STC SIE Practice Exams #'s 3 & 4
Questions and Answers 100% Pass
If a brokerage firm creates an in-house, non-cash incentive program, it is permitted to
be based on:
A. The total amount of sales executed by the RR
B. The specific type of product being sold by the RR
C. The most suitable products being sold by the RR
D. Only the equity securities being sold by the RR - ANSWER✔✔-A. The total amount
of sales executed by the RR
The person who distributes interest in a DPP is referred to as the:
A. Distributor
B. Syndicator
C. Managing partner
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,D. Limited partner - ANSWER✔✔-B. Syndicator
If an investor writes (sells) a covered call, what are the potential profit and loss
outcomes?
A. Unlimited profit and unlimited loss
B. Unlimited profit and limited loss
C. Limited profit and unlimited loss
D. Limited profit and limited loss - ANSWER✔✔-D. Limited profit and limited loss
Municipal bond rating organizations are concerned primarily with the risk of:
A. Declining purchasing power
B. Market price fluctuations
C. Default
D. Illiquidity - ANSWER✔✔-C. Default
Which of the following organizations does NOT enforce MSRB rules?
A. The Comptroller of the Currency
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,B. FINRA
C. The MSRB
D. The SEC - ANSWER✔✔-C. The MSRB
The MSRB has no enforcement power. The SEC and FINRA enforce municipal
regulations for broker-dealers. The Comptroller of the Currency, FRB, and FDIC enforce
municipal regulations for dealer banks. The MSRB establishes its rules but has no
enforcement powers.
A corporation that has filed for bankruptcy is to be liquidated. Which of the following
securities issued by that corporation has seniority in the liquidation process?
A. Mortgage bonds
B. Debenture bonds
C. Common stock
D. Participating preferred stock - ANSWER✔✔-A. Mortgage bonds
When a corporation is liquidated, its assets are sold and the proceeds are distributed.
Secured creditors are paid first (i.e., mortgage bondholders), then unsecured creditors
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, (debenture holders), then preferred stockholders, and last the common stockholders.
This would make mortgage bonds the senior security of those listed.
Which of the following recommendations will protect assets if there's an impending
large market decline?
A. Sell covered calls on all of the stocks in a portfolio
B. Buy an S&P 500 ETF
C. Move investments into cash and equivalents
D. Invest in a managed large-cap growth fund - ANSWER✔✔-C. Move investments into
cash and equivalents
Moving money into cash and equivalents (i.e., money-market securities) will provide
investors with the most protection. Selling covered calls will generate some income, but
will not provide protection over the short-term.
A registered representative has just been appointed as a trustee for a trust that was
established by her father-in-law. The trust was established for the benefit of the RR's
spouse and dependent children. The registered representative will also receive a small
fee for managing the trust. Which of the following best describes the registered
representative's obligations under industry rules?
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Questions and Answers 100% Pass
If a brokerage firm creates an in-house, non-cash incentive program, it is permitted to
be based on:
A. The total amount of sales executed by the RR
B. The specific type of product being sold by the RR
C. The most suitable products being sold by the RR
D. Only the equity securities being sold by the RR - ANSWER✔✔-A. The total amount
of sales executed by the RR
The person who distributes interest in a DPP is referred to as the:
A. Distributor
B. Syndicator
C. Managing partner
Copyright ©SOPHIABENNETT 2025 ACADEMIC YEARALL RIGHTS RESERVED. Page 1/41
,D. Limited partner - ANSWER✔✔-B. Syndicator
If an investor writes (sells) a covered call, what are the potential profit and loss
outcomes?
A. Unlimited profit and unlimited loss
B. Unlimited profit and limited loss
C. Limited profit and unlimited loss
D. Limited profit and limited loss - ANSWER✔✔-D. Limited profit and limited loss
Municipal bond rating organizations are concerned primarily with the risk of:
A. Declining purchasing power
B. Market price fluctuations
C. Default
D. Illiquidity - ANSWER✔✔-C. Default
Which of the following organizations does NOT enforce MSRB rules?
A. The Comptroller of the Currency
Copyright ©SOPHIABENNETT 2025 ACADEMIC YEARALL RIGHTS RESERVED. Page 2/41
,B. FINRA
C. The MSRB
D. The SEC - ANSWER✔✔-C. The MSRB
The MSRB has no enforcement power. The SEC and FINRA enforce municipal
regulations for broker-dealers. The Comptroller of the Currency, FRB, and FDIC enforce
municipal regulations for dealer banks. The MSRB establishes its rules but has no
enforcement powers.
A corporation that has filed for bankruptcy is to be liquidated. Which of the following
securities issued by that corporation has seniority in the liquidation process?
A. Mortgage bonds
B. Debenture bonds
C. Common stock
D. Participating preferred stock - ANSWER✔✔-A. Mortgage bonds
When a corporation is liquidated, its assets are sold and the proceeds are distributed.
Secured creditors are paid first (i.e., mortgage bondholders), then unsecured creditors
Copyright ©SOPHIABENNETT 2025 ACADEMIC YEARALL RIGHTS RESERVED. Page 3/41
, (debenture holders), then preferred stockholders, and last the common stockholders.
This would make mortgage bonds the senior security of those listed.
Which of the following recommendations will protect assets if there's an impending
large market decline?
A. Sell covered calls on all of the stocks in a portfolio
B. Buy an S&P 500 ETF
C. Move investments into cash and equivalents
D. Invest in a managed large-cap growth fund - ANSWER✔✔-C. Move investments into
cash and equivalents
Moving money into cash and equivalents (i.e., money-market securities) will provide
investors with the most protection. Selling covered calls will generate some income, but
will not provide protection over the short-term.
A registered representative has just been appointed as a trustee for a trust that was
established by her father-in-law. The trust was established for the benefit of the RR's
spouse and dependent children. The registered representative will also receive a small
fee for managing the trust. Which of the following best describes the registered
representative's obligations under industry rules?
Copyright ©SOPHIABENNETT 2025 ACADEMIC YEARALL RIGHTS RESERVED. Page 4/41
