SIE Midterm Practice

An investor owns 500 shares of stock whose current market value is $20 per share. The stock undergoes a split, after which the investor owns 400 shares. What is the new price of the investors stock?

$25 per share

An investor purchases an 8% corporate bond at 93. The bond is scheduled to mature in 2028. What will the investor receive at maturity?

$1,040

Harry's Burgers has announced a tender offer for 20 million shares of Jim's Junkfood Corner at $30 a share. If Harry's secures all the shares then they will control Jim's. The shareholders of Jim's, that submit their shares to the tender offer, will realize which of these? 1. A capital loss occurs if their cost basis is greater than the tender price. 2. There is no effect. 3. A capital gain occurs if their cost basis is less than the tender offer. 4. Investment income is received equal to the va

1 and 3

Your client, Bill Hearst, inherited several thousand shares of his grandfather's auto parts manufacturer, National Autoparts. He sells a portion of the position in order to raise some cash to buy a new boat. Which of these is true? 1. This is a secondary market transaction. 2. This is a primary market transaction. 3. This is a long sale of the stock. 4. This is a short sale of the stock (he never purchased it).

1 and 3

the bid price represents 1. the price the broker-dealer is willing to pay when buying a security 2. the price the customer will pay when buying a security 3. the price a customer will receive when selling a security 4. the price the broker-dealer will receive when buying a security

1 and 3

A bond with a 4.5% stated yield might make 1. annual interest payment of $45 2. annual interest payment of $450 3. semiannual interest payments of $2.50 4. semiannual interest payments of $22.50

1 and 4

Five years ago your client purchased a par $100,000 of New Brunswick City GO bonds maturing in 20 years from now and callable in six months. Interest rates have gone down over the last five years. Which of these should your client do? 1. your client should recognize that the bonds have a high probability to be called 2. your client should recognize that the bonds are unlikely to be called 3. your client should expect the bond is trading at a large discount 4. your client should expect the bonds

1 and 4

Six days into the cooling-off period, an issuer receives a deficiency letter from the securities and exchange commission (SEC) requesting clarification and corrections. Once the issuer submits these, and assuming that they satisfy the deficiency, the cooling-off period will resume. With no other deficiencies arising, the issue should become effective in:

14 days

WRJ stock is quoted as 21 bid, 21.15 offer. For a customer order, which of the following is true? 1. a purchase can be made at $21 per share if buying at the market 2. a purchase can be made at $21.15 per share if buying at the market 3. the spread is $0.15 4. The sale can be made at $21.15 per share if selling at the market

2 and 3

Which of the following would cause a mutual fund's net asset value (NAV) per share to fall? 1. the fund purchases securities for the portfolio 2. the fund pays a dividend to shareholders 3. the market value of the portfolio declines 4. a large number of share are redeemed

2 and 3

With money market securities, the risks are: 1. lack of liquidity 2. a lower return than with longer-term instruments 3. relative safety compared with other longer-term debt instruments 4. the potential reinvestment of principal at different rates over short periods of time

2 and 4

An investor has her registered representative enter a sell stop limit order at 50. Following the order entry, trades occur at 52, 50, 49, 51, and 53. The investor would receive:

51

Which of the following statements regarding put and call features on debt securities is not correct?

A callable bond is likely to be called when interest rates are rising

Seacoast securities, a member firm, filled a customer's sell order for BigTech Computers common stock and did not charge a commission. The firm is most likley acted in what capactiy?

A dealer

Which of the following statements about American depositary receipts (ADRs) is not correct?

ADRs normally trade on foreign exchanges

A company reorganizing with the intent to emerge from bankruptcy is likely to issue which of the following type of bonds to accomplish that goal?

Adjustment bonds

The SEC has established rules regarding delivery of a prospectus when a secondary market transaction occurs after the effective date. Which of these is correct regarding the rules for initial public offerings (IPOs) and additional public offerings (APOs)?

An IPO of a stock to be listed on the NYSE requires delivery for a period of 25 days

the price an investor can sell a security is called the:

Bid

All of these are part of the expense ratio of a mutual fund except?

CDSC

Which of the following is an unsecured corporate debt security?

Debenture

BigTech Computers, Inc., trades over the counter, and the board has declared a $0.25 per share dividend on Tuesday, May 2. The dividend will be paid to holders of record of BigTech common stock as of Tuesday, May 24, and will be paid out on Wednesday, June 8. Who will set the ex-dividend date?

FINRA

Of the following government-sponsored entities, which is backed by the full faith and credit of the U.S. government?

GNMA

Which of the following option contracts is in the money if ABC stock is currently trading at $45 per share?

Jan. 55 put

Which of the following has a right and is bullish on the stock?

Long call

Which of the following best describes a final prospectus?

