SIE Simulated Exam 2

A GTC order is left unexecuted at the end of the trading day on the last business day of April. Which of the following is true? a. the order will be automatically canceled b. the customer must give specific instructions to cancel the order so that it will not continue as a good working order c. the order will be automatically renewed d. the order will only continue working through the opening of the next business day

A

A customer buys an October 75 MMS put. MMS stock closes at 70. Which of the following is true? a. the put has intrinsic value b. the put is at the money c. it has only premium value d. the put is out of the money

A

A registered representative has left one firm to join another. Sometime later, the former employer discovers that some information on Form U-5 filed at the time of termination was inaccurate. The firm need not file an amended U5 if at least how much time has gone by? a. no stated time limit b. 30 days c. 2 years d. 5 years

A

Accusations of FINRA Conduct Rule violations will heard and handled under the a. code of procedure b. uniform practice code c. uniform securities act d. code of arbitration procedure

A

All of the following are considered unique or nonstandard corporate actions except a. 3:1 stock split b. takeover c. tender offer d. merger

A

An investor has purchased class A mutual fund shares. the NAV per share of the fund is the price the investor a. will receive redemption of the shares b. has paid for the shares when purchased c. will use as the cost basis in tax return filings once redeemed d. knows will be the cost per share when the order is entered

A

An officer of a financial firm has identified what might represent suspicious behavior on the part of a customer, involving more than $5,000. When must the firm file a suspicious activity report (SAR)? a. within 30 calendar days b. by the end of the business day c. within 180 calendar days d. within 5 business days

A

The measure of the inflation rate is a. the consumer price index b. the EAFE index c. the business cycle d. the S&P 500 index

A

The spread a dealer makes is best described as a. the ask minus the bid b. the ask plus the bid c. the total commission d. none of these

A

To obtain a Statement of Additional Information (SAI) regarding a particular mutual fund, an investor could do any of the following except a. apply to the FINRA b. request a copy from the SEC c. call or write to the investment company that offers the fund d. request one from a broker dealer that sells the investment company shares

A

Which of the following are true of qualified plans but not true of non-qualified plans? a. the plan cannot discriminate b. all withdrawals are tax free c. all withdrawals are taxable above cost basis d. the plan may discriminate

A

Which of the following best describes how a market order to sell would fill if placed when the price of the stock is a 40 a. the next available price b. the next available price below 40 c. the next available price above 40 d. only at 40

A

Which of the following is a benchmark for small cap stocks? a. Russell 2000 index b. Standard and Poor's 500 index c. Dow Jones Industrial Average d. Wilshire 5000

A

Which of the following would all be considered the same regarding yields on debt instruments? a. stated, nominal, and coupon yields b. nominal, yield to call, and yield to maturity c. stated, nominal, and yield to maturity d. nominal, coupon, and yield to call

A

Your client, Dana McCann, just purchased a 20-year City of Salt Lake School District bond for $800. The bond has a stated rate of 4%. The current yield is a. 5% b. 2% c. 3% d. 6%

A

a customer of a broker-dealer purchases 100 shares of XYZ stock at $50 per share on Monday. Later that week, a confirmation arrives electronically indicating that the total cost of the transaction was $5,000. The client is puzzled that there is no additional charge for commission. The most likely reason for that is a. the broker-dealer acted as a principal in the trade b. there is a mistake on the confirmation c. XYZ stock probably dropped significantly between the trade date and the sending of the confirmation so the broker/dealer waived the commission d. the broker-dealer acted as an agent in the trade

A

A customer has multiple accounts at a bank that also owns accounts at a broker-dealer. All of the following accounts would be covered by FDIC insurance up to the specified limits except a. an IRA in a five-year CD b. a checking account in a money market mutual fund c. a joint savings account with a spouse d. both spouses' individual savings account

B

A municipal finance professional (MFP) is a. an elected official of a municipality having some decision-making authority regarding who will underwrite the municipality's bonds b. an employee of a FINRA member engaged in municipal security representative activities such as underwriting and trading c. an employee of the MSRB specializing in seeing that broker-dealers adhere to the MSRB rules and regulations regarding the sales of municipal bonds d. employed by a municipality (not elected) to oversee the issuance of municipal bonds

