SIE Practice Exam 1
When a limited partnership is liquidated (dissolved), the priority of payments to settle accounts are made from first to last in which order? I. General partners II. Limited partners III. General creditors IV. Secured creditors A)I, II, III, IV B)I, IV, III, II C) IV, III, II, I D) IV, III, I, II
C) IV, III, II, I Creditors are paid first in a liquidation, with priority given to the secured lenders before general lenders; limited partners are paid first of the partners, with general partners last to be paid.
Which of the following are true of traditional IRAs but not of Roth IRAs? Contributions may be deductible Contributions are always deductible There is a 50% penalty for failing to take the required minimum distribution (RMD) There are income limits for making contributions A) I and III B) I and II C) II and III D) III and IV
A)I and III If the contributor has an employer-sponsored plan and makes over the limit, the contributor can still have an IRA but it won't be deductible. After reaching age 72, the RMDs must be taken each year. Failure to do so results in a 50% penalty. Income limits on traditional IRAs impact deductibility, not contributions.
An official statement is a disclosure document that would be used in connection with an offering of which of the following securities? A) Municipal bonds B) Common of preferred stock offered privately C) U.S. Treasury notes D) Limited partnership interests
A)Municipal bonds An official statement serves as a disclosure document and contains any material information an investor might need about a municipal bond issue. Municipal bonds are exempt from registration under the Securities Act of 1933.
By the Securities and Exchange Commission (SEC) definition, when is the latest that payment in full for purchased securities may take place in a cash account? A) T + 4 business days B) On the trade date C) Promptly D) T + 3 business days
A)T + 4 business days Regulation T, which applies to everyone who opens a brokerage account, specifies that payment in full for securities must take place no later than two business days after regular way settlement. Because regular way settlement is T + 2, it follows that T + 4 is the latest.
When must a report listing all written complaints be filed with FINRA? A) Within 15 days of the end of each calendar quarter B) Within 30 days of the end of the calendar year C) Within 30 days of the end of each calendar quarter D) Within 15 days of the end of the calendar year
A)Within 15 days of the end of each calendar quarter
The seller of a call has A) the obligation to sell the stock. B) the right to buy the stock. C) the obligation to buy the stock. D) the right to sell the stock.
A)the obligation to sell the stock. The buyer of the call has the right to buy the stock. The seller of the call has the obligation to sell the stock.
In a limited partnership, which of the following best describes who is responsible for tax consequences of the business? A) The investors B) The general partners C) The limited partners D) The business
A) The investors All tax consequences of the business flow through proportionality to the investors. All partners will have some tax impact, not just the general or just the limited partners.
The current quote for Generic Motors stock is bid 32-ask 32.05 5 × 2. Your customer places an order to sell 300 shares. How much will they likely receive, before commission? A) $9,600 B) $3,200 C) $9,615 D) Cannot be determined because only 200 shares are available on this side of the quote
A)$9,600 Your customer will sell at the bid (32), or likely very close to it. The bid size is 500 shares so the market can absorb the entire order. 32 × 300 = $9,600. Customers who are selling receive the bid. Those who are buying pay the ask. The size shows bid × ask; 500 shares may be sold at 32 and 200 shares are available to buy at 32.05.
A customer purchased 300 shares of DEF Corporation at $33 per share. After holding the position for 14 months, they sell the position for $35 per share. What is the result of these transactions? A) A $600 long-term capital gain B) A $200 long-term capital gain C) A $200 short-term capital gain D) A $600 short-term capital gain
A)A $600 long-term capital gain The customer realized a $2 per-share gain. The 300 shares resulted in a $600 gain. The position was held for more than one year making it a long-term gain.
A FINRA maintenance call will occur in a long account if the equity drops below A) 35% or $2,500. B) 25% or $2,000. C) 30% or $2,000. D) 50% or $2,500.
B)25% or $2,000. In a long account, equity must be maintained at 25% or $2,000, whichever is greater.
Sierra Verde Coffee Company has 122 million shares of common stock outstanding. The last four weeks of trading volume are as follows: 120,000 shares; 100,000 shares; 110,000 shares; and 90,000 shares. What is the volume limitation for an affiliate selling shares of the company over the next 90 days? A) 1.05 million B) 1.22 million C) 1.10 million D) 1.20 million
B)1.22 million The volume limitations under Rule 144 are the greater of 1% of the outstanding shares of the company or the average weekly trading volume over the most recent four weeks. In this example 1% of 122 million is 1.22 million. That is higher than any of the trade volumes of the last four weeks, much less the average of 1.05 million.
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)? A) An APO of a stock listed on the NYSE requires delivery for a period of 25 days. B) An IPO of a stock to be listed on the NYSE requires delivery for a period of 25 days. C) An APO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 90 days. D) An IPO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 day
B)An IPO of a stock to be listed on the NYSE requires delivery for a period of 25 days. The prospectus delivery rules include the following: IPO for listed or Nasdaq—25 days APO for listed or Nasdaq—none IPO for non-Nasdaq—90 days APO for non-Nasdaq—40 day
A broker-dealer may extend credit under Regulation T for which of these transactions? A) A fixed annuity purchase B) An exchange-traded fund C) The purchase of an IPO at the POP D) A mutual fund purchase
B)An exchange-traded fund Regulation T governs customer payment and the extension of credit to clients in margin accounts. An exchange-traded fund (ETF) is a security that is eligible for purchase on credit. IPOs and other new issues—such as mutual fund purchases—may only receive loan value (and credit) after 30 days from issuance. Annuities may not be purchased with margined funds.
