SIE Practice Exam

Which of the following statements is true regarding the concept of an annuity contract?

The kind of annuity selected partly determines the payment amounts to the annuitant.

What is the cost basis of an inherited mutual fund?

The net asset value (NAV) of the shares when the owner dies

Which of the following statements is true regarding a customer account held as tenants in common?

The ownership of the decedent's assets is governed by their will or state law.

Under SEC Regulation S-P (Consumer Privacy). which of the following information must a firm include in its customer privacy and opt-out notices?

The policies to protect the security of nonpublic information

Which of the following considerations should a registered representative explain to a customer when recommending a 529 college savings plan?

The potential deductibility of contributions from state taxes

Which of the following represents the effect of a stock split?

The price per share of common stock decreases.

Under Federal Reserve Regulation T, a 90-day restriction is imposed when a customer opens and closes which of the following positions?

The same stock in a cash account without paying for the stock in full

When selling a fixed amount of a base currency to purchase a counter currency, which of the following factors is primarily used to determine how much of the counter currency the customer will receive?

The spot exchange rate

Which of the following statements is true about all U.S. government agency issues?

They are exempt from the registration under the Securities Act of 1933

In the event of a stock split, which of the following parties is required to maintain a record of the shareholders eligible to receive the additional shares?

Transfer agent

The owner of which of the following products is most exposed to inflationary risk?

Treasury bonds

Which of the following security types provides investors with a stated maturity date, a floating interest rate, and an option to put the security back to a financial intermediary on a daily weekly basis?

Variable rate demand note

At the time of issuance, which of the following securities normally has the longest period to expiration?

Warrants

A transaction in which a writer covers a position by purchasing on option is called?

a closing purchase

A member of a stock exchange responsible for providing liquidity on a security by being willing to buy and sell at all times is known as:

a market maker.

The lsat transaction in XYZ 5.50s 2030 was at 102. This bond is selling at:

a premium

A married couple who earned income that exceeded $300.000 in each of the prior two years and reasonably expects the same for the current year is:

an accredited investor.

When a broker-dealer charges a commission on a securities transaction, it has acted as:

an agent.

Under FINRA rules, noncash compensation connected with the sale of variable contracts includes all of the following items except:

commissions.

A customer is an officer of a company that is involved in some significant changes. All of the following items are examples of corporate affairs that could be considered inside information if the customer shares them with his registered representative except:

declare stock dividend

Direct participation programs (DPPs) provide:

exposure to non-correlated assets with steady returns.

Stability in the value of a debt portfolio is greatest when:

maturities of the debt securities are short

UTMA accounts are opened under the tax ID of the:

minor.

A firm is a participant in a Public offering. To sell a substantial amount of the securities to its customers. the firm agrees to repurchase the shares at no less than the original sales price. Such agreements are:

prohibited as fraudulent and manipulative.

A broker-dealer is permitted to accept payment for a new issue from a new customer when the:

registration is effective

Call protection is most valuable to a bond owner when bond prices are generally:

rising.

When is interest on a Treasury notes paid?

semiannually

Under a system of statutory voting, a common stockholder has as many votes for each vacancy on the board of directors as the number of:

shares owned by the stockholder.

FinCen accomplishes its mission to safeguard the financial system from the abuses of financial crime, including terrorist financing and money laundering, by enforcing:

the Bank Secrecy Act

Under industry regulations, an initial purchase of $3,000 of common stock in a margin account requires a cash deposit of:

$2,000

A customer buys 1 ABC Jan 35 put for a premium of $3 and simultaneously buys 100 shares of ABC stock for $35 per share. The customer will break even when the stock is selling at what price per share at expiration?

$38

Broker-dealer ABC seeks to underwrite a municipal securities offering by a local town in which the mayor is currently seeking re-election. A municipal finance professor who resides in the town and works for ABC contributed $200 to the mayor's re-election campaign 13 months ago. If the employee wants to support the campaign further without impacting the municipal securities business of the firm., he is permitted to make an additional contribution of up to what amount?

