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Securities > Mock 5 > Flashcards

Mock 5 Flashcards

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SIE Exam flashcards
1
Q

Once the terms have been agreed between buyer and seller and the trade executes it next enters the:

A

Clearing phase

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2
Q

A company has enlisted the help of financial professionals to issue a large number of new shares to the market. Which of the following would agree to support the price by buying back the newly issued shares in the market if the price falls below a certain level, therefore stabilising the price?

A

Lead manager

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3
Q

The purpose of stabilisation is:

A

To reduce volatility in a company’s shares in order to prevent the impact of panic selling

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4
Q

What is the role of a note trustee?

A

To represent the interests of holders of issues of securities, while providing guidance to the issuer

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5
Q

With respect to the issuing company which of the following would be considered a benefit to issuing warrants rather ordinary shares?

A

They will be able to issue shares at a higher price

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6
Q

In the UK, a secured corporate debt istrument is known as a debenture. Which of the following would be considered a key role performed by a trustee in the issuance of a debenture?

A

Making sure the corporation adheres to the terms of the indenture

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7
Q

Which members would be involved in a subscription IPO?

A

Issuer

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8
Q

What is the key factor that is considered by credit rating agencies when providing a credit rating for a company?

A

Their cash flow generated will comfortably service and repay its debts

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9
Q

Which of the following would give rise to a capital gain only?

A

Commercial paper

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10
Q

During periods of inflation, which of the following would be true of an index linked government bond?

A

Coupon and redemption value would increase

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11
Q

Which of the following would be considered an advantage of a regional custodian over a local custodian?

A

They offer custody services across multiple markets

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12
Q

Which of the following best indicates the risk of a share you own performing poorly in relation to shares of other companies?

A

Unsystematic

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13
Q

A UK company purchases 7% of shares in ABC plc industries to add to their 23% holdings. Why does the market need to be informed?

A

So that investors can gauge the impact of the takeover

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14
Q

On exchange, if a trader executes a transaction using an electronic order driven system, how is the trade captured?

A

Automatically captured by the exchange

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15
Q

When comparing a company quoted on the London Stock exchange with one that is not, the quoted company must do which of the following?

A

Produce a half yearly report

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16
Q

Which of the following is an advantage to investing in a real estate investment trust (REIT)?

A

The costs of investment are usually a lot lower than direct property investment

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17
Q

How many days prior to the ex-date can a UK listed share trade special ex-div?

A

10 days

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18
Q

What is the BEST description of the purpose of an underwriting syndicate with regards to an initial public offer?

A

Guarantee to buy any unsold shares under the issue

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19
Q

Which one of the following would BEST describe a reverse repo agreement?

A

A Government bond is purchased by one market participant from another and at a defined future date it is sold back at a pre-agreed amount

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20
Q

Which is true in regards to shareholders?

A

Votes are proportional to the number of shares held

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21
Q

If a limit order is entered onto the order book with no specific time of when to expire, if it does not execute, when will it normally be removed from the order book?

A

End of the day

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22
Q

A company wishing to undergo an initial public offer will first go to:

A

A listing agent

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23
Q

Which one of the following is true for index-linked bonds?

A

Both the principal and coupon are adjusted against an inflation index

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24
Q

An offer for subscription must:

A

Be made available to the general public

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25
Q

A factory is planning some new developments. Which of the following would be debited from revenue expenditure?

A

Worker’s wages

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26
Q

An investor chooses to invest in the forward foreign exchange market rather than the spot market. Which of the following statements is true?

A

Forward markets settle on a pre-agreed date three days or more after the deal

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27
Q

Which of the following is an example of capital expenditure?

A

Purchase of non-current assets

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28
Q

For which of the following reasons might the UK government issue a US dollar denominated bond?

A

To broaden the investor base

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29
Q

What is the purpose of an ICEBERG order?

A

To broaden the investor base

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30
Q

What is the purpose of an ICEBERG order?

A

To reduce market impact

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31
Q

Return on capital employed is BEST described as:

A

Money returned over total financing

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32
Q

An investor wishes to hold their investments in a nominee account that would best facilitate proxy voting at a company’s general meetings. Which account would that be?

A

Designated nominee account

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33
Q

Which one of the following is a description of a corporate nominee system?

A

It is a hybrid which has characteristics of pooled and designated

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34
Q

Modified duration measures the:-

A

Expected change in a bonds price for a specified change in interest rates

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35
Q

A company wishes to reduce its share price without it going below its nominal value. Which of these is the best course of action?

A

Stock split

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36
Q

Which of the following is a dealer-to-dealer electronic market system?

A

MTS

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37
Q

Which of these is the cheapest way of issuing new shares?

A

Placing

38
Q

Which of these will give a virtually guaranteed yield?

A

Gilt

39
Q

Who issues UK Treasury Bills to investors?

A

The Debt Management Office

40
Q

For a stock split and a bonus issue which one of the following is true?

A

Only a stock split will reduce the nominal value

41
Q

Which ratio below measures income return based on the value of the shares?

A

Dividend yield

42
Q

What would measure the change in the price of a bond in relation to a change in the interest rate?

A

Modified duration

43
Q

Which of the following would explain why an investor wishes to use a net total return index rather than a price return index?

A

They wish to factor in the effects of dividend reinvestment

44
Q

What is the settlement period for German government bonds?

