SIE - TEST, MULTIPLE CHOICE WITH
EXPLANATIONS- QUESTIONS WITH
COMPLETE ANSWERS
Investor A holds 100 shares of Company XYZ in his personal brokerage account. He
decides to sell these shares for a profit. This transaction will take place on the: -
ANSWER -Secondary market
Explanation:
The secondary market is what most people know as the "stock market." It facilitates
transactions in existing securities that are not sold directly by the issuer. Investors
purchase these securities from other investors through accounts held by brokerage
firms like Fidelity or Charles Schwab.
The term 'disclaimer' is most often associated with - ANSWER -The fact that the
government cannot guarantee the accuracy of the information in a prospectus
Explanation:
The SEC reviews the information in a registration statement, it does not approve or
disapprove of the information, nor does it guarantee the accuracy of the information
disclosures. Therefore no sales agent can say to a prospect that these are 'government
approved' securities.
SIPC, the securities investor protection corporation is:
A. An insurance entity which protects investors investments again market losses up to
$500,000
B. An insurance entity which protects investors who are sold worthless securities
C. A Congressional guarantee against losses in the securities markets
D. None of the above - ANSWER -D. None of the above
Explanation:
SIPC was set up to protect customer ACCOUNTS in the event of a broker-dealer
bankruptcy, not protect investments against loss. Be careful of the wording in this
question. Cash & securities in customer accounts are 'insured' up to $500,000 in the
event the B/D goes bankrupt and the cash and securities can't be located and properly
returned to the customer.
In most cases, Federal Securities Laws:
A. Supersede State securities laws
B. Are subordinate to State securities laws
C. Are given the same weight as State securities laws
,D. None of the above - ANSWER -A. Supersede State securities laws
Explanation:
Federal securities laws typically supersede State laws.
Which of the following are not considered money market securities?
A. T-bills
B. Commercial Paper
C. Reverse Repos
D. ADRs - ANSWER -D. ADRs
Explanation:
Since the 'money market' includes short term debt instruments only, and since ADRs
represent ownership (equity) in foreign stocks, ADRs are not debt.
NYSE-listed stock transactions generally take place on the floor of the NYSE. However,
when they occur off the floor, this is referred to as a: - ANSWER -Third-market
transaction
Explanation:
Brokerage firms often transact in exchange-listed securities directly with their
institutional customers, without the involvement of a formal exchange. This is known as
a third-market transaction and is often done for trading efficiency, better execution,
and/or better price, though the transaction is still reported to the NYSE ticker tape as
promptly as if it had taken place on the floor.
When investment securities are referred to as exempt, this generally refers to
exemption from what? - ANSWER -SEC registration
Explanation:
Securities such as U.S. Government bonds and bonds issued by states, counties, and
cities, otherwise called municipal bonds, do not have to be registered with the Securities
& Exchange Commission (SEC). They are thus referred to as exempt securities.
Hedge funds and mutual funds are two examples of which type of investor? - ANSWER
-Institutional investors
Explanation:
institutional investors are large investors that are considered sophisticated enough to
make their own investment decisions. They can only be legal entities, such as real
estate investment trusts, venture capital funds, insurance companies, credit unions,
banks, pension funds, hedge funds, and mutual funds.
When a corporation goes public, it is issuing:
,A. Common stock
B. Preferred stock
C. Convertible bonds
D. Any of the above - ANSWER -A. Common stock
Explanation:
Going public means sharing equity ownership (common stock) with public investors, for
the first time (Initial public offering, IPO).
The term 'issuer' most often refers to:
A. A corporation seeking to raise additional capital for expansion or modernization
purposes
B. A business which prints up securities certificates such as bonds and stocks
C. A business which has satisfied the listing requirements of one or more approved
stock exchanges
D. A business, a municipality, or a federal governmental entity which is seeking to raise
capital from the sale of securities. - ANSWER -D. A business, a municipality, or a
federal governmental entity which is seeking to raise capital from the sale of securities.
Explanation:
Whether one considers answers A, B, or C partially accurate, the last answer, D is the
most complete therefore best answer.
Every publicly-traded corporation is required to have a transfer agent and a registrar.
