SIE EXAM PREP | 2025/2026| - 100
COMPREHENSIVE PRACTICE QUESTIONS
WITH FINRA-ALIGNED ANSWERS |
ALREADY GRADED A+ | VERIFIED
ANSWERS & RATIONALES
1. Which of the following is a characteristic of the secondary market?
A) Companies raise capital through initial public offerings
B) Securities are traded between investors
C) Underwriters price new securities
D) The SEC approves new stock issuances
Answer: B - The secondary market is where existing securities are traded between
investors. The primary market is where new securities are issued.
2. The Federal Reserve conducts open market operations by:
A) Setting bank reserve requirements
B) Adjusting the discount rate
C) Buying and selling government securities
D) Regulating margin requirements
Answer: C - Open market operations involve the Fed buying and selling government
securities to influence the money supply and interest rates.
3. Which organization operates the NASDAQ stock exchange?
A) SEC
B) FINRA
C) MSRB
D) Nasdaq, Inc.
Answer: D - Nasdaq, Inc. operates the NASDAQ stock exchange. The SEC regulates
securities markets, FINRA regulates broker-dealers, and MSRB regulates municipal
securities.
Investment Products (44% of exam)
**4. A bond with a 6% coupon and a market price of $900 has a current yield of
approximately:**
A) 5.4%
B) 6.0%
C) 6.67%
D) 7.0%
,**Answer: C** - Current yield = Annual coupon payment / Market price = $60 / $900
= 6.67%.
5. Which of the following is NOT a characteristic of common stock?
A) Voting rights
B) Guaranteed dividends
C) Residual claim on assets
D) Preemptive rights
Answer: B - Common stock dividends are not guaranteed. They are declared by the
board of directors and can be reduced or eliminated.
6. An investor purchasing a call option has:
A) The obligation to buy the underlying asset
B) The right to buy the underlying asset
C) The obligation to sell the underlying asset
D) The right to sell the underlying asset
Answer: B - A call option gives the buyer the RIGHT (not obligation) to BUY the
underlying asset at the strike price.
7. Which type of bond is backed by a specific asset?
A) Debenture
B) Secured bond
C) Subordinated bond
D) Income bond
Answer: B - Secured bonds (also called mortgage bonds) are backed by specific
collateral. Debentures are unsecured.
8. A 529 plan is primarily used for:
A) Retirement savings
B) Healthcare expenses
C) Education expenses
D) Estate planning
Answer: C - 529 plans are tax-advantaged savings plans designed for education
expenses.
9. A mutual fund with an NAV of $20 and offering price of $21.20 is a:
A) No-load fund
B) Closed-end fund
C) Load fund
D) Money market fund
Answer: C - The difference between the offering price and NAV represents a sales
charge (load). Sales charge = ($21.20 - $20) / $21.20 = 5.66%.
10. Which of the following has the LEAST interest rate risk?
A) 30-year Treasury bond
,B) 10-year corporate bond
C) 5-year municipal bond
D) 90-day Treasury bill
Answer: D - Interest rate risk increases with maturity. The 90-day T-bill has the
shortest maturity and therefore the least interest rate risk.
Client Accounts & Regulatory Framework
11. All of the following can purchase an IPO, EXCEPT:
A) The father of a broker-dealer employee
B) The cousin of a broker-dealer employee
C) The grandson of a broker-dealer employee
D) The grandfather of a broker-dealer employee
Answer: B - FINRA rules generally restrict immediate family members (father,
grandfather, grandson) of broker-dealer employees from purchasing IPOs, but more
distant relatives like cousins are not subject to the same restrictions.
12. A corporate bond is quoted at 86 5/8. What is its price?
A) $865.21
B) $866.25
C) $866.86
D) $868.69
Answer: B - A bond quote of 86 5/8 means 86.625% of par. 86.625% x $1,000 =
$866.25.
13. Which type of bond is typically quoted in terms of yield?
A) Municipal G.O. bonds
B) Corporate bonds
C) Municipal "dollar" bonds
D) U.S. Treasury bonds
Answer: A - Municipal general obligation bonds are often quoted on a yield-to-
maturity basis, not as a percentage of par.
