Knopman Marks Securities Industry Essentials (SIE) exam with correct answers

Knopman Marks Securities Industry |\ |\ |\ |\




Essentials (SIE) exam with correct |\ |\ |\ |\ |\




answers


Do the following Investment Companies/Products offer continuous
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share offering or fixed share counts?
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Mutual Funds |\




Closed-End Funds |\




UIT
ETF - CORRECT ANSWERS ✔✔Mutual Funds: Continuous
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Closed-End Funds: Fixed |\ |\




UIT: Fixed |\




ETF: Fixed |\




What Term signifies that a share of common stock can be freely
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transferred, assigned, or delivered to another entity?
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a) Fungible
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b)Negotiable
c)Portable
d)Endorsable - CORRECT ANSWERS ✔✔b - A negotiable security|\ |\ |\ |\ |\ |\ |\ |\ |\


is one that can be freely transferred, assigned, or delivered. Note
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that not all securities are negotiable.
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,ABC Company is paying a quarterly dividend to common
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stockholders. On which date must an investor legally own shares, |\ |\ |\ |\ |\ |\ |\ |\ |\


on the books of the issuer, to be entitled to receive the divided?
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a) Declaration Date
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b) Record Date
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c) Payable Date
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d)Ex-dividend Date - CORRECT ANSWERS ✔✔b - The dividend is |\ |\ |\ |\ |\ |\ |\ |\ |\ |\


announced by the board on the declaration date. It is then paid |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\


on the payable date to shareholders of record on the record date.
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New investors must buy the stock before the ex-dividend date to
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be shareholders of record on the record date. Remember that
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the books are locked in, for dividend payment purposes, on the
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record date. |\




What determine the amount of interest paid on a floating rate
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bond?
a. the market value of the bond
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b. the general health of the company
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c. the value of a widely accepted bond benchmark
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d. the supply and demand characteristics of the bond issue -
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CORRECT ANSWERS ✔✔c - Interest rates of floating rate |\ |\ |\ |\ |\ |\ |\ |\ |\


(adjustable rate, variable rate)bonds are determined by the level |\ |\ |\ |\ |\ |\ |\ |\ |\


of popular bond index or benchmark, such as LIBOR. For
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example, the rate may be LIBOR +2%. The advantages of these
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bonds is that they have little or no interest rate risk - i.e. they
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don't decline in market value, if rates rise.
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How does a sinking fund protect bond investors?
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a. provides call protection
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,b. adds a yield booster
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c. protects principal against rising rates
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d. ensures funding to retire bonds at maturity - CORRECT
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ANSWERS ✔✔d- a sinking fund provision requires the issuer to |\ |\ |\ |\ |\ |\ |\ |\ |\ |\


regularly set aside money for redeeming bonds. The money is
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held in escrow by a third party, which ensures that the issuer has
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sufficient funds to retire bonds at maturity.
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A bond issue has three potential call dates int he future. Which of
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these will be used in calculating yield to call?(YTC)
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a. The first
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b. The last
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c. An average of the three
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d. None, because YTC calculation defaults on to the maturity date
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in the even to multiple call dates - CORRECT ANSWERS ✔✔a - it
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is always the first call date (plus any call premium on that date)
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tat is used in the YTC calculation
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Which of the following bonds will appreciate the most as interest
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rates fall? |\




a. 10 yr, zero coupon bond
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b. 10 yr, 5% bond
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c. 30 yr, zero coupon bond
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d. 30 yr, 5% bond - CORRECT ANSWERS ✔✔c - Long term, low
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coupon bonds (including zero) are the most susceptible to
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changing interest rates. Therefore, as interest rates fall, the price
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of the 30 yr, zero coupon bond will appreciate the most
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, Paula wants to buy an investment grade corporate bond. What is
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the lowest S&P rating to consider?
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a. BBB|\




b. BB |\




c.B
d.CCC - CORRECT ANSWERS ✔✔a - BBB is S&P's lowest
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investment grade bond rating. For Moody's, the comparable |\ |\ |\ |\ |\ |\ |\ |\


rating is Baa. Bonds that are rated below these categories are
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considered non-investment grade. |\ |\




A convertible bond can be converted into common stock of the
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bond issuer at a price of $20 per share. The bond is currently
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selling for $800. What is the conversion ratio?
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a. 40:1
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b. 50:1
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c.80:1
d. It can't be determined from given info - CORRECT ANSWERS
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✔✔b - to calculate the conversion ratio, divide par value by the
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conversion price. $1,000/$20 = $50 |\ |\ |\ |\




Hal owns corporate bonds currently selling at $1,200. Their par
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value is $1,000. The conversion ratio is 30:1 What is the parity
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price of the underlying stock?
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a. $20.00
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b. $30.00
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c.$33.33