SIE EXAM | SIE EXAM FINRA 300 ACTUAL
QUESTIONS AND ANSWERS WITH CORRECT
DETAILED RATIONALES
PART 1: E QUITY SECURITIES (Questions 1–30)
1. What is the primary advantage of common stock over preferred stock?
A) Fixed dividend payments
B) Priority in liquidation
C) Voting rights on corporate matters
D) Guaranteed capital appreciation
Answer: C
Rationale: Common stockholders typically have voting rights on corporate issues
like board elections. Preferred stock generally does not offer voting rights.
2. Which type of stock is most likely to pay a fixed dividend?
A) Common stock
B) Preferred stock
C) Penny stock
D) Treasury stock
Answer: B
,Rationale: Preferred stock usually pays a fixed, stated dividend, while common
stock dividends are variable and not guaranteed.
3. Dividends on preferred stock are typically quoted as a:
A) Percentage of par value
B) Dollar amount per share of market price
C) Percentage of retained earnings
D) Fixed dollar amount based on earnings
Answer: A
Rationale: Preferred stock dividends are usually quoted as a percentage of the
stock's par value (e.g., 6% preferred stock).
4. A company issues stock to raise capital. This is an example of:
A) Primary market transaction
B) Secondary market transaction
C) Third market transaction
D) Fourth market transaction
Answer: A
Rationale: Primary market involves new issues of securities sold to investors by
the issuer to raise capital.
5. The secondary market is where:
A) New securities are issued
B) Existing securities are traded between investors
,C) Only institutional investors trade
D) The issuer buys back its shares
Answer: B
Rationale: The secondary market is for trading already-issued securities among
investors, providing liquidity.
6. Which stock is most likely to pay a high, stable dividend?
A) Growth stock
B) Income stock
C) Cyclical stock
D) Defensive stock
Answer: B
Income stocks are known for high, stable dividend payments.
7. A company with high growth potential but low or no dividends is called a:
A) Value stock
B) Growth stock
C) Blue-chip stock
D) Income stock
Answer: B
Growth stocks reinvest earnings into expansion, usually paying little to no
dividends.
, 8. Which ratio indicates how much investors are willing to pay per dollar of
earnings?
A) Dividend yield
B) Price-to-earnings (P/E) ratio
C) Current ratio
D) Debt-to-equity ratio
Answer: B
The P/E ratio shows the market price per share relative to earnings per share.
9. A stock with a beta of 0.8 is considered:
A) More volatile than the market
B) Less volatile than the market
C) As volatile as the market
D) Uncorrelated with the market
Answer: B
A beta below 1.0 indicates less volatility than the overall market.
10. What does a stock split do to a shareholder's total value?
A) Increases it
B) Decreases it
C) Keeps it the same
D) Converts it to debt
Answer: C
QUESTIONS AND ANSWERS WITH CORRECT
DETAILED RATIONALES
PART 1: E QUITY SECURITIES (Questions 1–30)
1. What is the primary advantage of common stock over preferred stock?
A) Fixed dividend payments
B) Priority in liquidation
C) Voting rights on corporate matters
D) Guaranteed capital appreciation
Answer: C
Rationale: Common stockholders typically have voting rights on corporate issues
like board elections. Preferred stock generally does not offer voting rights.
2. Which type of stock is most likely to pay a fixed dividend?
A) Common stock
B) Preferred stock
C) Penny stock
D) Treasury stock
Answer: B
,Rationale: Preferred stock usually pays a fixed, stated dividend, while common
stock dividends are variable and not guaranteed.
3. Dividends on preferred stock are typically quoted as a:
A) Percentage of par value
B) Dollar amount per share of market price
C) Percentage of retained earnings
D) Fixed dollar amount based on earnings
Answer: A
Rationale: Preferred stock dividends are usually quoted as a percentage of the
stock's par value (e.g., 6% preferred stock).
4. A company issues stock to raise capital. This is an example of:
A) Primary market transaction
B) Secondary market transaction
C) Third market transaction
D) Fourth market transaction
Answer: A
Rationale: Primary market involves new issues of securities sold to investors by
the issuer to raise capital.
5. The secondary market is where:
A) New securities are issued
B) Existing securities are traded between investors
,C) Only institutional investors trade
D) The issuer buys back its shares
Answer: B
Rationale: The secondary market is for trading already-issued securities among
investors, providing liquidity.
6. Which stock is most likely to pay a high, stable dividend?
A) Growth stock
B) Income stock
C) Cyclical stock
D) Defensive stock
Answer: B
Income stocks are known for high, stable dividend payments.
7. A company with high growth potential but low or no dividends is called a:
A) Value stock
B) Growth stock
C) Blue-chip stock
D) Income stock
Answer: B
Growth stocks reinvest earnings into expansion, usually paying little to no
dividends.
, 8. Which ratio indicates how much investors are willing to pay per dollar of
earnings?
A) Dividend yield
B) Price-to-earnings (P/E) ratio
C) Current ratio
D) Debt-to-equity ratio
Answer: B
The P/E ratio shows the market price per share relative to earnings per share.
9. A stock with a beta of 0.8 is considered:
A) More volatile than the market
B) Less volatile than the market
C) As volatile as the market
D) Uncorrelated with the market
Answer: B
A beta below 1.0 indicates less volatility than the overall market.
10. What does a stock split do to a shareholder's total value?
A) Increases it
B) Decreases it
C) Keeps it the same
D) Converts it to debt
Answer: C