14. Which statement related to the relationship between interest rates and
inflation is correct?
A) Interest rates primarily maintain a positive correlation with inflation
B) Interest rates primarily maintain a negative correlation with inflation
C) The relationship between interest rates and inflation cannot be determined
D) Interest rates maintain no correlation with inflation
Answer: A - Higher inflation generally leads to higher interest rates as lenders
demand compensation for the erosion of purchasing power.
15. What statement regarding a registered representative's licenses after they
resign is true?
A) They will lapse after 1 year if they do not re-join the industry
, B) They will lapse after 2 years if they do not re-join the industry
C) The former employer can hold the person's licenses indefinitely
D) They must retake their licensing exams
Answer: B - If a registered representative is not employed by a FINRA member firm
for 2 years, their registrations will lapse.
16. Which of the following tools would NOT be utilized by the Federal Reserve
while implementing monetary policy?
A) Increasing federal budgetary spending
B) Updating reserve requirements for lending institutions
C) Engaging in open market operations
D) Changing margin deposit requirements
Answer: A - Increasing federal budgetary spending is a fiscal policy tool of the
government, not a monetary policy tool of the Federal Reserve.
17. Proxies are provided to shareholders in which of the following
circumstances?
A) Shareholders that own at least 100 shares
B) Shareholders that own a large percentage of shares
C) Shareholders that attend a company roadshow
D) Shareholders that do not attend the issuer's annual meeting
Answer: D - Proxies are distributed to shareholders who will not be attending the
annual meeting so they can vote by mail.
18. A rule 147 offering of securities takes place with a limited number of
investors. Which answer best describes the attributes of this offering?
A) Public offering
B) Private placement
C) Intrastate offering
D) Small dollar offering
Answer: C - Rule 147 offerings are intrastate offerings—securities offered and sold
only to residents of a single state.
19. A bond trading at a price of 102 is trading at:
A) A discount
B) Par
C) A premium
D) Maturity
Answer: C - A premium. Bond prices are quoted as a percentage of par (100). A
price of 102 means 102% of par, so the bond is trading above its face value, which is
a premium.
COMPREHENSIVE PRACTICE QUESTIONS
WITH FINRA-ALIGNED ANSWERS |
ALREADY GRADED A+ | VERIFIED
ANSWERS & RATIONALES
1. Which of the following is a characteristic of the secondary market?
A) Companies raise capital through initial public offerings
B) Securities are traded between investors
C) Underwriters price new securities
D) The SEC approves new stock issuances
Answer: B - The secondary market is where existing securities are traded between
investors. The primary market is where new securities are issued.
2. The Federal Reserve conducts open market operations by:
A) Setting bank reserve requirements
B) Adjusting the discount rate
C) Buying and selling government securities
D) Regulating margin requirements
Answer: C - Open market operations involve the Fed buying and selling government
securities to influence the money supply and interest rates.
3. Which organization operates the NASDAQ stock exchange?
A) SEC
B) FINRA
C) MSRB
D) Nasdaq, Inc.
Answer: D - Nasdaq, Inc. operates the NASDAQ stock exchange. The SEC regulates
securities markets, FINRA regulates broker-dealers, and MSRB regulates municipal
securities.
Investment Products (44% of exam)
**4. A bond with a 6% coupon and a market price of $900 has a current yield of
approximately:**
A) 5.4%
B) 6.0%
C) 6.67%
D) 7.0%
,**Answer: C** - Current yield = Annual coupon payment / Market price = $60 / $900
= 6.67%.
5. Which of the following is NOT a characteristic of common stock?
A) Voting rights
B) Guaranteed dividends
C) Residual claim on assets
D) Preemptive rights
Answer: B - Common stock dividends are not guaranteed. They are declared by the
board of directors and can be reduced or eliminated.
6. An investor purchasing a call option has:
A) The obligation to buy the underlying asset
B) The right to buy the underlying asset
C) The obligation to sell the underlying asset
D) The right to sell the underlying asset
Answer: B - A call option gives the buyer the RIGHT (not obligation) to BUY the
underlying asset at the strike price.
