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SIE/S79 Exam - Supplement > SIE Book Challenging Questions > Flashcards

SIE Book Challenging Questions Flashcards

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1
Q

Which type of preferred stock allows investors to participate in any potential upside of the same company’s common stock?

A

Convertible preferred

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2
Q

A corporate bond has a nominal yield of 6%. Howard owns eight of these bonds. At their maturity, how much will he receive?

A

$8,240

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3
Q

A bond trader announces that a bond’s “yield increased today by 20 bps.” If the day began with a rate of 4.53%, with what rate did it end?

A

4.73%

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4
Q

Which of the following statements are TRUE about interest rate risk?
I. The risk of bond-price decline increases as interest rates rise.
II. Low-coupon bonds have more interest rate risk than high-coupon bonds.
III. Holding a zero-coupon bond to maturity does not help to eliminate interest rate risk.
IV. Short-term bonds have more interest rate risk than long-term bonds.

A

I & II

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5
Q

Which of the following bonds will appreciate the most as interest rates fall?

A. 10-year, zero-coupon bond
B. 10-year, 5% bond
C. 30-year, zero-coupon bond
D. 30-year, 5% bond

A

C. 30-year, zero-coupon bond

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6
Q

Which of the following treasury securities has the greatest interest rate risk?

A. Six-month T-bill
B. 10-year T-note
C. 30-year T-bond
D. 30-year STRIP

A

D. 30-year STRIP

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7
Q

Mark owns a general obligation (GO) municipal bond issued by the county in which he lives. He wants to know what collateral stands behind these bonds. The best answer is:

A. the full faith and credit of the state government
B. the ability of his county to stick to its budget
C. his own property taxes
D. a collateral bond posted by the county

A

C. his own property taxes

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8
Q

Which of the following investments would not be found in a money market mutual fund?

A. Treasury bill
B. Municipal bond
C. Commercial paper
D. Negotiable security of deposit

A

B. Municipal bond

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9
Q

Carlos is investing $20,000 in a money market mutual fund. How many shares will this buy?

A

20,000

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10
Q

Which entity is responsible for distributing dividends and capital gains to fund shareholders?

A

Transfer agent

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11
Q

Alvin buys shares of Blue Chip Growth Mutual Fund in his brokerage margin account on March 1. He wants to know when he can use the value of these shares as collateral to buy other securities on margin. The answer is:

A. never, because mutual fund shares are not marginable
B. on or after March 16 (15 days after purchase)
C. on or after March 31 (30 days after purchase)
D. on or after January 1 of the next year

A

C. on or after March 31 (30 days after purchase)

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12
Q

The NAV of ABC Closed-End Fund is $16.50. The current offer price is $16.58. Frank wants to buy 100 shares at a price not greater than $16.50. What can he do?

A. Wait for the price to decline to $16.50 and enter a market order
B. Enter a “buy at NAV” order now
C. Enter a limit order to buy at $16.50 now
D. It is not possible to buy closed-end fund shares at NAV

A

C. Enter a limit order to buy at $16.50 now

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13
Q

Owning which of the following types of REITs is most similar to buying a personal home as an investment and holding it 10 years to capture the price appreciation?

A. Public equity REIT
B. Public mortgage REIT
C. Public hybrid REIT
D. Private REIT

A

D. Private REIT

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14
Q

Are dealers of local government investment pools (LGIPs) required to give prospective investors a disclosure document, describing terms and fees of the fund?

A. No, because LGIPs are not regulated
B. Yes, a prospectus must be delivered
C. Yes, an official statement must be delivered
D. Yes, a copy of the SEC registration statement must be delivered

A

C. Yes, an official statement must be delivered

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15
Q

Karen writes a covered call with a strike price of $55 when the underlying stock is priced at $51. She earns a premium of $2. What is her maximum profit on the combination of option and stock?

A

$600

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16
Q

Carl owns Apple stock and believes it will do well. However, he is worried that it could be dragged lower by a downturn in the stock market as a whole. How can he continue to own Apple, and participate in any upside, without being exposed to a general stock market downturn?

A. Sell Apple calls
B. Buy Apple puts
C. Buy S&P 500 Index calls
D. Buy S&P 500 Index puts

A

D. Buy S&P 500 Index puts

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17
Q

Can an individual customer ever opt out of customer-specific suitability requirements?

A. Yes, by filing a written statement that verifies investment experience or sophistication
B. Yes, by making all of her own investment decisions
C. Yes, by having at least $50M of total assets
D. No, because only sophisticated organizations are allowed to opt out

A

C. Yes, by having at least $50M of total assets

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18
Q

Patrick is setting aside money for his retirement in 20 years, and he wants capital appreciation with a high degree of predictability and safety. Which of the following investments can best meet his need?

A. Money market mutual funds
B. Long-term, zero-coupon US Treasuries
C. Long-term municipal bonds
D. None, because his two objectives are not compatible

A

B. Long-term, zero-coupon US Treasuries

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19
Q

The Morrisons have an asset allocation program set up for their children’s college educations. Lately, the stocks in this program have been performing well and the bonds have been performing poorly. If the portfolio is rebalanced, what effect will this event have on the program’s asset mix?