The primary distinction between the two is:
A. They are not different --- they perform the same function
B. The registrar keeps the record of all stock and bond holders
C. The transfer agent transmits the payment for securities from the purchaser to the
seller in all secondary market trades.
D. The transfer agent ensures that dividend payments go out to all registered owners of
record on the payable date. - ANSWER -D. The transfer agent ensures that dividend
payments go out to all registered owners of record on the payable date.
Explanation:
This is one of the functions of a Transfer Agent. Registrars make sure that a company
does not issue more shares than authorized in the Charter.
One of the more attractive features of common stock is that:
A. One cannot lose more than one's investment
B. The stockholders have the right to vote on quarterly dividends
C. The stockholders have the right to choose Officers
D. Any of the above - ANSWER -A. One cannot lose more than one's investment
, Explanation:
You cannot lose more than you've put at risk. A common stockholder cannot be held
liable for any debts of the corporation, therefore they have limited liability.
When the market price of a company's common stock has reached triple digits ($100 or
above), the Board of Directors may elect to declare which of the below to make the
shares more affordable?
A. Reverse stock split
B. A stock split
C. A stock dividend
D. Any of the above - ANSWER -B. A stock split
Explanation:
Splitting a stock provides each shareholder with more shares and the CMV (current
market value) of the stock will decline proportionately. Because of the reduced price in
the market, it becomes more 'affordable.'
When a corporate Board announces a 10% stock dividend, shareholders know they will
be receiving:
A. more shares
B. money
C. both of the above
D. neither of the above - ANSWER -A. more shares
Explanation:
Stock dividends are not Cash dividends - they are dividends in the form of additional
shares.
Boards of Directors in the publicly-traded sphere are elected by corporate stockholders,
using which of the following methods?
A. statutory voting
B. regular voting
C. cumulative voting
D. any of the above are possible voting procedures - ANSWER -D. any of the above are
possible voting procedures
Explanation:
All three are correct - in fact, Regular and Statutory are the same.
Call option contracts are considered to have intrinsic value:
A. when CMV exceeds exercise price
B. when exercise price exceeds CMV
EXPLANATIONS- QUESTIONS WITH
COMPLETE ANSWERS
Investor A holds 100 shares of Company XYZ in his personal brokerage account. He
decides to sell these shares for a profit. This transaction will take place on the: -
ANSWER -Secondary market
Explanation:
The secondary market is what most people know as the "stock market." It facilitates
transactions in existing securities that are not sold directly by the issuer. Investors
purchase these securities from other investors through accounts held by brokerage
firms like Fidelity or Charles Schwab.
The term 'disclaimer' is most often associated with - ANSWER -The fact that the
government cannot guarantee the accuracy of the information in a prospectus
Explanation:
The SEC reviews the information in a registration statement, it does not approve or
disapprove of the information, nor does it guarantee the accuracy of the information
disclosures. Therefore no sales agent can say to a prospect that these are 'government
approved' securities.
SIPC, the securities investor protection corporation is:
A. An insurance entity which protects investors investments again market losses up to
$500,000
B. An insurance entity which protects investors who are sold worthless securities
C. A Congressional guarantee against losses in the securities markets
D. None of the above - ANSWER -D. None of the above
Explanation:
SIPC was set up to protect customer ACCOUNTS in the event of a broker-dealer
bankruptcy, not protect investments against loss. Be careful of the wording in this
question. Cash & securities in customer accounts are 'insured' up to $500,000 in the
event the B/D goes bankrupt and the cash and securities can't be located and properly
returned to the customer.
In most cases, Federal Securities Laws:
A. Supersede State securities laws
B. Are subordinate to State securities laws
C. Are given the same weight as State securities laws
,D. None of the above - ANSWER -A. Supersede State securities laws
Explanation:
Federal securities laws typically supersede State laws.
Which of the following are not considered money market securities?
A. T-bills
B. Commercial Paper
C. Reverse Repos
D. ADRs - ANSWER -D. ADRs
Explanation:
Since the 'money market' includes short term debt instruments only, and since ADRs
represent ownership (equity) in foreign stocks, ADRs are not debt.
