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SIE Practice Exam > Steven Rice - D1 - Practice Exam > Flashcards

Steven Rice - D1 - Practice Exam Flashcards

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1
Q

Which of the following disputes must be resolved using the Code of Arbitration?

I. A dispute between a member of FINRA and a registered rep
II. A dispute between a member of FINRA and a customer
Ill. A dispute between two members of FINRA
IV. A dispute between a bank and a member of FINRA

(A) IV only

(B) II and IV

(C) I and III

(D) I, III, and IV

A

C

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2
Q

Which of the following are important to investors evaluating direct participation programs?

I. The economic soundness of the program
II. The expertise of the general partner
Ill. The basic objectives of the program
IV. The start-up costs

(A) I, II, and III

(B) I, II, and IV

(C) II, III, and IV

(D) I, II, III, and IV

A

D

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3
Q

The FDIC covers each

(A) depositor for up to $250,000

(B) investor for up to $250,000

(C) depositor for up to $500,000

(D) investor for up to $500,000

A

A

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4
Q

If one of your clients wants to purchase municipal securities that you believe to be unsuitable for her investment objectives, what should you do?

(A) Execute the order as long as you mark the order ticket as “unsolicited.”

(B) You must refuse the order unless the client changes her investment objectives.

(C) You must obtain the permission of the firm’s compliance officer before executing the order.

(D) You may only execute the order with prior permission of a principal of the firm.

A

A

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5
Q

Common stockholders of PXPX Corporation have which of the following rights and privileges?

(A) The right to receive an audited financial report weekly

(B) The right to vote for cash dividends to be paid

(C) A residual claim to assets at dissolution

(D) The right to vote for stock dividends to be paid

A

C

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6
Q

Which of the following statements is NOT true of life-cycle funds?

(A) As life-cycle funds get nearer to their target date, the portfolio holdings will be adjusted to purchase more equity securities and less fixed-income securities.

(B) These funds are usually set up as funds of funds.

(C) The asset allocation of the fund will be rebalanced on a regular basis to make sure that the risk/reward balance is correct given the target date of the fund.

(D) The objective of the fund assumes that most investors cannot tolerate as much risk as they get older.

A

A

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7
Q

The ex-date is:

(A) the date on which the corporation ceases paying a dividend

(B) the date on and after the date the seller is entitled to the dividend

(C) the third business day before the record date

(D) the day the stock price is increased by the amount of the dividend

A

B

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8
Q

When compared to statutory voting, cumulative voting provides an advantage to

I. larger shareholders
II. mortgage bondholders
III. smaller shareholders
IV. convertible bondholders

(A) I only

(B) II and IV

(C) III only

(D) II and III

A

C

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9
Q

If a customer wants to open a new account but refuses to provide some of the financial information requested by the member firm, which of the following statements is TRUE?

(A) The firm may open the account for the customer and make recommendations freely.

(B) The firm may open the account if it can determine from other sources that the customer has the financial means to handle the account.

(C) The firm may open the account and take unsolicited trades only.

(D) The firm may not accept any trades for the account until the information is received from the customer.

A

B

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10
Q

Which of the following IS TRUE of the Telephone Act of 1991?

I. You cannot make calls before 8 a.m. or after 9 p.m. in the local time zone of the potential customer.
II. You are required to provide your name, company name, company address, and phone number.
Ill. Individuals who ask not to be called need to be placed on the company’s do-not¬ call list.
IV. You may not send unsolicited ads by fax machine.

(A) I and III

(B) II and IV

(C) I, II, and III

(D) I, II, III, and IV

A

D

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11
Q

An investor buys 100 shares of common stock of T- Prompters, Inc. at $15 per share. Six months later, T-Prompter Inc. is trading at
$12.40-$12.65, and the registered repre­sentative offers to purchase the 100 shares back from the investor for his own account at
$15 per share. This procedure is

(A) permitted by FINRA rules

(B) permitted with the written permission of a manager of the firm

(C) prohibited because it violates the Code of Procedure

(D) prohibited because it is a guarantee against a loss

A

D

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12
Q

Which of the following occurs under the provisions of the Uniform Gifts to Minors Act (UGMA) when a minor reaches the age of majority?

(A) The account must be transferred to the donor.

