SIE Exam 4: Questions & Answers: SIE Exam 4 Study Guide: Updated Solution

What is a stock power? (Ans- It is a document that's used to transfer delivery of a security from a seller to a buyer. The stock power is used when a seller wants to safeguard a security in the mail. The stock is sent in one envelope, while the signed stock power is sent in another. A company has conducted a spin-off of a division which has begun independently trading. The physical shares of the spin-off are not yet available for delivery. The new company: (Ans- The spin-off will trade as a when-issued security and settle after the shares become available for delivery. What is an advantage of a UIT compared to a managed mutual fund? (Ans- Since unit investment trusts (UITs) have fixed portfolios with no manager, they have no management fee. Therefore, UITs have lower operating costs than most mutual funds. Both UITs and mutual funds issue redeemable securities and are registered with the SEC under the Securities Act of 1933 and the Investment Company Act of 1940.Philip is considering the use of sector rotation as a strategy for his portfolio. Which of the following statements best describes how Philip's portfolio would be managed after implementation of this strategy? (Ans- Shifting investments from one business sector to another is known as sector rotation. As the economic cycle changes, different business sectors will be affected. Some sectors will outperform, based on the change in economic activity, while others will not. The strategy is used to attempt to profit through timing from a particular economic cycle. Based on the reading of the economy and its future direction, a portfolio will be shifted into different sectors in anticipation of a particular sector outperforming the others at that point in the business cycle