A

T+2

45
Q

On an order driven platform, when might a limit order to buy not achieve its limit price on execution?

A

During an uncrossing period following an auction

46
Q

Which of the following would describe how UK T-bills are issued?

A

Tenders

47
Q

Why do underwriters get paid a fee?

A

Will buy unsold shares at a price that may be higher than their value

48
Q

Which of the following would not be found on the statement of financial position under intangible non-current assets?

A

Work in progress

49
Q

Following instructions from your client you sold stock on 14 March. On 21 April, your client tells you that he has been paid a dividend relating to this stock. The ex-div date was 16 March. What do you advise your client?

A

Bank the cheque and await a claim

50
Q

Gilt inter-dealer brokers are:

A

matching agents

51
Q

Which of the following differentiates a covered warrant from a standard equity warrant?

A

They are issued by a third party

52
Q

A government bond wishing to be admitted to the main market of an exchange so that it may be traded, must be granted permission from the:

A

The listing Authority

53
Q

A corporate bond’s current price will mostly depend on:

A

The internal rate of return

54
Q

During an initial public offer of shares, how is the price usually determined?

A

Through a tender process

55
Q

Company USR uses copper and buys a stake in a copper mining company. Two other copper mining companies already hold significant stakes in the mining company.
How would Company USR’s purchase be described?

A

Strategic

56
Q

According to corporate governance requirements for a listed company, a company must:

A

Ensure that management responsibilities are shared within a firm

57
Q

An investor buys an American depository receipt (ADR). What BEST describes the investment he holds?

A

Evidence of ownership of non-US shares

58
Q

Which of these is shown on the statement of financial position (balance sheet)?

A

Investments

59
Q

Which of the following is the BEST description of revenue expenditure?

A

Money spent that immediately impacts the income statement

60
Q

Which of the following would offer treasury dealing services?

A

Investment banks

61
Q

A company has bought a 51% stake in another organisation and is seeking to consolidate its accounts. How will it show the purchase above the fair value?

A

Goodwill

62
Q

An income statement would be best described as a:

A

Moving picture showing income and expenses over a given period of time.

63
Q

You buy US treasury bonds when they are issued. The method of pricing used would be:

A

Tender

64
Q

Which of these allows rights to be sold at the ‘nil paid price’?

A

Rights Issue

65
Q

Why would an investor invest in a long/short hedge fund?

A

Considered a market neutral strategy

66
Q

On an electronic order book system, a market order to buy will:

A

Execute against the best priced sell orders immediately and if not completely filled the remainder will be cancelled

67
Q

Which of the following is NOT a condition of REITs?

A

No one person can hold more than 5% of the shares

68
Q

Which of the below is not a typical service offered by prime brokerage?

A

Advice

69
Q

An inter-dealer broker:-

A

Matches market makers trades

70
Q

A base line for spread measurement, which is based on the rate at which funds for particular currencies are offered between a range of banks, would be called:

A

LIBOR

71
Q

Which of the following would be a suitable investment for a money market fund?

A

Bills

72
Q

Why might the yield curve be inverted?

A

Short dated yields are high, but expected to fall

73
Q

What is hedging used for?

A

To reduce risks

74
Q

Which of the following is true of a company wishing to perform an offer for sale?

A

An issuing house will sell the shares to investors on behalf of the issuing company

75
Q

An investor is looking for long-term capital growth. You recommend:

A

Ordinary shares

76
Q

If a company produces summary financial statements, under the financial standards rules, which ratio must also be included?

A

Diluted earnings per share

77
Q

A prime broker offers to cover a hedge funds short positions when they undertake a long/short strategy. Which of the following services is being used?

A

Securities lending and borrowing

78
Q

What is the motivation for a pension fund that permits its assets to be lent to a stock borrowing and lending intermediary?

A

To enhance returns

79
Q

For issuance of securities the members of a syndicate would be:

A

the lead manager and co-lead managers

80
Q

Real assets take into account which of the following factors?

A

Inflation

81
Q

A convertible bond that gives the holder the right to convert into 100 shares has a conversion price of £1.00. If the current share price is £3.00 and this market price falls, we would expect which of the following?

A

The market price of the bond to fall

82
Q

Why might an investor purchase shares in a company?

A

To exert influence

83
Q

A yield curve shows:

A

The yields offered on varying bonds against the maturities of those bonds

84
Q

When shares are held together in an omnibus account the name on the company’s register will be:

A

The nominee

85
Q

Which of the below bonds issued in the US provide local tax benefits and are often guaranteed by a monoline insurer?

A

Municipal bonds

86
Q

A company which has a high interest cover can mean that:

A

Lenders will be likely to lend the company more money

87
Q

A firm lends out client stock, who would make the trade report?

A

It is not a reportable trade

88
Q

Which of the following is MOST likely to issue direct commercial paper?

A

Financial companies

89
Q

At what percentage of share ownership would an investor be forced to make a mandatory bid?

A

30%. If a predator acquires influence over 30% or more of voting rights of a company, it must make an offer for all the remaining shares of the company.

90
Q

When is it possible for a limit order residing on a London Stock Exchange platform to achieve a better price than its limit order?

A

When the uncrossing algorithm is run at the start or end of the trading day, or during any of the two intraday auctions

91
Q

NBV

A

NBV = cost - accumulated depreciation

Securities (19 decks)

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