FINRA SIE Practice Exam 150 Questions with Verified Answers,100% CORRECT, Exams of Business Fundamentals

Download FINRA SIE Practice Exam 150 Questions with Verified Answers,100% CORRECT and more Exams Business Fundamentals in PDF only on Docsity! FINRA SIE Practice Exam 150 Questions with Verified Answers When is interest on Treasury notes paid? A.) Quarterly B.) Semiannually C.) Annually D.) At maturity - CORRECT ANSWER B.) Semi-annually The computation of dollar prices and accrued interest on municipal bonds is normally on what calendar basis? A.) 30/360 B.) 30/365 C.) Actual/360 D.) Actual/365 - CORRECT ANSWER A.) 30/360 Which of the following security types provides investors with a stated maturity date, a floating interest rate, and an option to put the security back to a financial intermediary on a daily or weekly basis? A.) Equity put option B.) Perpetual preferred stock C.) Variable rate demand note D.) Tax-deferred variable annuity - CORRECT ANSWER C.) Variable rate demand note Which of the following products is adversely impacted if the issuer's credit rating is downgraded? A.) Mutual funds B.) Unit Investment Trusts (UITs) C.) Exchange-traded funds (ETFs) D.) Exchange-traded notes (ETNs) - CORRECT ANSWER D.) Exchange-traded notes (ETNs) Which of the following Form U4 reportable events results in a statutory disqualification? A.) A personal bankruptcy filing B.) A written customer complaint alleging misappropriation of assets C.) A felony theft charge D.) A felony conviction for driving under the influence (DUI) charge - CORRECT ANSWER D.) A felony conviction for driving under the influence (DUI) charge Which of the following statements is true regarding a customer account held as tenants in common? A.) The owners must equally share the assets B.) The ownership of the decedent's assets is governed by their will or state law C.) Tenants in common is permitted for use only for two individuals D.) Tenants in common is permitted for use only for married couples or family members - CORRECT ANSWER B.) The ownership of the decedent's assets is governed by their will or state law Which of the following outcomes are possible for the writer of a covered call option? A.) Profit limited and loss limited B.) Profit limited and loss unlimited C.) Profit unlimited and loss limited D.) Profit unlimited and loss unlimited - CORRECT ANSWER A.) Profit limited and loss limited Which of the following statements is true about all U.S. government agency issues? A.) They are exempt from federal taxes B.) They are exempt from registration under the Securities Act of 1933. C.) They are issued in the bearer form only C.) Solicit interest from investors in the stock offering. D.) Chaperone company management during the road show. - CORRECT ANSWER B.) build an order book and allocate the stock. In a period of low inflation and economic recession, the Federal Reserve is expected to take which of the following actions? A.) Decrease taxes B.) Raise the federal funds rate C.) Buy bonds in the open market D.) Require banks to increase reserves - CORRECT ANSWER C.) Buy bonds in the open market Which of the following statements is true regarding the concept of an annuity contract? A.) Payouts of an investment in a nonqualified annuity are all income tax-free. B.) The kind of annuity selected partly determines the payment amounts to the annuitant. C.) In the case of life annuity contracts, the age and sex of the annuitant do not affect the payment amounts. D.) The amounts of the periodic payments to the annuitant are determined by the performance of the insurance company's investment returns. - CORRECT ANSWER B.) The kind of annuity selected partly determines the payment amounts to the annuitant. No-load mutual funds may have lower expense ratios than load mutual funds for which of the following reasons? A.) No-load funds do not charge 12b-1 fees. B.) No-load funds are not permitted to charge a 12b-1 fee greater than 25 basis points. C.) Sales charges for load mutual funds increate their annual expense ratios. D.) Fund management fees for no-load funds are always lower than load funds. - CORRECT ANSWER B.) No-load funds are not permitted to charge a 12b-1 fee greater than 25 basis points. At the time of issuance, which of the following securities normally has the longest period to expiration? A.) Rights B.) Options C.) Warrants D.) Repurchase agreements - CORRECT ANSWER C.) Warrants A customer has a cash balance in her account together with long positions in several securities. She has made no securities transactions in the account during the past 18 months. How often must the firm send her an account statement? A.) Monthly B.) Quarterly C.) Semiannually D.) Annually - CORRECT ANSWER B.) Quarterly Direct participation programs (DPPs) provide: A.) Liquidity and Transparency B.) Exposure to non-correlated assets with