B

A municipality wants to issue general obligation (GO) bonds that will put it over its statutory debt limit. Which of the following is true? a. this is statutorily forbidden b. they may do so with voter approval c. they may do so with the approval of their state senators d. this is prohibited by the federal government

B

All of the following are nonsystematic risks except a. business risk b. purchasing power risk c. call risk d. capital risk

B

All of the following associated persons engaged in the investment banking and securities business are considered registered representatives, except a. someone who trains others to supervise, solicit, or conduct business in securities b. someone who serves on the board of directors c. someone who supervises, solicits, or conducts business in securities d. someone who solicits or otherwise conducts securities business

B

An analyst is trying to determine upcoming economic activity to better determine her recommended investment strategy. She would be most interested in a. lagging indicators b. leading indicators c. coincident indicators d. coterminous indicators

B

An investor is short a January 30 call at 5. Breakeven is a. 30 b. 35 c. 25 d. 200

B

An investor owns a bond purchased several years ago yielding 3%, which at the time was considered a fair return. However, these fixed 3% interest payments have not kept up with the inflation rate. This situation presents the investor with a. financial risk b. purchasing power risk c. liquidity risk d. currency risk

B

An officer of a broker-dealer firm would be categorized as a restricted person if that individual attempted to purchase a. call or put options on a stock in the secondary market b. a new issue initial public offering (IPO) at the public offering price c. closed-end funds on the secondary market d. a municipal bond in a state where the officer does not reside

B

As an investment vehicle, and regarding the tax consequences, REITs are organized as a. debt instruments b. trusts c. mutual funds d. corporations

B

Economists refer to longer, more severe contractions in the economy as a. declines b. depressions c. depletions d. recessions

B

Under the UTMA, a custodian may invest in all of the following except a. mutual funds in growth shares b. blue-chip stocks on margin c. US treasury notes with less than one year to maturity d. non-investment grade (junk) bonds

B

When a corporation issues a mortgage bond, the issue's total value a. is unrelated to the value of the real estate because it is an unsecured debt instrument b. should be less than that of the real estate it is backed by c. must equal the value of the real estate by which it is backed d. should be greater than that of the real estate it is backed by

B

Which of the following has an obligation and is bearish on the stock? a. long put b. short call c. long call d. short put

B

Your customer is a limited partner in a real estate partnership. This partner has the right to do all of the following except a. sue the general partner for damages resulting from any business decisions made b. inspect and obtain copies of all partnership records c. vote with the limited partners to remove the general partner d. choose which properties the partnership should buy or sell

B

A bond that is structured so that the issuer pays off a portion of the principal before the final maturity but pays off a major portion of the bond at the final maturity date is a. A term bond b. A series bond c. A serial bond d. A balloon bond

D

A corporation has issued a single bond having successive maturity dates set from 2020 through 2030. This is known as what type of bond? a. series b. balloon c. term d. serial

D

A customer who is bullish on ABC would most likely a. sell ABC long b. buy ABC short c. sell ABC short d. buy ABC long

D

A registered representative is explaining discretionary and non-discretionary accounts to a customer. Only one of the following statements is accurate and can be made by the registered representative. Which is it? a. if I decide that the account should be a discretionary one you will no longer be able to enter orders yourself b. in a discretionary account you will have the opportunity to approve any order I want to enter before I enter it c. I decide if the account should be set up as discretionary or non-discretionary, but must do so in your best interest d. in a non-discretionary account no order can be entered without your prior approval

D

A registered representative was guilty of an undetected minor rule violation during the last year of employment at a broker-dealer firm. The representative has now decided to leave the industry. For how long might the representative still be subject to fines or other sanctions by FINRA if the violation is belatedly detected a. 30 calendar days b. 6 months c. FINRA no longer has jurisdiction d. 2 years

D

A select pair of group of companies organized to underwrite corporate or municipal securities is best known as a. an investment club b. a market maker c. an introducing broker-dealer d. a syndicate

D

All of the following must be on the cover page or beginning of the summary prospectus of a mutual fund except a. the website where a full prospectus may be downloaded b. the share class or classes offered by the fund c. the fund share class or classes ticker symbols d. the name of the investment advisor

