SIE Final 2
36, What is the annual dividend payment for 200 shares of a 3.5% preferred stock that has a $100 par value? A $700 B $350 C $175 D $87.50
A = $700
70, Hanna writes 3 XYZ Sept 30 puts @2. The holder of the options exercises when the market price is 525 and Hanna is assigned the option, forcing her to purchase 300 shares of XYZ. Hanna then decides to sell these shares immediately. What Is Hanna's profit or loss from the options contracts? A $900 loss B $900 profit C $1,500 loss D $1.500 profit
A = $900 loss
39, Who is NOT required to be fingerprinted at a broker-dealer? A Administrative assistant B Accounting supervisor C Registered representative D Registered principal
A = Administrative assistant
1, If you want to exercise an option before the expiration date, which type of option would you need? A American B European C Either American or European D Neither American nor European
A = American
32, Which of the following is an accurate list of the parties involved in mutual funds? A Board of directors, investment adviser, custodian, transfer agent, underwriters. shareholders B Investment adviser, exchange advocate, president, shareholders, facilitators C Custodian, board of investors. fund adviser, board of directors, customer services agent D Customer services agent. broker-dealers, board of directors, shareholders
A = Board of directors, investment adviser, custodian, transfer agent, underwriters. shareholders
42, The principal characteristic of a balanced fund is its combination of: A Bonds and equities B Growth funds and value funds C Open-end and closed-end funds D Growth funds and income funds
A = Bonds and equities
72, Which of the following is reported on Form 1099-DIV? A Cash dividends B Stock dividends C Stock splits D All of the above
A = Cash dividends
64, A registered representative based in Los Angeles is working at the office late making cold calls to potential customers. At 6:45 PM in Los Angeles, the registered representative is making cold calls to individuals in Miami and individuals in Sacramento. Which statement is TRUE? A Cold calls to potential customers in Miami are prohibited but permitted lor potential customers in Sacramento B Cold calls to potential customers in both cities are permitted C Cold calls to potential customers in both cities are prohibited D Cold calls to potential customers in Sacramento ore prohibited but permitted to potential customers in Miami
A = Cold calls to potential customers in Miami are prohibited but permitted lor potential customers in Sacramento
12, All of the the following are defined as "portfolio income" under IRS guidelines EXCEPT: A Distributive share of income from limited partnership holdings B Proceeds from the sale of securities in excess of the tax basis of those securities C Interest income received from bond holdings D Dividends received from preferred stock holdings
A = Distributive share of income from limited partnership holdings
8, An officer of a company has acquired shares of that issuer in the open market. If the officer wishes to sell the shares, the officer must meet which of the following requirements: A Filing of Form 144 with the SEC if the sale is above 5.000 shares or $50.000. B Filing form 144 if the sole is under 5.000 shares or $50.000. C The stock must be held for 6 months, fully paid D Each sale is limited to the lesser of 1%6 of the outstanding shares; or the weekly average of the prior 4 week trading volume
A = Filing of Form 144 with the SEC if the sale is above 5.000 shares or $50.000.
