SIE EXAMS SET QUESTIONS AND
CORRECT ANSWERS
What type of risk is unique to a specific industry, business enterprise, or investment type? - correct
answer-✅Nonsystematic risk
Under which of the following circumstances is an investor in a position to acquire stock? - correct
answer-✅Buy 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 answer-✅the cost of an option contract, expressed in dollars per share of
the underlying stock
Options- strike price - correct answer-✅The 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
answer-✅buy 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 answer-✅right (they usually expire in 30-
45 days)
American depositary receipts (ADRs) - correct answer-✅issued 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 answer-✅Customer ledgers
(statements)
While underwriters can assist with preparation and filing, the accuracy and adequacy of these
documents is the responsibility of the - correct answer-✅Issuing corporation
What institutions serve as depository and clearing facilities? - correct answer-✅Depository 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 answer-✅(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 answer-✅Acting 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 answer-✅those 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 answer-✅Capital gains and income
To expand the overall economy, we want to - correct answer-✅buy securities via open-market
operations, pushing interest rates down
To meet a Regulation T margin call, a customer would have how long? - correct answer-✅settlement
plus 2 additional business days (or S + 2)
What is A fully disclosed broker-dealer - correct answer-✅one 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
answer-✅Regulation S-P
A market maker that does not honor its firm quote is said to be - correct answer-✅"backing away"
,A deficit in the U.S. balance of payments can occur if - correct answer-✅interest 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 answer-✅Organizing 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 answer-✅cut 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 answer-✅the rate commercial money center banks charge each
other for an overnight, unsecured loan
The Federal Open Market Committee (FOMC) - correct answer-✅buy 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 answer-
✅Contraction, due to a lack of consumer demand
Who is exempt from registering with SIPC? - correct answer-✅Those who deal exclusively with US
Government securities (i.e.-Treasury bonds), exclusively municipality securities, and in redeemable
investment company securities
Retail investor - correct answer-✅An individual who makes investments such as the purchase of
securities for his or her account rather than for an organization
Market maker - correct answer-✅Any 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 answer-
✅buy Treasury securities from banks in the open market
SROs functioning under the SEC include... - correct answer-✅FINRA, MSRB and CBOE
Mild inflation can - correct answer-✅encourage growth and stimulate the economy
Discount rate - correct answer-✅The rate the FRB charges member banks
Prime rate - correct answer-✅The 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 answer-✅expansion (recovery), peak (prosperity), contraction
(decline), trough, and then expansion (recovery) again
Securities Act of 1933 - correct answer-✅(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 answer-✅raise taxes and
cut government spending for programs and development
Out of the federal funds rate, discount rate, prime rate and broker call loan rate, which is the most
volatile? - correct answer-✅Federal funds rate because of the overnight offerings (short-term)
The shelf offering (registration) provision under the Securities Act of 1933 allows - correct answer-
✅issuers to quickly raise capital when needed or when market conditions are favorable.
Types of direct participation programs (DPPs) - correct answer-✅real estate, gas and oil, and leasing
programs
Long vs short investor - correct answer-✅Long (buy), short (sell)
Debenture - correct answer-✅a debt obligation of a corporation backed only by its word and general
creditworthiness, written promises of the corporation to pay the principal at its due date and interest on
a regular basis.
, Municipal revenue bonds - correct answer-✅bonds issued to finance a project or facility with the bonds'
debt service backed by the facility's revenue stream. The revenue might come from rents, tolls, or
admission fees, among other sources.
Build America Bonds (BABs) - correct answer-✅Taxable municipal securities. Two types: Direct Payment
( provide the municipal issuer with payments from the U.S. Treasury) and Tax Credit, or Issuer (provide
the bondholder with a federal income tax credit)
Long 1 XYZ January 50, put at 2. What is the max. potential gain? - correct answer-✅"Investor BOUGHT
100 shares of XYZ in January at $50 per share, the premium is $2."
Maximum gain for a long put is calculated by subtracting the premium from the strike price (50 − 2 = 48
per share). One contract represents 100 shares, so the buyer's maximum gain is $4,800 (this occurs if the
stock becomes worthless).
Adjusted cost basis problem - correct answer-✅see example on page 129 under dividends
When must a suspicious activity report (SAR) be filed with FinCEN after noticing suspicious activity in an
account? - correct answer-✅within 30 calendar days, the client may not know he is subject to an SAR.