Which of the following investment companies do not redeem their shares? A) Face amount certificates B) Closed end funds C) Open end funds D) Unit investment trusts
B)Closed end funds Face amount certificates, unit investment trusts, and open end funds all redeem their shares. Closed end funds do not redeem their shares.
Which of the following are true of nonqualified plans but not true of qualified plans? A) All withdrawals are taxable B) The plan may discriminate C) All withdrawals are tax free D) The plan cannot discriminate
B)The plan may discriminate With qualified plans, all withdrawals are taxable and the plan cannot discriminate; it has to be offered to all qualified employees. A nonqualified plan does not need to be offered to all qualified employees, and distributions above the cost basis are taxable.
In order to calculate the earnings per share you would need information from A) the balance sheet and current market value. B) both the balance sheet and the income statement. C) just the balance sheet. D) just the income statement.
B)both the balance sheet and the income statement. Earnings per share (EPS) is earning available to the common shareholder (from the income statement) divided by the number of outstanding shares (found in the net worth section of the balance sheet). The stock's current market value is not used in the calculation.
Shares held in electronic form at a clearing house under a broker-dealers account are A) are in custodial name. B) held in street name. C) in trust name. D) held in safe keeping.
B)held in street name. Shares held in street name are normally registered to the broker-dealer, who hold them on behalf of the client at the broker-dealers clearing firm.
The TCPA only restricts solicitations that are delivered via A) facsimile. B) the telephone lines. C) email. D) voice telephone calls.
B)the telephone lines. The Telephone Consumer Protection Act of 1991 restricts any solicitation that uses a telephone line.
The market for Dizzy Rides Inc., is at $52 per share. Your customer would like to sell his shares for $55, and believes the stock will climb to that level in the next two to three weeks. What order should he place? A) Sell limit 55 B) Sell limit 55 AON C) Sell limit 55 GTC D) Sell limit 55 FOK
C)Sell limit 55 GTC Only the good-til-canceled (GTC) order will live past today. All the others will cancel if unexecuted by the end of the day. If there is no qualifier then it is a day order. Fill-or-kill (FOK) orders that cannot be filled immediately are cancelled. An all-or-none order would need to also be marked GTC to go into the next day.
Which of the following is not required to endorse a stock certificate for transfer? A) The correct number of shares are delivered B) Certificates in good condition C) Signatures of the receiving registered representative D) Proper endorsement by all owners
C)Signatures of the receiving registered representative The broker-dealer does not sign the certificate. All the rest of these are requirements.
Which of the following is not a feature shared by mutual funds and closed-end funds? A) A professional investment adviser manages the portfolio for investors. B) An investor may liquidate a portion of his holdings without disturbing the portfolio's balance or diversification. C) The fund may offer various withdrawal plans that allow different payment methods at redemption. D) The fund provides diversification by investing in different companies or securities.
C)The fund may offer various withdrawal plans that allow different payment methods at redemption. A closed-end fund does not offer redemptions. Shares must be liquidated in the secondary markets. All the other points here are true of both types of managed investment companies.
Regarding registration for the sale of securities, those registered under the Investment Company Act of 1940, such as mutual funds, would be considered A) securities that are exempt from registration at all levels. B) securities required to register at both the federal and the state level. C) federal covered securities and not required to register at the state level. D) federal covered securities required to register at the state level only.
C)federal covered securities and not required to register at the state level. Investment companies registered under the Investment Company Act of 1940 offer securities that are deemed to be federally covered. The effect of this designation is that states do not have jurisdiction over the registration requirements of these securities; no state registration can be required. Therefore federally covered securities are required to register at the federal level only.
A customer purchased 100 shares of GHI common stock two years ago for $20 per share. After a year, they sell the shares for $23 per share. Over the past two years, GHI has paid a $0.25 quarterly dividend. What is the total return? A) 10% B) 25% C) 15% D) 20%
D)20% The formula for calculating total return is (income + gains or - losses) / cost basis. For this question ($1 + $3) / 20 = 4 / 20 = 0.20 (20%). Note that the position was held for only one year.
Which of the following must precede the first trade in an account? A) Customer's notarized signature on the new account form B) Filing of the account information with the applicable self-regulatory organization (SRO) C) Registered representative's signature on the new account form D) Approval of the new account by a principal
D)Approval of the new account by a principal All accounts must be approved by a principal before the first trade. Neither the customer nor the registered representative need sign the new account form, and no self-regulatory organization (SRO)—requires the filing of new account information with them.
Which of the following is not part of the expense ratio of a mutual fund? A) Contingent deferred sales charge B) 12b-1 fees C) Legal fees D) Manager's fee
D)Manager's fee The expense ratio does not include sales charges or loads. The other items here are normally included in the expense ratio of a fund.
When a bond is purchased at a discount the current yield will be A) the same as the nominal rate. B) lower that the stated rate. C) lower than the fixed rate. D) higher than the coupon rate.
D)higher than the coupon rate. The coupon rate, the stated rate, the fixed rate, and the nominal rate all mean the same thing. It is the amount the bond will pay each year. On a discount bond the current yield is always higher than the coupon rate.