15, What does the Federal Reserve do to stimulate the economy? A Lowers the reserve requirements B Raises the reserve requirements C Increases the discount rate D Sells Treasury securities
A = Lowers the reserve requirements
53, A stabilizing bid is a bid for shares by the underwriters in an effort to: A Prop up the price of the new issue B Encourage sales in the secondary market C Win an underwriting contract D Collect indications of interest from investors
A = Prop up the price of the new issue
6, Which of the following securities transactions would result in a short term capital gain? A Purchase 100 shares of ABC stock at $50 on January 2. 2021: Sell 100 shares of ABC stock at $60 on July 2 2021 B Purchase 100 shares of ABC stock at $50 on January 2. 2021: Sell 100 shares of ABC stock at $45 on July 2 2022 C Purchase 100 shares of ABC stock at $50 on January 2. 2021: Sell 100 shares of ABC stock at $60 on January 3 2022 D Purchase 100 shares of ABC stock at $50 on January 2. 2021: Sell 100 shares of XYZ stock at $60 on January 2. 2022
A = Purchase 100 shares of ABC stock at $50 on January 2. 2021: Sell 100 shares of ABC stock at $60 on July 2 2021
48, Restricted securities may be resold using: A Rule 144 B Regulation A C A prospectus D The Trust Indenture Act of 1939
A = Rule 144
21, Buying a put option would indicate what about an investor? A She is bearish on a stock B She is bullish on a stock C She believes a stock will split soon D She favors low-risk investments
A = She is bearish on a stock
13, A beneficiary withdraws funds from a qualified tuition plan, also known as a 529 plan, for an eligible college expense. How will the withdrawal be taxed on the federal level? A The principal and earnings are both withdrawn tax-free B The principal and earnings are both taxed on withdrawal C The principal is withdrawn tax-free, but the earnings are taxed on withdrawal D The principal is taxed on withdrawal, but the earnings are withdrawn tax-free
A = The principal and earnings are both withdrawn tax-free
58, Which of the following is a characteristic of both ETFs and ETNs? A Trade on an exchange B Fixed maturity C Voting rights D Pay interest and dividends
A = Trade on an exchange
50, A developmental oil and gas limited partnership program would: A drill a new well near an existing oil field B inject water into an existing well to increase underground pressure C inject steam into an existing well to increase underground pressure D drill a new well in unproven greus
A = drill a new well near an existing oil field
25, Stock held in the custodial account is the subject of a rights offering. All of the following actions by the custodian are appropriate EXCEPT: A letting the rights expire unexercised B selling another security in the account and using the proceeds to exercise the rights C donating the funds required to exercise the rights D selling the rights and reinvesting the proceeds
A = letting the rights expire unexercised
47, Industrial development bonds are backed by the: A rental revenues paid by the corporate lessee and take on the credit rating of the corporate lessee B rental revenues paid by the corporate lessee and take on the credit rating of the municipal lessor C municipality's ad valorem taxes and take on the credit rating of the corporate lessee D municipality's ad valorem taxes and take on the credit rating of the municipal lessor
A = rental revenues paid by the corporate lessee and take on the credit rating of the corporate lessee
10, The conversion price of a convertible debenture is set at issuance at $25 per share. The common stock is now trading at $27.50 while the bond is trading at 110. In order for the common stock to be trading at parity to the current market price of the bond, the stock price would be: A $27.50 B $30.00 C $32.00 D $35.50
A =$27.50
28, A type of qualified retirement plan that is designed for employees of public schools and certain non-profit organizations is the: A 401(k) plan B 403(b) plan C 457(b) plan D 412(i) plan
B = 403(b) plan
24, A company has decided to terminate its retirement plan. In order to defer taxation on the distribution, the employee must roll over the funds into an Individual Retirement Account within how many days of the distribution? A 30 B 60 C 90 D 120
B = 60
35, Kate holds 600 shares of common stock in Company B. At its annual shareholders' meeting, the company is holding an election for its board of directors. There are 5 candidates competing for 3 board positions. It the company is using statutory voting at its meeting, what is the maximum total number of votes that Kate can cast for any one candidate? A 100 votes B 600 votes C 3.600 votes D 7.200 votes
B = 600 votes
27, Most broker-dealers interested in new T-bills would get them from: A The U.S. Treasury B A primary dealer C An underwriter D Fannie Mae
B = A primary dealer
38, Which type of mutual fund shares might investors consider if they prefer a contingent deferred sales charge payable at the sale of their mutual fund shares instead of a front-end sales load payable upon purchasing their mutual fund shares? A A shares B B shares C C shares D F shares
B = B shares
33, During periods when interest rates are rising, which statement is TRUE? A Bonds with high coupon rates exhibit the greatest price volatility B Bonds with low coupon rates exhibit the greatest price volatility C To minimize price volatility, investors should buy zero-coupon bonds D Bonds should appreciate in this rising rate environment.