(B) The account is automatically changed to a UTMA account.

(C) The account is closed, and the new adult receives a check in the amount equal to the market value of the account less any commission.

(D) The account must be transferred to the donee after she reaches adulthood.

A

D

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13
Q

All the following items must be included on a trade confirmation EXCEPT

(A) the customer’s account number

(B) the customer’s signature

(C) the price of the security

(D) the commission, if the trade took place on an agency basis

A

B

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14
Q

A customer, without giving written authorization, may permit a registered representative to exercise his judgment as to

(A) whether to buy or sell
(B) the security
(C) the price and timing to enter the order
(D) the number of shares

A

C

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15
Q

If the U.S. dollar has fallen in comparison with foreign currencies, which of the following statements is TRUE?

(A) U.S. exports are likely to fall.

(B) Foreign currencies buy fewer U.S. dollars.

(C) U.S. products cost more for foreign consumers.

(D) U.S. exports increase.

A

D

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16
Q

Which of the following establishes the U.S. Treasury Department as the regulator for anti-money-laundering programs?

(A) The Bank Secrecy Act

(B) OFAC

(C) SDN

(D) None of the above A

A

A

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17
Q

If Buddy Seagull has a limited amount of funds and wants to invest in the pharmaceutical industry but does not want to limit his investments to only one or two companies, which type of fund would be MOST suitable?

(A) A hedge fund

(B) A sector fund

(C) A balanced fund

(D) A money market fund

A

B

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18
Q

GHI convertible bonds are convertible into common stock for $20. If the stock is trading at $24, what is the parity price of the bonds?

(A) $1,120

(B) $1,200

(C) $1,320

(D) $1,000

A

B

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19
Q

RANs, BANs, TANs, and CLNs are issued by municipalities seeking

(A) to insure their municipal securities

(B) the approval of the SEC

(C) long-term financing

(D) short-term financing

A

D

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20
Q

Which of the following governmental bodies receives no revenue from ad valorem taxes?

(A) County governments

(B) State governments

(C) School districts

(D) Local municipalities

A

B

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21
Q

One of your clients is expecting to receive a lot of money over the next three years. Your client would like to shelter some of that money by investing in a DPP. Which of the following types of DPPs will help your client shelter the most money?

(A) Oil and gas income

(B) Oil and gas developmental

(C) Oil and gas combination

(D) Oil and gas wildcatting

A

D

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22
Q

The Federal Reserve Board is responsible for which of the following?

(A) Easing the money supply

(B) Setting Regulation T

(C) Printing currency

(D) All of the above

A

D

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23
Q

Which of the following have ownership positions in a corporation?

I. Convertible bondholders
II. Convertible preferred stockholders
Ill. Common stockholders
IV. Mortgage bondholders

(A) II and III

(B) I, II, III, and IV

(C) II and IV

(D) II only

A

A

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24
Q

Which of the following are factors that affect the marketability of municipal GO bonds?

I. The quality
II. Call features
III. The issuer’s name
IV. Credit enhancements

(A) I and II

(B) II and III

(C) I, II, and III

(D) I, II, III, and IV

A

D

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25
Q

You have a new client who is in a high tax bracket and is looking for investments with a tax advantage. Which of the following securities would you LEAST likely recommend?

(A) Municipal bonds

(B) GNMAs

(C) Retirement plans

(D) Direct participation programs

A

B

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26
Q

Which of the following partnership documents needs to be filed with the secretary of state in the home state of the partnership?

I. The certificate of limited partnership
II. The partnership agreement
Ill. The subscription agreement

(A) I only

(B) II and III

(C) I and III

(D) I, II, and III

A

A

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27
Q

Which of the following are true about the annuitization of a variable annuity?

I. The value of the annuity units is fixed.
II. The number of annuity units is fixed.
Ill. The value of the annuity units varies.
IV. The number of annuity units varies.

(A) I and II

(B) II and III

(C) II and IV

(D) None of the above

A

B

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28
Q

Which of the following would qualify as management companies?