D

Class A mutual fund shares are also known as a. high-end load shares b. fully loaded shares c. up-front shares d. front-end load shares

D

Purchased 15 years ago with a coupon of 6.25%, a corporate bond in an investor's portfolio has matured. With interest rates now substantially lower at 2.75%, this investor, having no immediate need for the proceeds, is now exposed to a. financial risk b. interest-rate risk c. call risk d. reinvestment risk

D

The Specifically Designated Nationals (SDN) list must be checked a. prior to each trade in an account b. prior to distribution of dividends and interest c. prior to settlement of each trade d. when opening a new account for an individual or other entity

D

When investors buy and sell securities to and from one another, these transactions occur a. in the OTC market only b. on exchanges only c. in the primary market d. in the secondary market

D

Which type of accounts bills a single fee annually for a group of services that might include asset allocation, portfolio management, and executions? a. margin account b. option account c. cash account d. wrap account

D

Your client, Jacob Riley, wants to purchase Treasury bonds and asks when he would need to pay for the bonds. You would inform him that regular way settlement for U.S. Government Bond is a. trade date plus 3 business days b. trade date plus 2 business days c. trade date d. trade date plus 1 business day

D

the rate on an adjustable preferred stock would most likely be indexed to a. the producer price index (PPI) b. the consumer price index (CPI) c. the Dow Jones industrial average (DJIA) d. the treasury bill (t-bill) rate

D

A share of stock in the hands of a stockholder represents a. neither the entitlement to receive profits through dividends when distributed nor the right to vote for who will serve on the BOD b. no entitlement to receive profits through dividends when distributed nor the right to vote for who will serve on the BOD c. no entitlement to receive profits through dividends when distributed and the right to vote for who will serve on the BOD d. entitlement to receive profits through dividends but not the right to vote for who will serve on the BOD

C

A strong US dollar leads to more a. US exports and a balance of payments deficits b. US exports and a balance of payments surplus c. US imports and a balance of payments deficit d. US imports and a balance of payments surplus

C

All of the following are required when completing Form U4 except a. legal name and any aliases used b. date of birth c. educational degrees d. employment history for the past 10 years

C

During a discussion with a customer about a potential investment opportunity involving securities, standing alone, all of the following would likely be permissible except a. the registered representative points out only that a tech firm has a brilliant idea and the CEO has advanced degrees in science b. the registered representative shows the customer a brochure with a chart showing best and worst case scenarios for product development over the next year c. the registered representative pessimistically implies that an investment has a good chance of losing money, as well as gaining, because the product might not have a market d. the registered representative points out, correctly, that the maximum possible loss on this particular investment is probably smaller than the maximum possible gain

A

Examples of investments in assets that would be considered illiquid would be all of the following except a. common stock b. real estate c. works of art d. classic automobiles

A

Federal funds represent a. the amount by which a bank exceeds its required deposits to be held on reserve at the FRB b. the amount the FRB holds in reserve for its member banks c. the amount of a bank's deposit required to be held on reserve at the FRB d. the amount by which a bank falls short of its required deposits to be held on reserve at the FRB

A

Holding customer mail is consistent with your broker-dealer's in-house rules. Considering this, if requested to do so, the BD must a. verify at reasonable intervals that the customer's instructions still apply b. request approval from the SEC c. have the customer request anew after six months and then each three months thereafter d. await approval from FINRA

A

In a prime brokerage account, the prime broker a. provides custody and clearing services as well as margin loans b. provides custody and clearing, but no margin financing c. provides execution services only, while another broker clears transactions and provides any other account services d. subcontracts out all services to other brokers

A

Mutual funds that market directly to the public, using no underwriter and charging no sales charge, are called a. no-load funds b. charge-free funds c. loaded funds d. free-sale funds

A

Regarding the rights of a common stockholder, each of the following is true except a. stockholders may never be part of the management of the company b. stockholders have the right to receive audited financial statements annually c. stockholders can vote for those who will serve on the board of directors d. stockholders have a limited right to examine the minutes of meetings held by the board of directors

A

Reports of rising inventories generally occur during which period of the business cycle? a. contraction b. recovery c. expansion d. peak