B = Bonds with low coupon rates exhibit the greatest price volatility
57, One of the stocks in a customer's portfolio declines in price because the Issuer is poorly managed and several new competitors have entered its industry. The possibility that this would happen is what kind of Investment risk? A Systematic risk B Business risk C Market risk D Marketability risk
B = Business risk
59, When a registered person ends his service with a broker-dealer, the firm must file which of the following forms with FINRA? A Form U4 B Form U5 C Form BD D Form NMA
B = Form U5
17, Each of the following is true of a stabilizing bid except: A it can only be made by the underwriters of an offering B It can be made only on NYSE issues C it cannot be made unless the prospectus indicates its possible use at a later date D Only one such bid is allowed in any market at the same price and time
B = It can be made only on NYSE issues
44, Jim has invited a few friends over to help him celebrate the annuitization of his variable annuity. This means that: A Jim now has a guaranteed fixed monthly payment amount B Jim will begin to receive income C Jim will receive a lump sum D Jim has run out of good reasons to have a get together
B = Jim will begin to receive income
16, A new customer. when you ask him fo his address, he was recently evicted, is staying at a hotel, and has no current address until he locates a new apartment. Which statement is BEST about this situation? A The address to be used for Customer Identification purposes is the client's last known residence address B The address to be used for Customer Identification purposes is the address of a close relative C The address to be used for Customer Identification purposes is a P.O. Box D The address to be used for Customer Identification purposes is the address of the hotel
B = The address to be used for Customer Identification purposes is the address of a close relative
41, What will back a municipal revenue bond? A Any municipal revenue collected B The specific revenue stipulated in the bond's Official Statement C Taxes collected by the stute of issuance D Taxes collected by the issuing municipal entity
B = The specific revenue stipulated in the bond's
23, The MSRB regulates all of the following EXCEPT: A municipal salespersons B municipal issuers C municipal underwriters D municipal traders
B = municipal issuers
49, The nominal yield of a bond will: A increase as bond prices fall B remain unchanged as bond prices fluctuate C increase as bond prices rise D decrease as bond prices rise
B = remain unchanged as bond prices fluctuate
63, A "fund of hedge funds" is an investment company that makes investments in: A mutual funds that engage in sophisticated risk-limiting hedging strategies B selected hedge funds inside a registered investment company wrapper C individual securities with equally weighted positive and negative betas to limit market risk D top-performing mutual funds as rated by Morningstar that have managers noted for their longevity and posilive performance in down markets
B = selected hedge funds inside a registered investment company wrapper
22, The civil penalty for being found guilty of insider trading is: A double damages B treble damages C quadruple damages D quintuple damages
B = treble damages
46, A corporate bond with a face value of $1,000 is quoted at 98 3/8. What is the bond's current market price? A $1,000.00 B $983.80 C $983.75 D $983.00
C = $983.75
3, Janice wants to invest in a fund everyone is talking about at work. She knows the POP is $21.35 and the NAV is $20.31. She's now curious about the sales charge. What is it? A 3.2% B 5.1% C 4.9% D 6.3%
C = 4.9%
67, Under Regulation T, a margin account holder must typically put what percentage of a stock's purchase price into his account? А 25% B 30% C 50% D 75%
C = 50%
55, PDQ Company S10 par common stock is currently trading at $40. PDQ is currently paying a quarterly common dividend of S.90 per share. The current yield of PDQ stock is: A 2.25% B 4% C 9% D 1095
C = 9%
43, Clyde is a customer who has a cognitive disability that impairs his judgement. He has contacted you, and says he wants to liquidate his IRA because someone on the internet told him that he is the rightful heir to a billion dollar international diamond mine but in order to access this inheritance, Clyde must pay $250,000 in excise taxes. What is the best next step? A Contact FINRA B Comply with Clyde's request immediately C Contact Jasmine, Clyde's niece, who is the trusted contact on the account D Immediately cancel the withdrawal
C = Contact Jasmine, Clyde's niece, who is the trusted contact on the account
66, Who might be best suited to purchase a leveraged ETF? A 70 year old retiree, looking to diversify B 25 year old college graduate, interested in long-term aggressive strategies C Institutional investor who would like to engage in short-term speculation D Young married couple. looking for long term investments for a child
C = Institutional investor who would like to engage in short-term speculation
7, Gertrude purchased a variable annuity contract to fund retirement for herself and her husband, Harry. If she wants to maximize the amount of the payout but also provide lifetime income for Harry in case she dies first, which is the most appropriate settlement option? A Straight life. B Life with period certain. C Joint life with last survivor, D Life only.