A. Buy more stocks, sell bonds
B. Sell stocks, buy more bonds
C. Add money and buy both stocks and bonds
D. Subtract money and sell both stocks and bonds

A

B. Sell stocks, buy more bonds

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20
Q

Jackson is a broker who is getting his clients involved in an IPO. The effective date of the offering ins Monday, June 4. One of his clients buy shares on June 5. Although a final prospectus has been filed with the SEC, he does not deliver one in hard copy. Rather, on June 7 he sends the client a notice indicating where the final prospectus can be accessed online. Has he committed a prospectus violation?

A. Yes, because he should have delivered a final prospectus before the client purchased shares
B. Yes, because he should have delivered a final prospectus on June 5
C. Yes, because he should have delivered a hard-copy version of the final prospectus, not an electronic copy
D. No, because he has met the requirements for final prospectus delivery

A

D. No, because he has met the requirements for final prospectus delivery

21
Q

Which one of the following is not a qualified institutional buyer (QIB)?

A. An insurance company with a securities portfolio of $250 million
B. A pension fund with a securities portfolio of $80M
C. A broker-dealer with a portfolio of $60M
D. A mutual fund company with a securities portfolio of $1B

A

B. A pension fund with a securities portfolio of $80M

22
Q

During the cooling-off period, what type of advertisement is permitted, for purposes of promoting a securities offering?

A. Any that is truthful and summarizes facts contained in the registration
B. Any print (but not online) ad in a reputable newspaper or periodical
C. Tombstone only
D. None

A

C. Tombstone only

23
Q

Kevin is the 30-year-old son of an employee at a FINRA firm who wants to get in on the IPO of a hot tech company. Can he participate in the IPO? If he cannot, can his spouse, Mary?

A. Both Kevin and Mary can participate
B. Kevin can’t participate, but Mary can
C. Mary can participate only if she buys shares in an individual account, not a joint account
D. Neither can participate

A

D. Neither can participate

24
Q

Which of the following items is not included on an order ticket?

A. Customer account number
B. Customer name
C. Whether or not the order was solicited
D. When the order was entered for execution

A

B. Customer name

25
Q

Which statement about market makers on the NYSE and Nasdaq is accurate?

A. The NYSE has fewer designated market makers (DMMs) than Nasdaq
B. DMMs at NYSE work in a central location; DMMs at Nasdaq are scattered
C. The NYSE has a DMM for every stock; the Nasdaq has DMMs for only some stocks
D. The NYSE has DMMs, and Nasdaq doesnt

A

D. The NYSE has DMMs, and Nasdaq doesnt

26
Q

Unemployment is considered to be a what type of economic indicator?

A. Leading
B. Lagging
C. Coincident
D. Countercyclical

A

B. Lagging

27
Q

What does a widening of bond yield spreads indicate?

A. Higher interest rates
B. A flight into quality bonds
C. A flattening yield curve
D. The onset of an economic expansion

A

B. A flight into quality bonds

28
Q

Actions taken by central banks based on changes in interest rates and in money supply

A

Monetary policy

29
Q

Actions taken by governments based on changes in taxes, budgeting, adn spending

A

Fiscal policy

30
Q

How does the Federal Reserve conduct its open market operations?

A. By making short-term loans to banks
B. By issuing new government securities to the public
C. By trading securities with primary dealers
D. by changing interest rates

A

C. By trading securities with primary dealers

31
Q

What is the minimum amount of cash an investor must have in the account to short 100 shares of XYZ stock at $10 per share in a margin account?

A

$2000

32
Q

James is an unregistered employee of BD XYZ. His firm puts him to work cold-calling prospects. James tells prospects his firm has published a research report on an energy company, and he offers to send a free copy. When prospects ask to know more information he reads excerpts from the report. Has he committed a violation?

A. Yes, he must name the company on request
B. Yes, he must turn the call over to a registered person when prospects request more information
C. Yes, he cant cold-call until he is registered
D. No, he has met all cold-calling requirements

A

B. Yes, he must turn the call over to a registered person when prospects request more information

33
Q

Is it permissible to buy $30,000 of stock in a cash account without having $30,000 of cash available to pay for the trade?

A. No, this is an example of free-riding
B. Yes, but only if the client has at least $15,000 of cash available at the time the order is placed
C. Yes, but only if the client can pay the full $30,000 within four business days after the trade
D. Yes, provided the client has at least $60,000 worth of eligible securities already in the account

A

C. Yes, but only if the client can pay the full $30,000 within four business days after the trade

34
Q

What types of trades are permitted in a cash account that has been frozen because of freeriding activity?

A. None
B. Sell orders only
C. Only orders with prior principal approval
D. Only orders with sufficient cash in the account to cover the full purchase

A

D. Only orders with sufficient cash in the account to cover the full purchase

35
Q

If Hal owns $90,000 of stock in his margin account, what is the FINRA maintenance requirement?

