statutory voting

What is true regarding the taxation of TIPS?

TIPS are taxed at the federal level only

What will result if money distributed from a 529 plan is not used to pay for qualifying education expenses?

The gain is taxed as ordinary income, and a 10% penalty is applied

An individual who meets what criteria must register as an investment adviser?

The individual provides advice or analyses concerning securities The individual is in the business of providing investment advice The individual provides investment advice for compensation

An investor sells a naked call on Omikron for a $250 premium. What is true regarding the investors position?

The investor's potential loss is unlimited

in 2017, the SEC adopted an amendment to the Settlement Cycle Rule under the Securities Exchange Act of 1934 that changed the standard settlement cycle for most broker-dealer transactions in what way?

The standard settlement cycle was shortened from 3 business days after the trade (T+3) to 2 business days after the trade (T+2)

What market refers to the trading of exchange-listed securities in the over-the-counter market? These trades allow institutional investors to trade blocks of securities directly, rather than through an exchange, providing liquidity and anonymity to buyers.

Third market

What describes the relationship between total risk, systematic risk, and unsystematic risk?

Total risk - Systematic risk = unsystematic risk

_________ Utilization at its lowest level

Trough

What form must broker-dealers, investment advisers, or issuers of securities fill out in order to terminate the registration of an individual in the appropriate jurisdiction? It is also known as the Uniform Termination Notice for Securities Industry Registration.

U5

A trade surplus results from

a country exporting more than it imports

What is true regarding the capital structure of open-end mutual funds?

open-end mutual funds issue new shares and redeem existing shares from shareholders

A type of preferred stock that gives the investor the right to receive dividends equal to the normally specified rate, as well as an additional dividend based on a specific predetermined condition is called a

participating preferred stock

What is correct regarding Coverdell Education Savings Accounts (ESAs)?

private elementary school expenses are permitted to be paid from an ESA

An order to sell a stock at a price below the current market price is called a

sell stop order

All but which of the following are correct regarding stock market benchmarks and indexes?

the S&P 500 is a price-weighted index (The NASDAQ Composite, Russell 2000, S&P 500, and the Wilshire 5000 are all value-weighted indexes)

Profit sharing plans have what characteristic?

they can be invested entirely in company stock

In any single life private annuity transaction, if the seller outlives his or her actuarial life expectancy, the purchaser will have paid _______ for the property. If the seller does not outlive his or her actuarial life expectancy, the _________ will have made a good financial deal.

too much; purchaser