C = Joint life with last survivor
60, Which characteristics make a security most subject to liquidity risk? A Short term maturity and low credit rating B Short term maturity and high credit rating C Long term maturity and low credit rating D Long term maturity and high credit rating
C = Long term maturity and low credit rating
69, written request to hold his mall for a period of three months, which it did. Today, Reliable receives another written request from Henry to hold his mail, again for three months. Can honor the request? A Yes, because the limit for holding mail is 6 months B Yes, because Reliable can contact Henry in a timely manner about his account C No, because the three-month limit includes time from previous requests, unless there is a legitimate reason such as safety or security D No, because holding customer mail is no longer allowed by FINRA
C = No, because the three-month limit includes time from previous requests, unless there is a legitimate reason such as safety or security
45, Which statement is TRUE when comparing a Roth IRA to a Traditional IRA? A Anyone with earned income can open a Roth IRA or a Traditional IRA B Traditional IRAs are not available to high-earning individuals: Roth IRAs are available to high-earning individuals C Roth IRAs are not available to high-earning individuals: Traditional IRAs are available to high-earning individuals D Only individuals with income below federal threshold levels can open either a Roth IRA or a Traditional IRA
C = Roth IRAs are not available to high-earning individuals: Traditional IRAs are available to high-earning individuals
68, Which statement is TRUE regarding a "step-down" certificate of deposit? A The interest payment is fixed B The principal payment may be reduced C The interest payment may be reduced D The security may be "stepped down" to another smaller bank at the issuer's discretion
C = The interest payment may be reduced
26, TOD account registration stands for: A Transfer on Date specified by customer B Transfer on Disability of customer C Transfer on Death of customer D Transfer on Direction of customer
C = Transfer on Death of customer
65, Which of the following is not a type of equity security? A Preferred stock B Treasury stock C Treasury bills D Warrants
C = Treasury bills
56, A customer regularly makes cash deposits of $9,900. You begin to suspect that the customer knows that cash transactions totaling $10.000 or more in one day are reported to the government. Do you (or your supervisor) need to report this to FinCEN, and if so, how? A No, you only need to log the deposits in a Monetary Instrument Log (MIL) B Yes, you need to file a Currency Transaction Report (CTR) C Yes, you need to file a Suspicious Activity Report (SAR) D No. the activity does not need to be reported
C = Yes, you need to file a Suspicious Activity Report (SAR)
9, If you own a call option: A You have all of the rights of stock ownership and you expect the price of the stock to go up B You have all of the rights of stock ownership and you expect the price of the stock to go down C You have none of the rights of stock ownership and you expect the price of the stock to go up D You have none of the rights of stock ownership and you expect the price of the stock to go down
C = You have none of the rights of stock ownership and you expect the price of the stock to go up
37, Which type of security has the lowest reinvestment risk? A Treasury bond B AAA rated Corporate bond C Zero coupon bond D TIPS
C = Zero coupon bond
29, All of the following statements are true regarding "indications of interest" EXCEPT indications of interest: A allow an underwriter to gauge investor interest in the issue B help the underwriter to decide the final Public Offering Price C are binding on both the customer and the underwriter D can be conceled by both the customer and the underwriter
C = are binding on both the customer and the underwriter
51, Which of the following would likely attract foreign investors to a country? A change in political regime B Inflation C trade surplus D trade deficit
C = trade surplus
4, Ford Motor Company has issued 8% convertible debentures, convertible at a 10:1 ratio. Currently the debenture is trading at 94. The stock is trading at $80. What is the conversion price of the stock? A $10 B $80 C $94 D $100
D = $100
30, Five years ago, Jim purchased a 10-year bond with a par value of $4,000 and a 7% nominal yield. Since then interest rates have dropped to 5%. If interest rates stay at 5% for the next five years, how much will Jim have accumulated in interest payments over the life of the bond? A $1,400 B $2.000 C $2.400 D $2.800
D = $2.800
19, ABC company has 100,000 authorized shares and 20,000 issued shares and 5,000 treasury shares. How many shares outstanding does ABC have? A 20,000 B 80,000 C 120.000 D 15.000
D = 15.000
18, Which of the following types of investment risk is likely to affect an American Depositary Receipt (ADR) but not a domestic stock? A Regulatory risk B Business risk C Market risk D Currency risk