steady returns. C.) Market-related correlations with higher average returns. D.) Investors with direct purchases of stock from public companies. - CORRECT ANSWER B.) Exposure to non-correlated assets with steady returns. FinCEN accomplishes its mission to safeguard the financial system from the abuses of financial crime, including terrorist financing and money laundering, by enforcing: A.) SEC regulations B.) The Bank Secrecy Act C.) the Securities Act of 1933 D.) the Investment Company Act of 1940 - CORRECT ANSWER B.) The Bank Secrecy Act The redemption value of an open-end investment company's shares is based on the: A.) Previous offering price. B.) Previous closing Net Asset Value (NAV) C.) NAV computed after the order is received D.) Offering price computed after the order is received. - CORRECT ANSWER C.) NAV computed after the order is received Which of the following investment risks is the greatest risk in a variable life insurance policy? A.) Credit Risk B.) Market Risk C.) Inflation Risk D.) Interest Rate Risk - CORRECT ANSWER B.) Market Risk Which of the following statements is true about treasury stock? A.) It has voting rights B.) It receives dividends C.) It is issued stock taht has been subsequently reacquired by the corporation. D.) It is authorized stock that has not been issued and is held in the corporation's treasury. - CORRECT ANSWER C.) It is issued stock taht has been subsequently reacquired by the corporation. In the over-the-counter market, the term "spread" refers to the difference between the: A.) bid and asked prices. B.) offered and asked prices. C.) indicated and firm prices. D.) opening and closing prices. - CORRECT ANSWER A.) bid and asked prices. A decline in the GDP must last for at least how many quarters to be considered a recession? A.) 1 quarter B.) 2 quarters C.) 3 quarters D.) 4 quarters - CORRECT ANSWER B.) 2 quarters Which of the following represents the effect of a stock split? A.) The price per share of common stock increases. B.) The price per share of common stock decreases. C.) Each stockholder's proportionate ownership decreases. D.) Each stockholder's proportionate ownership increases. - CORRECT ANSWER B.) The price per share of common stock decreases. Broker-dealer ABC seeks to underwrite a municipal securities offering by a local town in which the mayor is currently seeking re-election. A municipal finance professional who resides in the town and works for ABC contributed $200 to the mayor's re-election campaign 13 months ago. If the employee wants to support the campaign further without impacting the municipal securities business of the firm, he is permitted to make an additional contribution of up to what amount? A.) $50 B.) $100 C.) $150 D.) $250 - CORRECT ANSWER A.) $50 The owner of which of the following products is most exposed to inflationary risk? A.) Utility stocks B.) Treasury bills C.) Treasury bonds D.) Blue chip industrials - CORRECT ANSWER C.) Treasury bonds What is the cost basis of an inherited mutual fund? A.) The net asset value (NAV) of the shares when the owner dies B.) The NAV 30 days after the owner's death C.) The same cost basis as the deceased D.) The same cost basis as the deceased plus capital gains distribution. - CORRECT ANSWER A.) The net asset value (NAV) of the shares when the owner dies Roth 401(k) and Roth individual retirement account (IRA) plans share which of the following features? A.) Contributions made are pretax. B.) Neither account has maximum contribution limits. C.) Neither account is subject to early distribution penalties. D.) Qualified distributions are excluded from federal income tax. - CORRECT ANSWER D.) Qualified distributions are excluded from federal income tax. A firm is a participant in a public offering. To sell a substantial amount of the securities to its customers, the firm agrees to repurchase the shares at no less than the original sales price. Such agreements are: A.) Prohibited as fraudulent and manipulative. B.) Permissible if the securities are deposited into escrow. C.) Prohibited unless the firm immediately sets aside funds for the repurchase. D.) Permissible if the customers retain the right to sell the securities into the open market. - CORRECT ANSWER A.) Prohibited as fraudulent and manipulative. In which of the following situations is an employee of a public company permitted to trade upon information without violating insider trading laws? A.) An independent securities analyst explains to the employee why the earnings for the company next quarter could be markedly poorer than expected. B.) The employee's neighbor works for the government and informs him that the government will award a major contract to the company next month. C.) The employee's spouse works in the corporate headquarters and shares with him a conversation overheard at work regarding possible acquisition