(A) Face-amount certificate companies

(B) Unit investment trusts

(C) Closed-end funds

(D) None of the above

A

C

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29
Q

Exchange-listed securities trading over-the¬ counter takes place in the

(A) first market

(B) second market

(C) third market

(D) fourth market

A

C

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30
Q

Mutual funds must send financial statements to shareholders at least

(A) monthly

(B) bimonthly

(C) quarterly

(D) semiannually

A

D

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31
Q

Prior to buying or selling options, a customer must first receive a(n)

(A) ODD

(B) OCC

(C) margin agreement

(D) OPRA

A

A

32
Q

Which of the following is NOT a benefit of investing in ADRs?

(A) The dividends are received in U.S. currency.

(B) The transactions are done in U.S. currency.

(C) ADRs are subject to antifraud rules.

(D) Currency risk is minimized.

A

D

33
Q

Jake Hanson lives in New York and is considering purchasing a bond. He has settled on either a 5-percent municipal bond offered by New York or a 7-percent corporate bond offered by The Greenhorn Corporation, which has headquarters in New York. Jake needs some guidance and would like you to help him determine which bond will provide him with the greatest return. Which of the following information do you need to obtain before you can make the appropriate recommendation?

(A) The business of his employer

(B) His current tax bracket

(C) How long he has lived in New York

(D) His other holdings

A

B

34
Q

Which of the following securities is traded on an exchange and is an entity that makes mortgage loans to developers and has a portfolio of properties?

(A) DPPs

(B) ETNs

(C) Hybrid REITs

(D) Mutual funds

A

C

35
Q

A customer’s confirmation must include

I. the markdown, if the member acted as a principal in a Nasdaq security
II. the amount of any commission, if the member acted as an agent
Ill. whether the member acted as an agent or a principal
IV. the markup if the member acted as a principal in a Nasdaq security

(A) I and III

(B) II and IV

(C) I, III, and IV

(D) I, II, III, and IV

A

D

36
Q

The SEC and FINRA require customer statements to be sent out at least

(A) monthly

(B) quarterly

(C) semiannually

(D) annually

A

B

37
Q

Which of the following investments requires a registered representative to obtain written verification of an investor’s net worth?

(A) Aggressive growth funds

(B) Variable annuities

(C) Direct participation programs

(D) Triple-tax-free municipal bonds

A

C

38
Q

Which of the following is true of accredited investors?

(A) They have had an annual income in excess of $200,000 for at least the last three years.

(B) They have had an annual income in excess of $100,000 for at least the last two years.

(C) They have a net worth of at least $1,000,000, excluding any equity they have in their primary residence.

(D) They have a net worth in excess of $200,000.

A

C

39
Q

Which of the following items are found on an indenture of a bond?

I. The maturity date
II. Callable or convertible features
ll. The coupon rate
IV. The name of the trustee

(A) II, III, and IV

(B) I, II, and III

(C) II and III

(D) I, II, III, and IV

A

D

40
Q

All of the following are important factors when determining the markup or commission on a municipal bond trade EXCEPT

(A) the fact that you and the firm you work for are entitled to make a profit

(B) the difficulty of the trade

(C) the 5 percent markup policy

(D) the market value of the securities at the time of the trade

A

C

41
Q

Under the Securities Act of 1933, which of the following securities must be registered with the SEC?

(A) Closed-end funds

(B) Variable annuities

(C) Open-end funds

(D) All of the above

A

D

42
Q

Which of the following is NOT an advantage for a customer adding REITs to her portfolio?

(A) Having a professionally managed portfolio of real-estate assets

(B) Preferential dividend treatment

(C) Being able to use a REIT as a potential hedge against a negative price movement in other equity securities

(D) Liquidity

A

B

43
Q

Which of the following statements regarding municipal revenue bonds is NOT true?

(A) Revenue bonds are not subject to a debt ceiling.

(B) Revenue bonds may be issued by interstate authorities.

(C) The maturity date of the issue will usually exceed the useful life of the facility backing the bonds.

(D) Debt service is paid from revenue received from the facility backing the bonds.

A

C

44
Q

According to MSRB rules, a customer confirmation must include

(A) the markup or markdown

(B) the location of the indenture

(C) the maturity date

(D) whether the trade was done on an agency or dealer basis

A

D

45
Q

All of the following are true about callable bonds EXCEPT

(A) any call features must be stated on the bond indenture

(B) the issuer must make an announcement of the call prior to the actual call date

(C) the investor decides when to exercise the call

(D) they offer higher yields than non-callable bonds

A

C

46
Q

Interest income from which of the following investments is exempt from state income tax?