NYSE-listed stock transactions generally take place on the floor of the NYSE. However,
when they occur off the floor, this is referred to as a: - ANSWER -Third-market
transaction
Explanation:
Brokerage firms often transact in exchange-listed securities directly with their
institutional customers, without the involvement of a formal exchange. This is known as
a third-market transaction and is often done for trading efficiency, better execution,
and/or better price, though the transaction is still reported to the NYSE ticker tape as
promptly as if it had taken place on the floor.
When investment securities are referred to as exempt, this generally refers to
exemption from what? - ANSWER -SEC registration
Explanation:
Securities such as U.S. Government bonds and bonds issued by states, counties, and
cities, otherwise called municipal bonds, do not have to be registered with the Securities
& Exchange Commission (SEC). They are thus referred to as exempt securities.
Hedge funds and mutual funds are two examples of which type of investor? - ANSWER
-Institutional investors
Explanation:
institutional investors are large investors that are considered sophisticated enough to
make their own investment decisions. They can only be legal entities, such as real
estate investment trusts, venture capital funds, insurance companies, credit unions,
banks, pension funds, hedge funds, and mutual funds.
When a corporation goes public, it is issuing:
,A. Common stock
B. Preferred stock
C. Convertible bonds
D. Any of the above - ANSWER -A. Common stock
Explanation:
Going public means sharing equity ownership (common stock) with public investors, for
the first time (Initial public offering, IPO).
The term 'issuer' most often refers to:
A. A corporation seeking to raise additional capital for expansion or modernization
purposes
B. A business which prints up securities certificates such as bonds and stocks
C. A business which has satisfied the listing requirements of one or more approved
stock exchanges
D. A business, a municipality, or a federal governmental entity which is seeking to raise
capital from the sale of securities. - ANSWER -D. A business, a municipality, or a
federal governmental entity which is seeking to raise capital from the sale of securities.
Explanation:
Whether one considers answers A, B, or C partially accurate, the last answer, D is the
most complete therefore best answer.
Every publicly-traded corporation is required to have a transfer agent and a registrar.
The primary distinction between the two is:
A. They are not different --- they perform the same function
B. The registrar keeps the record of all stock and bond holders
C. The transfer agent transmits the payment for securities from the purchaser to the
seller in all secondary market trades.
D. The transfer agent ensures that dividend payments go out to all registered owners of
record on the payable date. - ANSWER -D. The transfer agent ensures that dividend
payments go out to all registered owners of record on the payable date.
Explanation:
This is one of the functions of a Transfer Agent. Registrars make sure that a company
does not issue more shares than authorized in the Charter.
One of the more attractive features of common stock is that:
A. One cannot lose more than one's investment
B. The stockholders have the right to vote on quarterly dividends
C. The stockholders have the right to choose Officers
D. Any of the above - ANSWER -A. One cannot lose more than one's investment
, Explanation:
You cannot lose more than you've put at risk. A common stockholder cannot be held
liable for any debts of the corporation, therefore they have limited liability.
When the market price of a company's common stock has reached triple digits ($100 or
above), the Board of Directors may elect to declare which of the below to make the
shares more affordable?
A. Reverse stock split
B. A stock split
C. A stock dividend
D. Any of the above - ANSWER -B. A stock split
Explanation:
Splitting a stock provides each shareholder with more shares and the CMV (current
market value) of the stock will decline proportionately. Because of the reduced price in
the market, it becomes more 'affordable.'
When a corporate Board announces a 10% stock dividend, shareholders know they will
be receiving:
A. more shares
B. money
C. both of the above
D. neither of the above - ANSWER -A. more shares
Explanation:
Stock dividends are not Cash dividends - they are dividends in the form of additional
shares.
Boards of Directors in the publicly-traded sphere are elected by corporate stockholders,
using which of the following methods?
A. statutory voting
B. regular voting
C. cumulative voting
D. any of the above are possible voting procedures - ANSWER -D. any of the above are
possible voting procedures
Explanation:
All three are correct - in fact, Regular and Statutory are the same.
Call option contracts are considered to have intrinsic value:
A. when CMV exceeds exercise price
B. when exercise price exceeds CMV