Meets the full and fair disclosure requirements of the Securities Act of 1933

A customer enters an order for ABC, Inc. common stock that includes instructions that it must be executed in its entirety when entered or canceled. This is known as:

a fill-or-kill order

For Initial public offerings (IPOs) of common stock, all of the following would be considered restricted persons except

a person owning at least 5% of the member firm

During the cooling-off period of a new registration filed withe the Securities and Exchange Commission(SEC):

a red herring may be given to prospective investors

A registered representative needs which of the following licenses to solicit a variable annuity sale?

a securities and a life insurance license

limited partnerships sold through private placements involve:

a small group of investors, each contributing a large sum

Tombstone ads:

are permitted before the effective date

How often is net asset value (NAV) for a mutual fund determined?

at least once per business day

Class B mutual fund shares are also known as:

back-end load shares

T-Bills are delivered in:

book entry

Your investor is short 300 shares of Seabird Airlines common stock. In order to close this position the investor would enter which of the following orders?

buy 300 shares of Seabird Airlines

if a customer sold puts to open, which of the following transactions would be allowed if the options agreement was not returned signed within 15 days?

buy puts to close

A tombstone advertisement placed before the effective date can:

can be placed by the issuer directly or by the underwriters

Your customer purchases shares of a common stock of a major exchange in a trade that settles the same day. This is an example of which type of trade?

cash settlement trade

Voting rights are a privilege generally afforded to:

common shareholders only

All corporation will issue:

common stock

All corporations will issue:

common stock

Which of the following is not an example of a fixed-income security?

common stock that has historically paid dividends

If the midlands pencil corporation has issued several different debt securities, an investor would expect the lowest income stream from:

convertible debentures

A guaranteed bond is:

debt backed by another company, such as a parent company

With interest rates in the marketplace at 7%, it could be expected that in the secondary market, a bond carrying a 5% coupon would trade:

downward in price

A closing transaction can be:

either a buy or a sell

A customer receives interest from a T-note. They will likely owe income taxes on this income at what levels?

federal but not state

A customer owns 1,000 shares of stock subject to a 2:3 reverse stock split. The position will now consist of:

fewer shares worth more per share with the same net position value

Which is the most common way investors pay a mutual fund's sales charge?

front-end load

After filing of a registration for a new issue with the securities and exchange commission, and still in the registrations cooling off period, broker dealers may:

give a red herring to prospective investors

when interest rates in the marketplace moves up or down the price of all bonds move:

inversely

All of the following are true of negotiable commercial paper except:

it is typically issued by banks

Which of the following contracts do not have intrinsic value of the strike price is 40 and the market price is 30?

long call and short call

A March 30 call purchased at 3 has expired without exercised. The owner of the call:

loses the $300 premium paid

Bonds can be issued with additional features attached, making them more attractive to investors. All of the following can be considered such features except:

maturity

For real estate program partners, tax deductions will be derived from:

mortgage interest paid and depreciation

Which of the following engages in a continuous public offering?

mutual funds

Which of the following are fixed at the time a bond is issued?

nominal yield

When XYA is trading at 40, an XYA 30 put sold at 3 would be:

out of the money

Which of the following is not considered a financial benefit for owning common stock?

price stability

Which of these will be found in the final prospectus but is not in the preliminary prospectus?

public offer price

All of the following are types of direct participation programs (DPPS) except:

retail distribution

regarding corporate bond issues, which of the following statements best describes secured debt and unsecured debt?

secured debt is asset backed, while unsecured debt is not

Which of the following are considered money market securities at the time of issue?

t-bills

The ex-date for a dividend from a mutual fund is set by whom?

the board of directors

which of the following statements regarding $1,000 par value 6.5% bond trading offered at 110 is true?

the bonds current yield equals $65 / 1,000 = 5.9%

A corporate bond has a stated yield set at the time of issuance. This state yield is also known as:

the coupon or nominal yield

which of the following would be required for a good 'till canceled order to remain in force for more than six months?

the customer would need to reconfirm the order

All of the following are advantages of owning a mutual fund except:

the fund may be purchased at any time during the trading day

Nolan Babbage owns several units of the Cray Leasing LP. He is frustrated by the lack of cash flow and begins consulting with the general partners on how best to market the partnership's services. Which of the following features of a limited partnership has he placed in jeopardy?

the limited liability of a limited partner

Which of the following best describes how a sell stop at 39 order would be filled?

the next available price after the market price falls to 39

Which of the following is correct concerning an uncovered call writer?

the premium is the maximum gain and the loss potential is unlimited

Sandal manufacture Achilles, Inc. had registered to sell shares of its stock to the public for the first time. The company has several different uses for the money to be raised- first among them is the building of a new manufacturing plant outside of Troy, Michigan. This sale would be part of:

the primary market

Which of the following rights are specific to holders of American depositary receipts and are not available to owners of domestic common stock?

the right to convert to the underlying asset

Which of the following is not correct regarding a rights offering?

the rights offering allows the holder to exercise and purchase stock at a price higher than the market

An investor asks for a copy of mutual funds Statement of Additional Information (SAI). The request must be satisfied within:

three business days, free of charge

ABC Corporation's stock is trading at $35. A client has purchased a 50 call. The option's current value is made up of:

time value only

An investor established the following position: Long 1 XYZ September 40 call at 2. Utilizing this position, the maximum potential gain for the investor is:

unlimited

An investor is short a January 30 call at 5. Maximum loss for the investor is:

unlimited

Your customer has purchased $10,000 in U.S. Treasury bonds. These securities:

will have evidence of ownership recorded in book-entry form