targets. D.) A coworker informs the employee of a conversation he had with the administrative assistant to the company's general counsel regarding key developments in an ongoing class action lawsuit. - CORRECT ANSWER A.) An independent securities analyst explains to the employee why the earnings for the company next quarter could be markedly poorer than expected. A registered representative is reviewing the following porfolio: - 30% ABC Energy Company - 30% XYZ Health Care Company - 30% Exchange-traded fund (tracks the S&P 500) - 10% Money market funds Which of the following risks is inherent in this portfolio? A.) Credit B.) Liquidity C.) Political D.) Nonsystematic - CORRECT ANSWER D.) Nonsystematic A broker-dealer is permitted to accept payment for a new issue from a new customer when the: A.) registration is effective. B.) red herring is delivered. C.) preliminary prospectus is amended. D.) transaction takes place during the cooling-off period. - CORRECT ANSWER A.) registration is effective. Which of the following responses describes an advantage of the index funds? A.) The protection of principal during bearish markets B.) High turnover to take advantage of market opportunities. C.) Higher management fees due to active management of the fund. D.) Lower management fees due to passive management of the fund. - CORRECT ANSWER D.) Lower management fees due to passive management of the fund. Which of the following stakeholders has first claim priority in a Chapter 11 proceeding? A.) Equity holders B.) Secured Debt holders C.) Unsecured Debt holders D.) Administrative claim holders - CORRECT ANSWER B.) Secured Debt holders The call provision of a bond stipulates which of the following factors? A.) Maturity date B.) Call date and call price C.) Original issue discount D.) Coupon rate and call date - CORRECT ANSWER B.) Call date and call price If a market maker posts a quote of 10.00 - 10.10 [25x10], which of the following actions is the market maker willing to take? A.) Sell 1,000 shares at $10.00 and buy 2,500 shares at $10.10 B.) Buy 2,500 shares at $10.00 and sell 1,000 shares at $10.10 C.) Sell 100 shares at $10.00 and buy 250 shares at $10.10 D.) Buy 250 shares at $10.00 and sell 100 shares at $10.10 - CORRECT ANSWER B.) Buy 2,500 shares at $10.00 and sell 1,000 shares at $10.10 UTMA accounts are opened under the tax ID of the: A.) minor B.) donor C.) parent D.) custodian - CORRECT ANSWER A.) minor A customer is an officer of a company that is involved in some significant changes. All of the following items are examples of corporate affairs that could be considered inside information if the customer shares them with his registered representative except: A.) pending transactions B.) declared stock dividend C.) top management changes D.) imminent financial liquidity problems - CORRECT ANSWER B.) declared stock dividend Regular way settlement on Treasury bonds is: A.) same day B.) next business day. C.) second business day. D.) fifth business day - CORRECT ANSWER B.) next business day. Under SEC Regulation S-P (Consumer Privacy), which of the following information must a firm include in its customer privacy and opt-out notices? A.) The address of the firm's website B.) The fee to opt out from the privacy program C.) The deadline by which to opt out from the privacy program D.) The policies to protect the security of nonpublic information. - CORRECT ANSWER D.) The policies to protect the security of nonpublic information. A savings account at a bank is guaranteed by which of the following entities? A.) FDIC B.) SIPC C.) Federal Reserve D.) Department of Treasury - CORRECT ANSWER A.) FDIC When selling a fixed amount of a base currency to purchase a counter currency, which of the following factors is primarily used to determine how much of the counter currency the customer will receive? A.) The spot exchange rate B.) The counter currency's inflation rate C.) The trade balance between the two countries D.) The credit rating of the counter currency's government - CORRECT ANSWER A.) The spot exchange rate Which of the following actions is required of a broker-dealer's anti-money laundering (AML) program? A.) Designating an AML compliance officer B.) Filing of the firm's AML program with FINRA C.) Conducting background checks of all employees D.) Identifying to regulators the employees responsible for Currency Transaction Reports (CTRs) - CORRECT ANSWER A.) Designating an AML compliance officer A company announces a tender offer to its shareholders with the intent to buy a maximum of 1 million shares of its outstanding stock at $10 per share and sets no minimum number of shares to be purchased. An investor wants to participate in this offer and tenders his 1,000 share position. At the close of the offer period, only 900,000 shares have been tendered. How many, if any, of the investor's shares