$50

Mike Smith is one of your clients. Mike is 55 years old, has a wife, two young adults going to college, and two children living at home. You have helped Mike determine his investment profile and how much risk he should be willing to take. However, Mike is hot on a particularly speculative security that doesn't fit his investment profile. Mike calls you saying he wants to purchase $20,000 worth of this security. What should you do? (A) Acceptance the order and mark it as unsolicited. (B) Refuse the order because it doesn't fit his investment profile. (C) Do nothing until talking to a principal. (D) Limit Mike's exposure by making sure that he doesn't purchase more than $5,000 worth of this speculative security.

(A) Acceptance the order and mark it as unsolicited.

Mark Schwimmerr owns 2,500 shares of TP Corporation. Which of the following actions would dilute Mark's equity? I. Primary share offerings (registered) II. A stock spilt III. Payment of a stock dividend IV. Secondary share offerings (registered) (A) I only (B) II only (C) I, II, and IV (D) I, II, III, and IV

(A) I only

Which of the following statements is TRUE about revenue bonds? (A) Their value is measured by the municipal project's capacity for generating revenue. (B) They are secured by a mortgage-backed bond (C) They are a type of general obligation (D) They are subject to the statutory debt limitations of the issuing jurisdiction

(A) Their value is measured by the municipal project's capacity for generating revenue.

Which f the following is the balance sheet equation? (A) assets= liabilities+shareholder's equity (B) assets+liabilities= shareholders equity (C) shareholder's equity+assets=liabilities (D) None of the above

(A) assets= liabilities+shareholder's equity

Where can an investor find the most information about a new municipal issue? (A) In a prospectus (B) In an official statement (C) In a tombstone ad (D) In a registration statement

(B) In an official statement

Regarding the taxation of dividends from corporate securities, which TWO of the following are TRUE? I. Qualified dividends are taxed at the investor's income tax rate. II. Qualified dividends are taxed at a maximum rate of 15 percent. III. Nonqualified dividends are taxed at the investor's tax rate IV. Nonqualified dividends are taxed at a maximum rate of 15 percent. (A) I and III (B) I and IV (C) II and III (D) II and IV

(C) II and III

An investor has a child who will be going to college in 15 years. Which of the following is a suitable investment? (A) T-bills (B) T-notes (C) Treasury receipts (D) AAAA aggressive growth fund

(C) Treasury receipts

Which of the following statements made by a registered rep is not prohibited? (A) "The stock will double in price." (B) "The earnings of the company will be better than expected" (C) "I can guarantee that you will not lose money on this stock" (D) "A research report shows that the company's financial performance may be better than expected"

(D) "A research report shows that the company's financial performance may be better than expected"

A company announces a tender offer to its shareholders with the intent to buy a maximum of 1 million shares of its outstanding stick at $10 per share and sets no minimum number of shares to be purchased. An investor wants to participate in this offer and tenders his 1,000 share position. At the close of the offer period, only 900,000 shares have been tendered. How many, if any, of the investor's shares will the company purchase?

1,000

Company ABC announces a 20% stock dividend for its common shareholders. If a customer holds 1,000 shares at $50.00, what is the new price and number of shares following the payment of the stock dividend?

1,200 shares at $41.67

Under normal circumstances, a customer's letter of intent on a mutual fund purchase is valid for what maximum period of time?

13 months

A decline in the gross domestic product (GDP) must last for at least how many quarters to be considered a recession?

2 quarters

The computation of dollar prices and accrued interest on municipal bonds is normally on what calendar basis?

30/360

An investor owns 100 shares of XYZ common stock at the current market price of $50 per share. If XYZ conducts a 1-for-2 reverse stock split, the investor's post-split stock position will be:

50 shares at $100 per share.

Which of the following From U4 reportable events results in a statutory disqualification?

A felony conviction for a driving under the influence (DUI) charge

Which of the following comparisons best describes the essential difference between a primary distribution and a secondary distribution?

A primary distribution involves a sale of newly issued shares by the issuer while a secondary distribution involves the sale of already issued and outstanding shares.

