SIE Practice Exam 2: Questions & Answers: Guaranteed 93% score: Latest Updated

Which of the following factors is the LEAST important in analyzing the investment quality of a mortgage bond? [A] The collateral held by the trustee bank [B] The current phase of the economic cycle [C] The trustee bank holding the title to the collateral* [D] The credit rating issued by a nationally recognized rating agency > - EXPLANATION The trustee bank is merely the legal owner of the real estate being pledged as collateral for the loan. In the event of default by the issuer, the trustee would initiate foreclosure proceedings against the property. Which of the following is TRUE regarding Traditional IRAs? [A] Money contributed to a Traditional IRA is always after-tax. [B] Beginning date for first required minimum distributions (RMDs) is April 1st of the year following the calendar year in which the owner reaches 70 1/2.* [C] Money that is paid out of a Traditional IRA is tax-free to the owner. [D] Individuals are only permitted to start saving using a Traditional IRA after they have attained the age of 59 1/2 under current regulations. > - EXPLANATIONUnder IRS Regulations for Traditional IRAs, Required Minimum Distributions (RMDs) must begin by April 1st of the year following the calendar year in which the account holder reaches age 70 1/2. A person wishing to open a Traditional IRA does NOT need to be 59 1/2, though that is the earliest that a person can take distributions from the Traditional IRA without penalty with a few exceptions. An investor who contributes to a Traditional IRA does so on a pre-tax basis, receiving a deduction from earned income in the year that the contribution was made and thus reducing their income for that year, lowering their tax burden while working. All money that is paid out of a Traditional IRA is taxable at the investor's ordinary income tax rate and would not be taxfree. Which of the following bonds currently trading at an 8% basis would most likely be refunded? [A] 5 1/2% of 2020, callable at 100. [B] 8 1/2% of 2030, callable at 100.* [C] 8% of 2030, callable at 103. [D] 6 1/2% of 2020, callable at 103. > - EXPLANATION