will the company purchase? A.) 0 B.) 100 C.) 900 D.) 1,000 - CORRECT ANSWER D.) 1,000 At issue, which of the following debt securities mature in one year or less? A.) FNMA bonds B.) GNMA bonds C.) Treasury notes D.) Money market instruments - CORRECT ANSWER D.) Money market instruments Which of the following actions is required when a firm receives cash in excess of $10,000 from one customer in one business day? C.) A market maker D.) A transfer agent - CORRECT ANSWER C.) A market maker Which corporate voting procedures entitles a shareholder to one vote per share, and votes must be divided evenly among the candidates being voted on? - CORRECT ANSWER Statutory voting What market refers to the trading of exchange-listed securities in the over-the- counter market? These trades allow institutional investors to trade blocks of securities directly, rather than through an exchange, providing liquidity and anonymity to buyers. - CORRECT ANSWER Third market An investor sells a naked call on Omikron for a $250 premium. What is true regarding the investors position? - CORRECT ANSWER The investor's potential loss is unlimited Which act created the SEC and empowered it with broad authority over all aspects of the securities industry? - CORRECT ANSWER Securities Exchange Act of 1934 A free tool provided by FINRA that is intended to help consumers research the professional backgrounds of brokers and brokerage firms, as well as investment advisor firms and advisors? - CORRECT ANSWER BrokerCheck The Federal Reserve Board performs what actions? - CORRECT ANSWER It sets monetary policy, but does not set tax policy An offering of shares to existing stockholders on a pro-rata basis is called a - CORRECT ANSWER Rights offering The difference between a bond's price and the conversion parity price is referred to as - CORRECT ANSWER conversion premium An individual who meets what criteria must register as an investment adviser? - CORRECT ANSWER The individual provides advice or analyses concerning securities The individual is in the business of providing investment advice The individual provides investment advice for compensation A type of preferred stock that gives the investor the right to receive dividends equal to the normally specified rate, as well as an additional dividend based on a specific predetermined condition is called a - CORRECT ANSWER participating preferred stock Profit sharing plans have what characteristic? - CORRECT ANSWER they can be invested entirely in company stock What is true regarding the Central Registration Depository (CRD)? - CORRECT ANSWER It was developed by NASAA and the NASD It consolidated a multiple paper-based state licensing and regulatory process into a single, nationwide computer system Its computerized database contains the licensing and disciplinary histories on more than 650,000 securities professionals and 5,200 securities firms Who is responsible for maintaining fair and orderly markets for an assigned set of listed firms? They operate both manually and electronically to facilitate price discovery during market opens, closes, and during periods of trading imbalances and instability. - CORRECT ANSWER Designated Market Makers If real GDP declined the last 3 quarters, how many more consecutive quarters of decline would be needed to be classified as an economic depression? - CORRECT ANSWER 3 quarters What is a correct reason to purchase a particular investment for a client's portfolio? - CORRECT ANSWER Blue chip common stocks because they provide a hedge against inflation An unconditional promise to pay a sum of money to a payee, either at a fixed or determinable future time, under specific terms is called a - CORRECT ANSWER Promissory note A trade surplus results from - CORRECT ANSWER a country exporting more than it imports William, age 56, recently retired from Epsilon Inc., and would like to take a distribution from a retirement plan to pay for medical expenses. What plan would allow William to take a penalty free withdrawal? - CORRECT ANSWER 401(k) from Epsilon Inc Match the state of the business cycle with the description that follows for questions 19-22 A. Trough B. Expansion C. Contraction D. Peak _______ Recession - CORRECT ANSWER contraction _________ Utilization at its lowest level - CORRECT ANSWER Trough _______ Recovery - CORRECT ANSWER Expansion ________ GDP at its highest point - CORRECT ANSWER Peak All are characteristics of a REIT EXCEPT - CORRECT ANSWER it is a publicly traded open-end investment company (it is closed-end) What can an investor sign which allows him or her to receive breakpoint discounts based upon a commitment to buy a specified number of mutual fund shares over a period of time, usually 13 months - CORRECT ANSWER Letter of intent What is a type of exchange rate system in which a country ties its currency to a basket of other currencies