SIE Final EXAM QUESTION AND ANSWERS GRADE A SOLUTIONS

Which of the following is TRUE regarding Traditional IRAs? [A]Money contributed to a Traditional IRA is always after-tax.[B]Beginning date for first required minimum distributions (RMDs) is April 1st of the year following the calendar year in which the owner reaches age 72. [C]Money that is paid out of a Traditional IRA is tax-free to the owner.[D]Individuals are only permitted to start saving using a Traditional IRA after they have attained the age of 59 1/2 under current regulations. B) Under IRS Regulations for Traditional IRAs, Required Minimum Distributions (RMDs) must begin by April 1st of the year following the calendar year in which the account holder reaches age 72. A person wishing to open a Traditional IRA does NOT need to be 59 1/2, though that is the earliest that a person can take distributions from the Traditional IRA without penalty with a few exceptions. An investor who contributes to a Traditional IRA does so on a pre-tax basis, receiving a deduction from earned income in the year that the contribution was made and thus reducing his income for that year, lowering his tax burden while working. All money that is paid out of a Traditional IRA is taxable at the investor's ordinary income tax rate and would not be tax-free. An exchange privilege in a mutual fund means the investor can [A]switch from an open-end company to closed-end company.[B]exchange shares of one mutual fund for those of another.[C]convert short-term capital gains into long-term capital gains.[D]exchange dividends for capital gains. B) The conversion or switching privilege allows investors to exchange shares of one fund for those of another fund within the same family of funds at the fund's net asset value (no sales load is charged). When disciplinary action is taken against a broker-dealer, final authority is in the hands of the [A]SEC - Securities Exchange Commission [B]FINRA- Financial Industry Regulatory Association [C]State Administrator in the state where the violation occurred [D]Broker-dealers supervisory committee A) All disciplinary actions taken by SRO's are subject to SEC review and the SEC has final authority over disciplinary events. The following are all characteristics of variable annuities EXCEPT: [A]The investment portfolio contains insurance protections against losses. [B]The holders may vote to change investment objectives. [C]The portfolio is professionally managed. [D]The portfolio may contain mutual fund shares. A) Holders of variable annuity contracts have investment risk. The investment portfolio is not insured against losses. All of the following are true of a corporate bond with a call feature EXCEPT: [A]Interest payments cease after the bond is called. [B]It limits the upside potential on the bond. [C]If the bond has a call premium, it normally declines in later years.[D]The bond will be sold for a higher price because of the call feature. D) Call features are less desirable to the investor so the bonds usually sell for a lower price. Regulation T Settlement for corporate securities such as common stocks, preferred stocks, and bonds is: [A]Trade date plus 2 business days [B]Trade date plus 3 business days [C]Trade date plus 4 business days [D]Trade date plus 5 business days C) Reg T Settlement is trade date plus four business days, or T+4. Regular way settlement is T+2. When determining position limits an investor that is short XYZ calls would be affected by which of the following? [A]Short XYZ puts [B]Long XYZ calls [C]Long XYZ puts [D]Long XYZ shares C) The position limits apply to options which are on the "same side of the market". Short calls are on the same side of the market as long puts. A wife owns a small business and has net income of $100,000 for the year. Her husband was hired by her as an accountant for her business and was paid $30,000. Which of the following is true concerning the amount that can be contributed to an IRA by the wife and/or husband? [A]The wife can contribute 20% of her earned income to an IRA.[B]The husband and wife can each contribute 20% of their earned income to an IRA. [C]The wife could only contribute $2,500 to her account and $2,500 to her husband's account. [D]Each or either can deposit $6,000 into their own IRA. D) The IRS allows a maximum of $6,000 to be deposited into each of their IRA accounts in 2020. The contribution maximum is unchanged from 2019. The ratio at which one country's currency can be converted into another country's currency is known as the: [A]Federal funds rate [B]Deficit rate [C]European currency rate [D]Exchange rate D) The Exchange rate is the ratio at which one country's currency can be converted into another country's currency. It is determined by the intervention of central banks and general market forces. Which regulator determines which securities can be purchased on margin when the securities are non-exempt securities trading on the OTC market? [A]FINRA - Financial Industry Regulatory Authority [B]FRB - Federal Reserve Board [C]SEC - Securities Exchange Commission [D]SIA - Securities Industry Association B) The Federal Reserve Board determines which securities can be purchase on margin when the securities are non-exempt OTC securities. Exchange traded securities are determined by the exchange on which they trade. Harvey had his registration revoked last year. If he wants to re-join the securities industry as a licensed person, who can approve it? [A]FINRA [B]The SEC [C]The member firm's executive committee by unanimous vote only [D]The U.S. Justice Department B) If a registration is revoked, the individual cannot be licensed again unless approved by the SEC. How often must a member firm send a customer an account statement showing the cash and securities positions in the account if there is no activity in the account? [A]Monthly [B]Quarterly [C]Semi-annually [D]Annually B) According to FINRA Rule 2231 (previously 2340), regardless if there is trading activity in a customer's account, statements must be sent to customers at least QUARTERLY. A customer enters an order to Buy 100 shares of ABC @49 stop. This order will be activated by which of the following? [A]a trade executed at $49 or higher [B]a trade executed at $49 or lower [C]Buy stop orders are not allowed [D]Buy stop orders are executed as soon as they reach the floor of the exchange A) Buy stop orders are always entered ABOVE the current market price of the stock and will become a MARKET order as soon as a trade is executed at $49 or higher. Buy stops are used to protect short stock positions and to take advantage of an upward break in the resistance level of a stock. The "spread" in an over-the-counter trade is [A]the difference between today's closing bid and yesterday's closing bid. [B]the difference between today's closing ask and yesterday's closing ask. [C]the difference between the current bid and ask prices. [D]the difference between the amount paid for the security by the dealer and the amount for which the security is sold by the dealer. CONTINUED.....