D = Currency risk
62, Which of the following is not a secured bond? A Equipment trust certificate B Collateral trust bond C Mortgage bond D Debenture bond
D = Debenture bond
40, Lawrence writes the following option: TCQ Aug 45 call @ 4 If Lawrence holds no shares of TCQ, what is the most that he can lose as a result of writing this option? A $400 B $4,100 C $4,500 D His maximum possible loss is unlimited
D = His maximum possible loss is unlimited
5, Which of the following types of orders guarantee a specific execution price? A Market orders B Limit orders C Stop orders D None of the choices listed
D = None of the choices listed
11, Shares acquired in a offering will be restricted. Choose the best answer. A Regulation A B Registered C Shelf D Regulation D
D = Regulation D
61, A registered representative believes that municipal bonds may be an appropriate investment for her customer In order to determine whether such a recommendation would be suitable, all of the following would be considered EXCEPT A The state in which the customer resides B The components of the customer's existing portfolio C Whether the customer is subject to the alternative minimum tax D The cash balance in the customer's IRA available to invest
D = The cash balance in the customer's IRA available to invest
34, Which is TRUE when comparing a Life Annuity to a Life Annuity with Period Certain? A Both annuities will cease when the person dies The Life Annuity is a safer choice since the Period B Certain contract stops all payments when the stated perio expires C The periodic payment for a Life Annuity will be lower than the periodic payment for a Period Certain annuity D The periodic payment for a Period Certain Annuity will be lower than the periodic payment for a Life Annuity
D = The periodic payment for a Period Certain Annuity will be lower than the periodic payment for a Life Annuity
2, Which statement is TRUE? A primary distribution is one that first must be offered to retail investors while a secondary distribution is one that first must be offered to institutional investors B primary distribution is one that is made using an underwriter while a secondary distribution is one sold directly to the public without the use of an underwriter C primary distribution cannot be combined with a secondary distribution D The proceeds from a primary distribution go to the issuer while the proceeds from a secondary distribution to the selling shareholder
D = The proceeds from a primary distribution go to the issuer while the proceeds from a secondary distribution to the selling shareholder
54, Which of the following is true of 529 college savings plan? A Contributors must be relatives of the beneficiary. B Contributions are made with pre-tax dollars. C Earnings are always taxed. D There are no tax consequences to transferring the account to another qualified beneficiary.
D = There are no tax consequences to transferring the account to another qualified beneficiary.
31, In a new corporate bond offering, the lead underwriter selects syndicate members based upon: A geographic location only B track record only C financial capability only D all of the above
D = all of the above
20, A 55 year old woman wishes to remove funds from her Individual Retirement Account to remodel her house The customer is subject to: A no tax liability B regular income tax liability only on the amount withdrawn C 10% penalty tax only on the amount withdrawn D both regular income tax liability and 10% penalty tax on the amount withdrawn
D = both regular income tax liability and 10% penalty tax on the amount withdrawn
71, An account is opened "joint tenants with rights of survivorship." All of the following statements are true EXCEPT: A orders may be given by either party B mail can be sent to either party C in the event of death, the other party assumes whole ownership of the account D checks can be drawn in the name of either party
D = checks can be drawn in the name of either party
14, Shareholders in a management company have all of the following rights EXCEPT the right to: A vote for the Board of Directors of the fund B vote for the investment adviser C receive semi-annual and annual reports D choose the broker who executes the portfolio transactions
D = choose the broker who executes the portfolio transactions
52, John Jones has an individual cash account; a joint margin account with his wife; a custodial account for his minor daughter; and a custodial account for his minor son; all at the same brokerage firm. If the firm should fail, Securities Investor Protection Corporation will cover: A all of the accounts as a single account B the individual and joint accounts as one account: and the custodial accounts as one account C the individual and joint accounts as one account: and each custodial account separately D each account separately
D = each account separately
