SIE Practice Study Guide Exam 3
Correctly Solved.
All but which of the following statements are correct regarding bonds and preferred stock?
A. If a company declares bankruptcy, bondholders are repaid before preferred stock
shareholders.
B. Preferred stocks pay dividends; bonds pay interest.
C. Bonds are subject to greater interest rate risk than preferred stock.
D. Neither bond interest nor preferred stock dividends qualify for capital gains treatment. -
Answer C
Which of the following is correct regarding a pre-emptive right?
A. It is also referred to as a "subscription right" or a "subscription privilege."
B. It is an obligation for existing shareholders to purchase new shares of stock before they are
offered to the public.
C. Exercising a pre-emptive right can cause dilution.
D. All of the above are correct. - Answer A
Which of the following is a characteristic of American Depository Receipts (ADRs)?
A. ADRs trade once per day like mutual funds.
B. ADR holders receive foreign tax credits for income tax paid to a foreign country.
C. ADR dividends are declared in U.S. dollars.
D. ADRs allow domestic securities to be traded in foreign countries. - Answer B
Which of the following is the measure of a company's earnings per share if all convertible
securities were exercised and converted to common stock?
A. Converted earnings per share
B. Conversion ratio per share
C. Diluted earnings per share
D. Price/earnings per share - Answer C
,Which of the following is the voice of state securities agencies responsible for efficient capital
formation and grass-roots investor protection in the U.S.? Their fundamental mission is to
protect consumers who purchase securities or investment advice, and their jurisdiction extends
to a wide variety of issuers and intermediaries who offer and sell securities to the public.
A. NAIC
B. NASAA
C. NASD
D. SIPC - Answer B
Which of the following is defined as the benefit provided to an asset manager by a broker-
dealer as a result of commissions generated from financial transactions executed by the broker-
dealer?
A. 12b-1 compensation
B. Administrative compensation
C. Hard-dollar compensation
D. Soft-dollar compensation - Answer D
Which of the following is/are correct regarding interest paid from municipal bonds?
(1) Interest paid from municipal bonds is not taxed by the federal government.
(2) Interest paid from municipal bonds is never taxable at the state level.
A. (1) only
B. (2) only
C. Both (1) and (2) are correct.
D. Neither (1) or (2) are correct. - Answer A
All but which of the following are correct regarding investment adviser representatives (IARs)?
A. Every investment advisory firm must have at least one IAR registered to the firm.
B. An IAR can be a dual registrant of multiple firms in some states only.
C. There are currently no continuing education requirements for IARs.
D. An IAR does not need to be registered to an RIA firm in order to conduct investment advisory
business. - Answer D
, Which of the following is an investor protection requirement that obligates a broker-dealer to
exercise reasonable care to execute a customer's order in a way to obtain the most
advantageous terms for the customer?
A. Best execution
B. Price execution
C. Price improvement
D. Prudent man rule - Answer A
A health savings account (HSA) allows the account holder to set aside money on a/an
__________ basis to pay for __________ medical expenses.
A. after-tax, qualified
B. after-tax, unqualified
C. pre-tax, qualified
D. pre-tax, unqualified - Answer C
Which of the following is the central banking system of the United States?
A. Federal Reserve
B. FOMC
C. U.S. Mint
D. U.S. Treasury - Answer A
If an investor's brokerage firm goes out of business and is a member of the SIPC, then the
investor's cash and securities held by the firm may be protected up to __________, including a
__________ limit for cash.
A. $500,000, $250,000
B. $500,000, $500,000
C. $1,000,000, $250,000
D. $1,000,000, $500,000 - Answer A
All but which of the following are characteristics of defined contribution plans?
A. Employer contributions are defined.
Correctly Solved.
All but which of the following statements are correct regarding bonds and preferred stock?
A. If a company declares bankruptcy, bondholders are repaid before preferred stock
shareholders.
B. Preferred stocks pay dividends; bonds pay interest.
C. Bonds are subject to greater interest rate risk than preferred stock.
D. Neither bond interest nor preferred stock dividends qualify for capital gains treatment. -
Answer C
Which of the following is correct regarding a pre-emptive right?
A. It is also referred to as a "subscription right" or a "subscription privilege."
B. It is an obligation for existing shareholders to purchase new shares of stock before they are
offered to the public.
C. Exercising a pre-emptive right can cause dilution.
D. All of the above are correct. - Answer A
Which of the following is a characteristic of American Depository Receipts (ADRs)?
A. ADRs trade once per day like mutual funds.
B. ADR holders receive foreign tax credits for income tax paid to a foreign country.
C. ADR dividends are declared in U.S. dollars.
D. ADRs allow domestic securities to be traded in foreign countries. - Answer B
Which of the following is the measure of a company's earnings per share if all convertible
securities were exercised and converted to common stock?
A. Converted earnings per share
B. Conversion ratio per share
C. Diluted earnings per share
D. Price/earnings per share - Answer C
,Which of the following is the voice of state securities agencies responsible for efficient capital
formation and grass-roots investor protection in the U.S.? Their fundamental mission is to
protect consumers who purchase securities or investment advice, and their jurisdiction extends
to a wide variety of issuers and intermediaries who offer and sell securities to the public.
A. NAIC
B. NASAA
C. NASD
D. SIPC - Answer B
Which of the following is defined as the benefit provided to an asset manager by a broker-
dealer as a result of commissions generated from financial transactions executed by the broker-
dealer?
A. 12b-1 compensation
B. Administrative compensation
C. Hard-dollar compensation
D. Soft-dollar compensation - Answer D
Which of the following is/are correct regarding interest paid from municipal bonds?
(1) Interest paid from municipal bonds is not taxed by the federal government.
(2) Interest paid from municipal bonds is never taxable at the state level.
A. (1) only
B. (2) only
C. Both (1) and (2) are correct.
D. Neither (1) or (2) are correct. - Answer A
All but which of the following are correct regarding investment adviser representatives (IARs)?
A. Every investment advisory firm must have at least one IAR registered to the firm.
B. An IAR can be a dual registrant of multiple firms in some states only.
C. There are currently no continuing education requirements for IARs.
D. An IAR does not need to be registered to an RIA firm in order to conduct investment advisory
business. - Answer D
, Which of the following is an investor protection requirement that obligates a broker-dealer to
exercise reasonable care to execute a customer's order in a way to obtain the most
advantageous terms for the customer?
A. Best execution
B. Price execution
C. Price improvement
D. Prudent man rule - Answer A
A health savings account (HSA) allows the account holder to set aside money on a/an
__________ basis to pay for __________ medical expenses.
A. after-tax, qualified
B. after-tax, unqualified
C. pre-tax, qualified
D. pre-tax, unqualified - Answer C
Which of the following is the central banking system of the United States?
A. Federal Reserve
B. FOMC
C. U.S. Mint
D. U.S. Treasury - Answer A
If an investor's brokerage firm goes out of business and is a member of the SIPC, then the
investor's cash and securities held by the firm may be protected up to __________, including a
__________ limit for cash.
A. $500,000, $250,000
B. $500,000, $500,000
C. $1,000,000, $250,000
D. $1,000,000, $500,000 - Answer A
All but which of the following are characteristics of defined contribution plans?
A. Employer contributions are defined.
