SIE exam caril |288 Questions with
Solutions
What type of risk is unique to a specific industry, business enterprise, or investment
type? - correct answersNonsystematic risk
Under which of the following circumstances is an investor in a position to acquire stock?
- correct answersBuy a call, sell a call (The holder of a call has the right to buy stock at
the strike price if exercised. The seller of a put is obligated to buy stock at the strike
price if exercised)
Options- a premium - correct answersthe cost of an option contract, expressed in
dollars per share of the underlying stock
Options- strike price - correct answersThe price at which the stock will be bought or sold
if the contract is exercised, expressed in dollars per share
A customer believes that ABC's price will go up but does not have the money to buy 100
shares right now. How could the customer use options to profit from an increase in the
stock's price? - correct answersbuy calls, write puts (both are bullish)
A corporation's offer to current stockholders of the ability to purchase a proportionate
number of new shares at a specific price for a limited time is called a - correct
answersright (they usually expire in 30-45 days)
American depositary receipts (ADRs) - correct answersissued by banks, represent a
specific number of shares of a foreign company, and trade and pay dividends in dollars
Which of the following records must be maintained for 6 years? - correct
answersCustomer ledgers (statements)
While underwriters can assist with preparation and filing, the accuracy and adequacy of
these documents is the responsibility of the - correct answersIssuing corporation
What institutions serve as depository and clearing facilities? - correct
answersDepository Trust Company and National Securities Clearing Corporation (most
specifically) then carrying and clearing firms can act as these as well.
What is a transfer agent? - correct answers(often a bank) for a corporation is
responsible for ensuring that its securities are issued in the correct owner's name,
,canceling old and issuing new certificates, maintaining records of ownership, and
handling problems relating to lost, stolen, or destroyed certificates
What is the function of the clearing corporation? - correct answersActing as an
intermediary in a trade, examples of these can be a commercial bank, can be a broker-
dealer but doesn't have to be
Who is considered a control person (security) - correct answersthose owned by
directors, officers, or persons (which include corporations, trusts, etc.) who own or
control 10% or more of the issuer's equity securities (an unaffiliated person would have
to own 10% or more of the outstanding shares)
What are the two components of Return on Investment? - correct answersCapital gains
and income
To expand the overall economy, we want to - correct answersbuy securities via open-
market operations, pushing interest rates down
To meet a Regulation T margin call, a customer would have how long? - correct
answerssettlement plus 2 additional business days (or S + 2)
What is A fully disclosed broker-dealer - correct answersone that introduces its business
to a carrying firm to clear transactions
The regulation enacted by the SEC to protect the privacy of customer information is
known as - correct answersRegulation S-P
A market maker that does not honor its firm quote is said to be - correct
answers"backing away"
A deficit in the U.S. balance of payments can occur if - correct answersinterest rates in
foreign countries are higher than U.S. domestic rates and U.S. consumers are
purchasing (importing) foreign goods
The general partner of a limited partnership has responsibility of - correct
answersOrganizing and managing the partnership, assumes unlimited liability, and is
responsible for paying all partnership debts
To grow or expand the economy, U.S. fiscal policy should be to - correct answerscut
taxes (so consumers have more money to spend) and increase government spending
for programs and development (to create more jobs)
What is the federal funds rate - correct answersthe rate commercial money center
banks charge each other for an overnight, unsecured loan
, The Federal Open Market Committee (FOMC) - correct answersbuy or sell Treasury
securities in the open market. Purchases add money to the economy, making the
money available to lend more plentiful, and sales take money out of the economy,
making money available to lend less plentiful.
Reports of rising inventories generally occur during which period of the business cycle?
- correct answersContraction, due to a lack of consumer demand
Who is exempt from registering with SIPC? - correct answersThose who deal
exclusively with US Government securities (i.e.-Treasury bonds), exclusively
municipality securities, and in redeemable investment company securities
Retail investor - correct answersAn individual who makes investments such as the
purchase of securities for his or her account rather than for an organization
Market maker - correct answersAny entity, individual or organization, willing to accept
the risk of holding a particular security in its own account to facilitate trading and provide
liquidity in that security
When the Federal Reserve Board wants to expand (loosen) the money supply, it will -
correct answersbuy Treasury securities from banks in the open market
SROs functioning under the SEC include... - correct answersFINRA, MSRB and CBOE
Mild inflation can - correct answersencourage growth and stimulate the economy
Discount rate - correct answersThe rate the FRB charges member banks
Prime rate - correct answersThe rate commercial banks (Wells Fargo) charges their
most creditworthy investors (Lincoln Financial). Prime rate decreases when banks sell
securities because there's money money in the market and don't need to charge as
much. Raise the rate when they buy securities.
4 stages of the business cycle - correct answersexpansion (recovery), peak (prosperity),
contraction (decline), trough, and then expansion (recovery) again
Securities Act of 1933 - correct answers(The Paper Act, Prospectus Act, New Issues
Act) requires that issuers who want to raise capital by making a public offering of
securities to the public, provide full and fair disclosure of all material facts about the
company and the securities being offered.