A. $22,500
B. $27,000
C. $45,000
D. $90,000

A

A. $22,500

36
Q

Ed and Susan, a married couple, own a joint brokerage account worth several million dollars. If Susan dies suddenly in a car crash, who gets the account value?

A. Ed
B. Ed gets half, and half goes to Susan’s estate
C. The account will be liquidated and go into probate, where Ed will have to file a claim for his share
D. It depends on how the account is titled

A

D. It depends on how the account is titled

37
Q

A married couple wishes to set up one or more UGMA/UTMA accounts for their two children. How many accounts must be opened to plan for both children? At minimum, how many beneficiaries and custodians must be named?

A. One account, one beneficiary, one custodian
B. One account, two beneficiaries, one custodian
C. Two accounts, two beneficiaries, one custodian
D. Two accounts, two beneficiaries, two custodians

A

D. Two accounts, two beneficiaries, two custodians

38
Q

Which of the following investments is not permitted in an IRA?

A. REITs
B. Money market mutual funds
C. Options
D. Municipal bonds

A

C. Options

39
Q

Who can sponsor a 457(b) plan?

A. Small employers
B. State and local governments and tax-exempt organizations
C. Religious and educational organizations
D. Self-employed individuals

A

B. State and local governments and tax-exempt organizations

40
Q

When do full-time employees over the age of 21 automatically become eligible to participate in a company’s non-qualified plan?

A. After one year of service
B. After two years of service
C. After joining the executive team
D. Whenever the employer decides to include them

A

D. Whenever the employer decides to include them

41
Q

Hank and Sally, a married couple, are both retired and age 66. Hank works part-time and earns $6,500 in a year. They have no other income. He contributes $6,000 to his traditional IRA. Can Sally make a contribution in the same year and of how much?

A. Yes, $500 to either a traditional or Roth IRA
B. Yes, $6,000, but only to a Roth IRA
C. No, he has used all of their combined contribution limit, so she can’t contribute
D. No, she doesn’t work so she can’t contribute

A

A. Yes, $500 to either a traditional or Roth IRA

42
Q

At age 42, Melissa is forced to take a $10,000 withdrawal from her traditional IRA to pay for her daughter’s college tuition. She has made no after-tax contributions. How much of this is taxable and what is the penalty for early withdrawals?

A. $5,000 is taxable; $1,000 penalty
B. $10,000 is taxable; no penalty
C. $10,000 is taxable; $1,000 penalty
D. None is taxable; no penalty

A

B. $10,000 is taxable; no penalty

43
Q

Which information contained on a new rep’s Form U4 must be verified by the FINRA member firm that sponsors them?

A. Five years of residential address history
B. Educational background
C. The three most recent years of employment history
D. Recent liens and judgements

A

C. The three most recent years of employment history

44
Q

Clarence is a registered rep who recommends fee-based mutual fund wrap accounts to his clients. These are advisory accounts, and his role is to work under an SEC-registered investment advisor, providing advice to clients and managing the portfolios by making discretionary trades. He is not an investment adviser. Must he register and if so, with whom?

A. No, registration is not required
B. Registration is only required if he has 30 or more clients
C. Yes, with the SEC
D. Yes, with his state

A

D. Yes, with his state

45
Q

A money launderer makes a series of many small bank deposits, withdrawls, and wire transfers to move illegal funds into sage havens while covering up the original source of the funds. This practice is called:

A. layering
B. placement
C. white-washing
D. masking

A

A. layering

46
Q

Calvin has just opened a brokerage account for a nice retired couple that has lived in his community for 40 years. They are well known to everyone. Must he obtain PATRIOT Act customer identification information from them, to prove their identities and if so, by when?

A. Yes, before opening the account
B. Yes, within 10 days of opening the account
C. Yes, within a reasonable time of opening the account, but before the first trade
D. No, because they are well known in the community

A

A. Yes, before opening the account

47
Q

With whom can a registered representative split a commission without committing a violation of a FINRA rule?

A. Only another securities-licensed person
B. Only an attorney, CPA, or certified financial planner
C. Only a registered investment adviser (RIA), subject to a written contract
D. Any person who has performed work for compensation commensurate with the commision paid

A

A. Only another securities-licensed person

48
Q

Frank has box seats to see the local pro football team, and they cost $200 each. An insurance agent has just referred several new clients to Frank and performed work to help Frank advise these clients. In return, Frank gives the agent four box seats. When Frank is questioned about this by his compliance officer, he says he is just rewarding the agent for work well done. Has he committed a violation?

A. Yes, if the insurance agent is not securities-licensed
B. Yes, because finder’s fees are never allowed
C. Not if the price of the tickets does not exceed the value of the work performed by the agent
D. No, because the value of the tickets does not exceed $1,000

A

A. Yes, if the insurance agent is not securities-licensed

SIE/S79 Exam - Supplement (1 decks)

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