(A) Corporate bonds

(B) Treasury bonds

(C) Revenue bonds

(D) General obligation bonds

A

B

47
Q

If an investor buys an equity option contract on issuance, which expires unexercised, what is the investor’s tax consequence at expiration?

(A) Short-term capital loss

(B) Long-term capital gain

(C) Long-term capital loss

(D) Short-term capital gain

A

A

48
Q

Institutional trading without using the services of a broker-dealer is considered a ______________ market trade.

(A) first

(B) second

(C) third

(D) fourth

A

D

49
Q

Two years ago, Duke Wallwalker purchased an LTSBR Corporation convertible bond at 95 on January 20. The bond is convertible at $40, and the investor converts his bond into stock on January 21 of the current year. If the bond is trading at 104 and the common stock is trading at $42, for tax purposes, these transactions will result in

(A) a $10 gain

(B) a $10 loss

(C) a $90 gain

(D) neither a gain nor a loss

A

D

50
Q

Investors who have international investments are subject to

I. political risk
II. currency risk
III. regulatory risk

(A) I and II

(B) II and III

(C) I and III

(D) I, II, and III

A

D

51
Q

Martina Martin is new to investing but has determined that her primary objective is making sure that she is prepared for retirement. Which of the following is the MOST important factor for you to consider when helping her set up her investment portfolio?

(A) Age

(B) Net worth

(C) Education level

(D) Previous investment history

A

A

52
Q

One of your clients is new to investing and has limited resources. Which of the following investments would you LEAST LIKELY recommend to this investor?

(A) Growth funds

(B) T-bills

(C) Blue-chip stock

(D) Oil and gas developmental program

A

D

53
Q

Which of the following are needed to open a margin account for a corporation?

I. Corporate charter and resolution
II. New account form
Ill. Hypothecation agreement
IV. Credit agreement

(A) I and II

(B) I and IV

(C) III and IV

(D) I, II, III, and IV

A

D

54
Q

Skippy Barrier III has 1,000 shares of DIM common stock in his portfolio. Skippy would like to protect himself in the event that the market price of DIM drops. Which of the following orders would best meet Skippy’s needs?

(A) A buy stop order

(B) A sell stop order

(C) A buy limit order

(D) A sell limit order

A

B

55
Q

While ABC is trading at $44.50 per share, an investor purchases an Oct 40 put at $3.00. What is the investor’s break-even point?

(A) 37

(B) 41.50

(C) 43

(D) 47.50

A

A

56
Q

Which of the following items are required on an order ticket?

I. The time of the order
II. A description of the security (stocks, bonds, symbol, and so on)
Ill. Whether the registered rep has discre­ tionary authority over the account
IV. The registered rep’s identification number

(A) I, III, and IV

(B) I and III only

(C) I, II, and IV

(D) I, II, III, and IV

A

D

57
Q

An investor owns the following investments:

  • 50 New York 5 percent general obligation bonds maturing in 2020 and rated AA
  • 50 Florida University 6.25 percent revenue bonds maturing in 2021 and rated AA
  • 50 Nevada Turnpike 5.75 percent revenue bonds maturing in 2020 and rated AA

What type of diversification does this represent?

(A) Maturity

(B) Quality

(C) Quantity

(D) Geographical

A

D

58
Q

Adjustable-rate preferred stock has a dividend that adjusts according to

(A) prevailing interest rates

(B) the amount of dividend given to common stockholders

(C) the coupon rate on the issuer’s bonds

(D) the rate on CMOs

A

A

59
Q

Which of the following is included in a preliminary prospectus?

I. The purpose for the funds being raised
II. Financial statements
III. A written statement in red citing that the prospectus may be amended and a final prospectus issued
IV. The final offering price

(A) I and II

(B) I, II, and III

(C) II and IV

(D) I, II, III, and IV

A

B

60
Q

What is the required beginning date (RBD) for traditional IRAs?