To contract or slow economic growth U.S. fiscal policy should be to - correct
answersraise taxes and cut government spending for programs and development
Solutions
What type of risk is unique to a specific industry, business enterprise, or investment
type? - correct answersNonsystematic risk
Under which of the following circumstances is an investor in a position to acquire stock?
- correct answersBuy a call, sell a call (The holder of a call has the right to buy stock at
the strike price if exercised. The seller of a put is obligated to buy stock at the strike
price if exercised)
Options- a premium - correct answersthe cost of an option contract, expressed in
dollars per share of the underlying stock
Options- strike price - correct answersThe price at which the stock will be bought or sold
if the contract is exercised, expressed in dollars per share
A customer believes that ABC's price will go up but does not have the money to buy 100
shares right now. How could the customer use options to profit from an increase in the
stock's price? - correct answersbuy calls, write puts (both are bullish)
A corporation's offer to current stockholders of the ability to purchase a proportionate
number of new shares at a specific price for a limited time is called a - correct
answersright (they usually expire in 30-45 days)
American depositary receipts (ADRs) - correct answersissued by banks, represent a
specific number of shares of a foreign company, and trade and pay dividends in dollars
Which of the following records must be maintained for 6 years? - correct
answersCustomer ledgers (statements)
While underwriters can assist with preparation and filing, the accuracy and adequacy of
these documents is the responsibility of the - correct answersIssuing corporation
What institutions serve as depository and clearing facilities? - correct
answersDepository Trust Company and National Securities Clearing Corporation (most
specifically) then carrying and clearing firms can act as these as well.
What is a transfer agent? - correct answers(often a bank) for a corporation is
responsible for ensuring that its securities are issued in the correct owner's name,
,canceling old and issuing new certificates, maintaining records of ownership, and
handling problems relating to lost, stolen, or destroyed certificates
What is the function of the clearing corporation? - correct answersActing as an
intermediary in a trade, examples of these can be a commercial bank, can be a broker-
dealer but doesn't have to be
Who is considered a control person (security) - correct answersthose owned by
directors, officers, or persons (which include corporations, trusts, etc.) who own or
control 10% or more of the issuer's equity securities (an unaffiliated person would have
to own 10% or more of the outstanding shares)
What are the two components of Return on Investment? - correct answersCapital gains
and income
To expand the overall economy, we want to - correct answersbuy securities via open-
market operations, pushing interest rates down
To meet a Regulation T margin call, a customer would have how long? - correct
answerssettlement plus 2 additional business days (or S + 2)
What is A fully disclosed broker-dealer - correct answersone that introduces its business
to a carrying firm to clear transactions
The regulation enacted by the SEC to protect the privacy of customer information is
known as - correct answersRegulation S-P
A market maker that does not honor its firm quote is said to be - correct
answers"backing away"
A deficit in the U.S. balance of payments can occur if - correct answersinterest rates in
foreign countries are higher than U.S. domestic rates and U.S. consumers are
purchasing (importing) foreign goods
The general partner of a limited partnership has responsibility of - correct
answersOrganizing and managing the partnership, assumes unlimited liability, and is
responsible for paying all partnership debts
To grow or expand the economy, U.S. fiscal policy should be to - correct answerscut
taxes (so consumers have more money to spend) and increase government spending
for programs and development (to create more jobs)
What is the federal funds rate - correct answersthe rate commercial money center
banks charge each other for an overnight, unsecured loan
, The Federal Open Market Committee (FOMC) - correct answersbuy or sell Treasury
securities in the open market. Purchases add money to the economy, making the
money available to lend more plentiful, and sales take money out of the economy,
making money available to lend less plentiful.
Reports of rising inventories generally occur during which period of the business cycle?
- correct answersContraction, due to a lack of consumer demand
Who is exempt from registering with SIPC? - correct answersThose who deal
exclusively with US Government securities (i.e.-Treasury bonds), exclusively
municipality securities, and in redeemable investment company securities
Retail investor - correct answersAn individual who makes investments such as the
purchase of securities for his or her account rather than for an organization
Market maker - correct answersAny entity, individual or organization, willing to accept
the risk of holding a particular security in its own account to facilitate trading and provide
liquidity in that security
When the Federal Reserve Board wants to expand (loosen) the money supply, it will -
correct answersbuy Treasury securities from banks in the open market
SROs functioning under the SEC include... - correct answersFINRA, MSRB and CBOE
Mild inflation can - correct answersencourage growth and stimulate the economy
Discount rate - correct answersThe rate the FRB charges member banks
Prime rate - correct answersThe rate commercial banks (Wells Fargo) charges their
most creditworthy investors (Lincoln Financial). Prime rate decreases when banks sell
securities because there's money money in the market and don't need to charge as
much. Raise the rate when they buy securities.
4 stages of the business cycle - correct answersexpansion (recovery), peak (prosperity),
contraction (decline), trough, and then expansion (recovery) again
Securities Act of 1933 - correct answers(The Paper Act, Prospectus Act, New Issues
Act) requires that issuers who want to raise capital by making a public offering of
securities to the public, provide full and fair disclosure of all material facts about the
company and the securities being offered.
To contract or slow economic growth U.S. fiscal policy should be to - correct
answersraise taxes and cut government spending for programs and development