When can corporate accounts trade on margin? - correct answer-✅Only when it is not listed as being
restricted for doing so.
When securities are held in street name, who is the beneficial owner? - correct answer-✅The security is
put in the broker-dealers name, but the customer is still the beneficial owner.
What are the requirements of a business continuity plan (BCP) if there is a major business disruption in
the firm? - correct answer-✅Data backup and recovery (hard and electronic copies), alternate business
location for employees, and prompt customer access to funds and securities
What securities can be purchased on margin? - correct answer-✅Equities, bonds and warrants. Mutual
funds cannot be purchased on margin, but can be used as collateral after being held for 30 days.
Spin-off - correct answer-✅When one company sells all of the shares of another it own
Stagflation - correct answer-✅When inflation and stagnation occur simultaneously: a period of high
unemployment and lack of growth and business activity (stagnation) and high unemployment and lack of
growth and business activity (inflation)
Keynesian theory - correct answer-✅Government intervention in the economy is a significant force in
creating prosperity by engaging in activities that affect aggregate demand.
Deflation - correct answer-✅a general decline in prices occurring during severe recessions and the
unemployment rate is rising.
Fourth market - correct answer-✅market for institutional investors in which blocks of stock trade
through electronic communications networks (ECNs) that are open 24 hours a day acting as agents
bullish position are... - correct answer-✅long (owning/buying a security in hopes that they can resell it
at a higher price later & owning securities that can be converted into rights, warrants and long calls)
bearish positions are... - correct answer-✅short
An investor purchased 100 shares of Acme Shoelace stock for $20 per share. Four years later, the
investor sold the stock for $28 per share. This investor would report these transactions, on a per share
basis, as - correct answer-✅$20 cost base, $8 capital gains (cost base: the price paid for the security,
capital gain/loss: difference between the cost base and price security sold for later)
A member firm holding stock in street name may vote the shares as it sees fit if - correct answer-✅the
customer does not return the signed proxy statement by the 10th day before the shareholders' meeting,
and if the matters to be voted on are of minor importance.
What records have to be maintained for 6 years? - correct answer-✅Blotters, general ledger, stock
ledger, customer ledger, and customer account records
Churning - correct answer-✅Excess trading in a customer's account, can happen in discretionary and
nondiscretionary accounts
CORRECT ANSWERS
What type of risk is unique to a specific industry, business enterprise, or investment type? - correct
answer-✅Nonsystematic risk
Under which of the following circumstances is an investor in a position to acquire stock? - correct
answer-✅Buy 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 answer-✅the cost of an option contract, expressed in dollars per share of
the underlying stock
Options- strike price - correct answer-✅The 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
answer-✅buy 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 answer-✅right (they usually expire in 30-
45 days)
American depositary receipts (ADRs) - correct answer-✅issued 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 answer-✅Customer ledgers
(statements)
While underwriters can assist with preparation and filing, the accuracy and adequacy of these
documents is the responsibility of the - correct answer-✅Issuing corporation
What institutions serve as depository and clearing facilities? - correct answer-✅Depository 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 answer-✅(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 answer-✅Acting 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 answer-✅those 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 answer-✅Capital gains and income
To expand the overall economy, we want to - correct answer-✅buy securities via open-market
operations, pushing interest rates down
To meet a Regulation T margin call, a customer would have how long? - correct answer-✅settlement
plus 2 additional business days (or S + 2)
What is A fully disclosed broker-dealer - correct answer-✅one 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
answer-✅Regulation S-P
A market maker that does not honor its firm quote is said to be - correct answer-✅"backing away"
,A deficit in the U.S. balance of payments can occur if - correct answer-✅interest 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 answer-✅Organizing 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 answer-✅cut 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 answer-✅the rate commercial money center banks charge each
other for an overnight, unsecured loan
The Federal Open Market Committee (FOMC) - correct answer-✅buy 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 answer-
✅Contraction, due to a lack of consumer demand
Who is exempt from registering with SIPC? - correct answer-✅Those who deal exclusively with US
Government securities (i.e.-Treasury bonds), exclusively municipality securities, and in redeemable
investment company securities
Retail investor - correct answer-✅An individual who makes investments such as the purchase of
securities for his or her account rather than for an organization
Market maker - correct answer-✅Any 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 answer-
✅buy Treasury securities from banks in the open market
SROs functioning under the SEC include... - correct answer-✅FINRA, MSRB and CBOE
Mild inflation can - correct answer-✅encourage growth and stimulate the economy
Discount rate - correct answer-✅The rate the FRB charges member banks
Prime rate - correct answer-✅The 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 answer-✅expansion (recovery), peak (prosperity), contraction
(decline), trough, and then expansion (recovery) again
Securities Act of 1933 - correct answer-✅(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 answer-✅raise taxes and
cut government spending for programs and development
Out of the federal funds rate, discount rate, prime rate and broker call loan rate, which is the most
volatile? - correct answer-✅Federal funds rate because of the overnight offerings (short-term)
The shelf offering (registration) provision under the Securities Act of 1933 allows - correct answer-
✅issuers to quickly raise capital when needed or when market conditions are favorable.