A registered representative (RR) who wants to place a mutual fund advertisement must obtain written approval from which of the following parties?

A registered principal of the RR's firm

Under the Securities Act of 1933, registration is required for which of the following securities?

American Depository Receipts (ADRs)

In which of the following situations is an employee of a public company permitted to trade upon information without violating trading laws?

An independent securities analyst explains to the employee why the earnings for the company next quarter could be markedly poorer than expected.

Which of the following investments are generally traded according to their average life rather than their stated maturity dates?

Asset-backed securities

In the over-the-counter market, the term "spread" refers to the difference between the:

Bid and asked prices

The primary purpose of a syndicate desk in the context of an equity offering is to:

Build an order book and allocate the stock

If a market maker posts a quote of 10.00 - 10.10 [25x10], which of the following actions is the market maker willing to take?

Buy 2,500 shares at $10.00 and sell 1,000 shares at $10.10

In a period of low inflation and economic recession, the Federal Reserve is expected to take which of the following actions?

Buy bonds in the open market

The call provision of a bond stipulates which of the following factors?

Call date and call price

Upon expiration, all in-the-money S&P 100 index call options are settled by the delivery of which of the following?

Cash

Which of the following actions is required of a broker-dealer's anti-money laundering (AML) program?

Designating an AML compliance officer

Under FINRA rules, which of the following activities by a registered representative requires written notification to her firm?

Driving part time for a transportation network company on weekend

Which of the following actions violates FINRA rules regarding selling away?

Engaging in private securities transactions without written prior consent of the employing BD

All of the following risks apply to both foreign and domestic debt instruments except:

Exchange

Which of the following products is adversely impacted if the issuer's credit rating is downgraded?

Exchange-trade notes (ETNs)

A savings account at a bank is guaranteed by which of the following entities?

FDIC

Which of the following actions is required when a firm receives cash in excess of $10,000 from one customer in one business day?

File a Currency Transaction Report (CTR)

Which of the following statements is true about treasury stock?

It is issued stock that has been subsequently required by the corporation.

Which of the following communications with public is considered misleading?

Literature providing 10-year performance information to support predictions of future performance

Which of the following responses describes an advantage of index funds?

Lower management fees due to passive management of the fund

Which of the following investment risks is the greatest risk in a variable life insurance policy?

Market risk

At issue, which of the following debt securities mature in one year or less?

Money market instruments

The redemption value of an open-end investment company's shares is based on the:

NAV computed after the order is received.

Regular way settlement on Treasury bonds is:

Next business day

No-load mutual funds may have lower expense ratios than load mutual funds for which of the following reasons?

No-load funds are not permitted to charge a 12b-1 fee greater than 25 basis points

A registered representative is reviewing the following portfolio: * 30% ABC Energy Company * 30% XYZ Health Care Company * 30% Exchange-traded fund (tracks the S&P 500) * 10% Money market funds Which of the following risks is inherent in this portfolio?

Nonsystematic

Which of the following outcomes are possible for the writer of a covered call option?

Profit limited and loss limited

An associated person who is not a registered representative is permitted to engage in which of the following activities?

Provide account opening forms to a new customer

Roth 401(k) and Roth individual retirement account (IRA) plans share which of the following statement features?

Qualified distributions are excluded from federal income tax.

Under Rule 144A, an issuer of restricted stock is permitted to sell to which of the following investors?

Qualified institutional buyers (QIBS)

A customer has a cash balance in her account together with long positions in several securities. She has made no securities transactions in the account during the past 18 months. How often must the firm send her an account statement?

Quarterly

To offer its shareholders a privilege to obtain its shares at a fixed price, which of the following products does a corporation issue?

Rights

Which of the following stakeholders has first claim priority in a Chapter 11 proceeding?

Secured debt holders

A registered representative (RR) wants to participate in a private securities transaction. Which of the following actions must the RR take?

Send written notice to his supervisor outlining the activity and compensation structure

Blue-sky laws are regulated by which of the following entities?

State securities regulators