or to another measure of value, such as gold? - CORRECT ANSWER Fixed exchange rate system What will result if money distributed from a 529 plan is not used to pay for qualifying education expenses? - CORRECT ANSWER The gain is taxed as ordinary income, and a 10% penalty is applied In addition to the federal securities laws, each state has its own set of securities laws, commonly referred to as ______, which are designed to protect investors against fraudulent sales practices and activities - CORRECT ANSWER Blue Sky Laws What passes capital gains, dividends, and interest earned on fund investments directly to shareholders so that it is taxed only at the personal level, and double taxation is avoided? - CORRECT ANSWER Regulated investment company In any single life private annuity transaction, if the seller outlives his or her actuarial life expectancy, the purchaser will have paid _______ for the property. If the seller does not outlive his or her actuarial life expectancy, the _________ will have made a good financial deal. - CORRECT ANSWER too much; purchaser How is the net asset value (NAV) of a mutual fund calculated? - CORRECT ANSWER NAV=(Total value of investment - liabilities) / shares outstanding The statement of cash flows is separated into what categories? - CORRECT ANSWER cash flow from financing activities cash flow from investing activities cash flow from operating activities Common stock is referred to as _______ because the owner of the stock is also an owner of the corporation and may participate in its capital and income growth - CORRECT ANSWER equity What is considered a hybrid security? - CORRECT ANSWER Preferred stock (it has both common stock and fixed-income investments) What occurs when the supply of goods and services exceeds their demand? - CORRECT ANSWER deflation An IRA must be created and funded by ________ of the calendar year following the year in which the contribution applies. - CORRECT ANSWER April 15 What calculates the required amount of an employer's annual contribution to a defined benefit plan to ensure that current and future plan benefits are available to the participants? - CORRECT ANSWER Actuary The Bank Secrecy Act of 1970 requires financial institutions to assist US government agencies in detecting and preventing money laundering by filing reports of cash transactions exceeding what daily amount? - CORRECT ANSWER $10,000 A fixed income security is subject to what risks? - CORRECT ANSWER Exchange rate risk purchasing power risk default risk liquidity risk reinvestment risk Diversification smooths price volatility, historical above-inflation return, can preserve purchasing power in a portfolio - CORRECT ANSWER Mutual Fund Liquid, easily converted to cash, low default risk, low real return - CORRECT ANSWER Money market fund Fixed return, may lose value if not held until maturity, fixed interest payments - CORRECT ANSWER corporate bond Not liquid, generally adequate inflation hedge - CORRECT ANSWER Real estate Used to generate income and growth, marketable, historical above-inflation return, can preserve purchasing power in a portfolio - CORRECT ANSWER common stock Rob owns 200 shares of Epsilon stock, which recently announced that it will pay a 4% stock dividend. How many shares will Rob have after the dividend has been paid? - CORRECT ANSWER 208 shares (200 * 4%) = 8 200+8 = 208 All but which of the following are correct regarding stock market benchmarks and indexes? - CORRECT ANSWER the S&P 500 is a price-weighted index (The NASDAQ Composite, Russell 2000, S&P 500, and the Wilshire 5000 are all value-weighted indexes) An unconditional contract between a bond issuer and a bond holder that specifies the terms of the bond is called a - CORRECT ANSWER indenture What is true regarding the capital structure of open-end mutual funds? - CORRECT ANSWER open-end mutual funds issue new shares and redeem existing shares from shareholders What refers to sing property to secure payment of a loan, which includes mortgages, pledges, and putting up collateral, but the borrower retains possession? - CORRECT ANSWER Hypothecate What is correct regarding Coverdell Education Savings Accounts (ESAs)? - CORRECT ANSWER private elementary school expenses are permitted to be paid from an ESA The standard expiration period for a put or call option is _____. Long-term equity anticipation securities (LEAPS) have an expiration period________ - CORRECT ANSWER 9 months, longer than 1 year A large interest rate change has the most significant effect on a _______ bond - CORRECT ANSWER low coupon What is true regarding the Federal Reserve? - CORRECT ANSWER It derives its authority from Congress It operates and oversees the US payment system It supervises and regulates banks A mutual fund that invests in securities both inside and outside the US is known as - CORRECT ANSWER Global fund