7. Which type of bond is backed by a specific asset?
A) Debenture
B) Secured bond
C) Subordinated bond
D) Income bond
Answer: B - Secured bonds (also called mortgage bonds) are backed by specific
collateral. Debentures are unsecured.
8. A 529 plan is primarily used for:
A) Retirement savings
B) Healthcare expenses
C) Education expenses
D) Estate planning
Answer: C - 529 plans are tax-advantaged savings plans designed for education
expenses.
9. A mutual fund with an NAV of $20 and offering price of $21.20 is a:
A) No-load fund
B) Closed-end fund
C) Load fund
D) Money market fund
Answer: C - The difference between the offering price and NAV represents a sales
charge (load). Sales charge = ($21.20 - $20) / $21.20 = 5.66%.
10. Which of the following has the LEAST interest rate risk?
A) 30-year Treasury bond
,B) 10-year corporate bond
C) 5-year municipal bond
D) 90-day Treasury bill
Answer: D - Interest rate risk increases with maturity. The 90-day T-bill has the
shortest maturity and therefore the least interest rate risk.
Client Accounts & Regulatory Framework
11. All of the following can purchase an IPO, EXCEPT:
A) The father of a broker-dealer employee
B) The cousin of a broker-dealer employee
C) The grandson of a broker-dealer employee
D) The grandfather of a broker-dealer employee
Answer: B - FINRA rules generally restrict immediate family members (father,
grandfather, grandson) of broker-dealer employees from purchasing IPOs, but more
distant relatives like cousins are not subject to the same restrictions.
12. A corporate bond is quoted at 86 5/8. What is its price?
A) $865.21
B) $866.25
C) $866.86
D) $868.69
Answer: B - A bond quote of 86 5/8 means 86.625% of par. 86.625% x $1,000 =
$866.25.
13. Which type of bond is typically quoted in terms of yield?
A) Municipal G.O. bonds
B) Corporate bonds
C) Municipal "dollar" bonds
D) U.S. Treasury bonds
Answer: A - Municipal general obligation bonds are often quoted on a yield-to-
maturity basis, not as a percentage of par.
14. Which statement related to the relationship between interest rates and
inflation is correct?
A) Interest rates primarily maintain a positive correlation with inflation
B) Interest rates primarily maintain a negative correlation with inflation
C) The relationship between interest rates and inflation cannot be determined
D) Interest rates maintain no correlation with inflation
Answer: A - Higher inflation generally leads to higher interest rates as lenders
demand compensation for the erosion of purchasing power.
15. What statement regarding a registered representative's licenses after they
resign is true?
A) They will lapse after 1 year if they do not re-join the industry
, B) They will lapse after 2 years if they do not re-join the industry
C) The former employer can hold the person's licenses indefinitely
D) They must retake their licensing exams
Answer: B - If a registered representative is not employed by a FINRA member firm
for 2 years, their registrations will lapse.
16. Which of the following tools would NOT be utilized by the Federal Reserve
while implementing monetary policy?
A) Increasing federal budgetary spending
B) Updating reserve requirements for lending institutions
C) Engaging in open market operations
D) Changing margin deposit requirements
Answer: A - Increasing federal budgetary spending is a fiscal policy tool of the
government, not a monetary policy tool of the Federal Reserve.
17. Proxies are provided to shareholders in which of the following
circumstances?
A) Shareholders that own at least 100 shares
B) Shareholders that own a large percentage of shares
C) Shareholders that attend a company roadshow
D) Shareholders that do not attend the issuer's annual meeting
Answer: D - Proxies are distributed to shareholders who will not be attending the
annual meeting so they can vote by mail.
18. A rule 147 offering of securities takes place with a limited number of
investors. Which answer best describes the attributes of this offering?
A) Public offering
B) Private placement
C) Intrastate offering
D) Small dollar offering
Answer: C - Rule 147 offerings are intrastate offerings—securities offered and sold
only to residents of a single state.
19. A bond trading at a price of 102 is trading at:
A) A discount
B) Par
C) A premium
D) Maturity
Answer: C - A premium. Bond prices are quoted as a percentage of par (100). A
price of 102 means 102% of par, so the bond is trading above its face value, which is
a premium.