A

Systematic risk would include all of the following except a. business risk b. interest rate risk c. inflation risk d. market risk

A

As interest rates rise, prices of preferred stock will a. rise b. become volatile c. fall d. remain unaffected

C

If a registered representative allows a customer to unknowingly buy investment company shares in an amount just under a dollar bracket that would qualify for a reduced sales charge, or encourages such a purchase, this is known as a. markup violaiton b. market manipulation violation c. a breakpoint sale violation d. short sale violation

C

Required minimum distributions (RMDs) for IRAs must begin by a. prior to the year the participant turns 59 1/2 b. the year after the participant turns 50 1/2 c. the year after the participant turns 72 d. prior to the year the participant turns 70 1/2

C

Some bonds have a feature that prohibits them from being called by the issuer before a certain date. This is known as a. interest-rate exposure b. capital risk c. call protection d. financial risk

C

When discussing investing with your client, all of the following would be considered recommendations except a. suggesting different market sectors b. suggesting a particular investment strategy c. discussing the pros and cons of traditional IRAs and Roth IRAs d. advising on the benefits of day trading

C

When the FRB utilizes the tools available to it, it is influencing a. the amount of money raised through taxes b. fiscal policies c. the money supply d. the federal budget

C

Which of the following is not a characteristic associated with hedge funds? a. they can invest in derivative products b. they might speculate in commodities and currencies c. they are regulated under the Investment Company Act of 1940 d. they can have highly leveraged portfolios

C

Which of the following statements about rights and warrants is true? a. rights and warrants are both short term b. rights and warrants are both long term c. rights are short term; warrants are long term d. rights are long term; warrants are short term

C

Firms applying for FINRA membership are required to I. agree to be in compliance with all federal securities laws II. pay dues, assessments, and other charges the association levies III. pass the appropriate qualification exam(s) IV. attend a FINRA annual conference no less frequently than once every three years

I and II

For options investors, which of the following are TRUE? I. buyers pay the premium for the right to exercise II. buyers pay the premium and incur an obligation to buy or sell III. sellers receive the premium and incur an obligation to buy or sell IV. sellers receive the premium for the right to exercise

I and III

The bid price represents I. the price the broker-dealer is willing to pay when buying a security. II. the price the customer will pay when buying a security. III. the price a customer will receive when selling a security. IV. the price the broker-dealer will receive when buying a security.

I and III

One of the FINRA Conduct Rules is concerned with private securities transactions. Under that rule, it would be CORRECT to state that I. if the member approves the registered participating in a transaction for compensation, it must treat the transaction as if it is being done on its own behalf by entering the transaction on its own books and supervising the associated person during the transaction II. as long as no compensation to the registered representative is involved, notificaito to the member is not required III. sale of a securities product to the registered representative's mother where there is only nominal compensation is not covered under the rule IV. if the member disapproves of the registered representative's participation in a transaction for compensation, the associated person may not participate in it

I and IV

Straight preferred shares I. are noncumulative II. are cumulative III. allow for missed dividends to be paid later IV. have no provision for paying missed dividends later

I and IV

What happens to the contents of a custodial account in the event of the death of the beneficial owner (the minor child)? I. the account's contents are returned to the donor(s) II. the custodian's fiduciary responsibility ceases III. the account passes to the minor's estate IV. the custodian remains fiduciary

II and II

What are some of the steps a firm could take to prevent potential exploitation of seniors? I. refuse to open accounts for people over 64 years old II. freeze the account if they suspect exploitation III. make a reasonable effort to obtain the name of a trusted contact person IV. close the account when the customer turns 65 unless they appoint a POA

II and III

Which of the following are true regarding mutual fund sales charges? I. they are used to defray fund expenses, such as operating costs and salaries II. they are set by the fund's transfer agent III. they are not an expense to the fund, but to the investor IV. they are used to compensate the fund's underwriter and sales representatives

III and IV

Which of the following records must be kept for only three years? I. customer statements II. customer new account forms III. customer confirmations IV. customer order tickets

III and IV

Which of the following would cause a change in the NAV of a mutual fund share? I. many shares are redeemed II. securities in the portfolio are sold for a capital gain III. the fund pays a small dividend IV. the market value of the portfolio declines

III and IV