(A) The year after the investor reaches the age of 59½

(B) The year the investor turns the age of 72

(C) April 1 of the year after the investor reaches the age of 72

(D) April 15 of the year after the investor reaches the age of 72

A

C

61
Q

All the following items would be found on the official statement of a municipal bond issue EXCEPT

(A) the markup

(B) a description of the issuer

(C) the coupon rate

(D) a legal opinion

A

A

62
Q

The Fed would be inclined to increase the money supply in which of the following conditions?

(A) Declining yields on bonds

(B) Declining gross domestic product (GDP)

(C) Declining interest rates

(D) Rising housing prices

A

B

63
Q

John Dow and Jane Dough, who are engaged but unmarried, want to open a new account registered as joint tenants with rights of survivorship. Which of the following should occur?

(A) A principal of the firm should be notified immediately about the account registration so that a report can be filed with FINRA.

(B) The agent must refuse to open the account.

(C) The agent must notify a principal of the firm and a report must first be filed with the SEC.

(D) The agent may open the account but should first discuss the rules of a JTWROS account with the unmarried couple.

A

D

64
Q

An investor who is long a call option will realize a profit if exercising the option when the underlying stock price is

(A) below the strike price minus the premium paid

(B) above the strike price

(C) above the strike price plus the premium paid

(D) below the strike price

A

C

65
Q

Which of the following is required on the registration statement for a new issue?

I. The capitalization of the issuer
II. Complete financial statements
Ill. What the money raised will be used for
IV. The names and addresses of all of the issuer’s control persons

(A) I, II, and III

(B) I, III, and IV

(C) I, II, and IV

(D) I, II, III, and IV

A

D

66
Q

An investor has shorted XYZ common stock at 55. XYZ common stock has recently dropped to 30, and the investor expects that the price will continue to decrease over the long term. If the investor would like to hedge against a possible increase in the price, the investor should

(A) buy an XYZ call

(B) sell an XYZ call

(C) buy an XYZ put

(D) buy an XYZ combination

A

A

67
Q

Variable annuities must be registered with the

I. Department of State
II. State Banking Commission
Ill. State Insurance Commission
IV. Securities and Exchange Commission

(A) I and II

(B) I and III

(C) I and IV

(D) III and IV

A

D

68
Q

A registered representative may open all the following customer accounts EXCEPT

(A) an account in the name of Mr. Wegner for Mrs. Wegner

(B) a minor’s account by a custodian

(C) a corporate account by a designated officer

(D) a partnership account by a designated partner

A

A

69
Q

The 5 percent markup policy applies to

(A) riskless or simultaneous transactions

(B) markdowns on stock sold from inventory

(C) commissions charged when executing trades for a customer

(D) all of the above

A

D

70
Q

If an investor buys an equity option contract on issuance, which expires unexercised, what is the investor’s tax consequence at expiration?

(A) Short-term capital loss

(B) Long-term capital gain

(C) Long-term capital loss

(D) Short-term capital gain

A

A

71
Q

Which of the following is TRUE regarding qualified retirement plans?

(A) Contributions are made with 100 percent pretax dollars.
(B) Contributions are made with 100 percent after-tax dollars.
(C) Distributions are taxable only prior to age 59 1/2.
(D) Distributions are subject to a 10 percent penalty.

A

A

72
Q

Which of the following are nonexempt securities?
I. Municipal unit investment trust shares
II. U.S. government bond fund shares
Ill. Variable annuity accumulation units
IV. Fixed annuities

(A) I and II

(B) III only

(C) III and IV

(D) I, II, and III

A

D

73
Q

Investing in a real-estate DPP program includes which of the following advantages?

I. Depreciation
II. Appreciation
Ill. Depletion
IV. Cash flow

(A) I and II

(B) III and IV

(C) I, II, and IV

(D) I, II, III, and IV

A

C

74
Q

Which of the following GSEs is directly backed by the U.S. government?

(A) FHLMC

(B) GNMA

(C) FNMA

(D) FCS B

A

B

75
Q

All broker-dealers need to maintain customer identification programs and should check the names of all new clients against

(A) a list maintained by the SEC

(B) a do-not-call list maintained by the firm

(C) a list compiled by FINRA

(D) a list of specially designated nationals (SDNs) maintained by OFAC

A

D

SIE Practice Exam (2 decks)

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