Types of direct participation programs (DPPs) - correct answer-✅real estate, gas and oil, and leasing
programs
Long vs short investor - correct answer-✅Long (buy), short (sell)
Debenture - correct answer-✅a debt obligation of a corporation backed only by its word and general
creditworthiness, written promises of the corporation to pay the principal at its due date and interest on
a regular basis.
, Municipal revenue bonds - correct answer-✅bonds issued to finance a project or facility with the bonds'
debt service backed by the facility's revenue stream. The revenue might come from rents, tolls, or
admission fees, among other sources.
Build America Bonds (BABs) - correct answer-✅Taxable municipal securities. Two types: Direct Payment
( provide the municipal issuer with payments from the U.S. Treasury) and Tax Credit, or Issuer (provide
the bondholder with a federal income tax credit)
Long 1 XYZ January 50, put at 2. What is the max. potential gain? - correct answer-✅"Investor BOUGHT
100 shares of XYZ in January at $50 per share, the premium is $2."
Maximum gain for a long put is calculated by subtracting the premium from the strike price (50 − 2 = 48
per share). One contract represents 100 shares, so the buyer's maximum gain is $4,800 (this occurs if the
stock becomes worthless).
Adjusted cost basis problem - correct answer-✅see example on page 129 under dividends
When must a suspicious activity report (SAR) be filed with FinCEN after noticing suspicious activity in an
account? - correct answer-✅within 30 calendar days, the client may not know he is subject to an SAR.
When can corporate accounts trade on margin? - correct answer-✅Only when it is not listed as being
restricted for doing so.
When securities are held in street name, who is the beneficial owner? - correct answer-✅The security is
put in the broker-dealers name, but the customer is still the beneficial owner.
What are the requirements of a business continuity plan (BCP) if there is a major business disruption in
the firm? - correct answer-✅Data backup and recovery (hard and electronic copies), alternate business
location for employees, and prompt customer access to funds and securities
What securities can be purchased on margin? - correct answer-✅Equities, bonds and warrants. Mutual
funds cannot be purchased on margin, but can be used as collateral after being held for 30 days.
Spin-off - correct answer-✅When one company sells all of the shares of another it own
Stagflation - correct answer-✅When inflation and stagnation occur simultaneously: a period of high
unemployment and lack of growth and business activity (stagnation) and high unemployment and lack of
growth and business activity (inflation)
Keynesian theory - correct answer-✅Government intervention in the economy is a significant force in
creating prosperity by engaging in activities that affect aggregate demand.
Deflation - correct answer-✅a general decline in prices occurring during severe recessions and the
unemployment rate is rising.
Fourth market - correct answer-✅market for institutional investors in which blocks of stock trade
through electronic communications networks (ECNs) that are open 24 hours a day acting as agents
bullish position are... - correct answer-✅long (owning/buying a security in hopes that they can resell it
at a higher price later & owning securities that can be converted into rights, warrants and long calls)
bearish positions are... - correct answer-✅short
An investor purchased 100 shares of Acme Shoelace stock for $20 per share. Four years later, the
investor sold the stock for $28 per share. This investor would report these transactions, on a per share
basis, as - correct answer-✅$20 cost base, $8 capital gains (cost base: the price paid for the security,
capital gain/loss: difference between the cost base and price security sold for later)
A member firm holding stock in street name may vote the shares as it sees fit if - correct answer-✅the
customer does not return the signed proxy statement by the 10th day before the shareholders' meeting,
and if the matters to be voted on are of minor importance.
What records have to be maintained for 6 years? - correct answer-✅Blotters, general ledger, stock
ledger, customer ledger, and customer account records
Churning - correct answer-✅Excess trading in a customer's account, can happen in discretionary and
nondiscretionary accounts
