SIE – TENTH SIMULATION

#1. Which of the following statements about the Securities Act of 1933 is TRUE?

It governs the registration of new issues of nonexempt securities

It established the Federal Reserve System

It regulates trading on national securities exchanges

It created the Securities Investor Protection Corporation

#2. Which of the following offerings involves a publicly traded issuer selling additional shares to raise capital?

Initial public offering

Follow-on public offering

Rule 144A institutional offering

Private placement under Regulation D

#3. Which of the following securities is LEAST likely to be considered an exempt security under the Securities Act of 1933?

U.S. Treasury note

Municipal general obligation bond

Publicly offered corporate debenture

Commercial paper maturing in 120 days

#4. Which market is sometimes called the new issue market?

Secondary market

Primary market

Third market

Fourth market

#5. Which of the following describes a broker-dealer acting in a principal capacity?

The firm acts solely as transfer agent

The firm only introduces accounts to a clearing firm

The firm buys or sells securities from its own inventory

The firm charges a commission for agency trades

#6. Which of the following best describes the role of a trader at a broker-dealer?

Supervises AML compliance only

Executes buy and sell orders in the firm’s trading account or for customers

Approves advertising and sales literature

Maintains shareholder records for issuers

#7. Which of the following corporate securities offers ownership with limited liability for investors?

Mortgage bond

Subordinated debenture

Commercial paper

Common stock

#8. Holders of common stock generally have which of the following rights?

Right to receive fixed interest payments

Right to redeem shares at NAV

Right to vote on major corporate matters

Right to a guaranteed dividend

#9. Cumulative preferred stock is attractive to investors because:

It cannot be called by the issuer

It always has the highest dividend yield

Missed dividends must be paid before common shareholders receive dividends

It is guaranteed by the federal government

#10. Which of the following is TRUE about convertible preferred stock?

It is always purchased at a discount to par

It can be exchanged for a fixed number of common shares

It pays interest instead of dividends

It must be redeemed at par at maturity

#11. Which of the following statements is TRUE about warrants?

They represent secured corporate debt

They guarantee payment of a fixed dividend

They are long-term options to buy stock at a specified price

They are short-term rights that typically expire in weeks

#12. Which risk is most associated with purchasing ADRs of foreign issuers?

Zero market risk

Prepayment risk only

Call risk only

Political and currency risk

#13. Which of the following best describes commercial paper?

Unsecured short-term promissory note issued by a corporation

Long-term secured bond issued by a municipality

Equity security traded on an exchange

Treasury obligation backed by the U.S. government

#14. Which type of bond has the greatest price volatility when interest rates change?

Long-term, low-coupon bond

Short-term, high-coupon bond

Short-term, floating-rate note

Money market instrument

#15. Which of the following BEST describes a serial bond issue?

Only the interest payments are staggered

A portion of the principal matures each year until final maturity

The bond has no stated maturity date

The entire principal is due on one maturity date

#16. Which of the following municipal issues would most likely be backed by user fees from a toll bridge?

Special assessment bond

Revenue bond

General obligation bond

Tax anticipation note

#17. Which of the following is TRUE regarding general obligation (GO) bonds?

They are insured by the FDIC

They are backed by the full faith, credit, and taxing power of the issuer

They are issued only by the federal government

They are backed solely by revenues from a specific project

#18. Which of the following statements about Treasury bills is TRUE?

They are issued at a discount and mature at par value

They are long-term obligations with 20- to 30-year maturities

They pay semiannual interest

They are only available to institutional investors

#19. Which of the following is a characteristic of Treasury notes?

They are zero-coupon instruments

They are issued only with 30-year maturities

They are money market instruments with maturities under one year

They pay semiannual interest and have intermediate-term maturities

#20. Which of the following describes a zero-coupon bond?

It pays interest monthly at a floating rate

It is issued at a deep discount and pays no periodic interest

It provides tax-free interest income

It is always callable at par

#21. Which of the following risks is an investor in zero-coupon bonds MOST exposed to?

Interest-rate risk

Reinvestment risk

Political risk

Shortfall risk only

#22. Which of the following securities is MOST appropriate for an investor seeking preservation of capital and daily liquidity?

Long-term growth stock fund

Direct participation program

Money market mutual fund

High-yield bond fund

#23. Which of the following investments would be MOST suitable for an investor seeking long-term growth and willing to accept volatility?

Equity growth mutual fund

FDIC-insured savings account

Treasury bill ladder

Short-term investment-grade bond fund

#24. Which of the following is a feature of a growth fund?

Invests primarily in companies expected to have above-average earnings

Invests only in index futures

Guarantees a minimum annual return

Invests solely in fixed-income securities

#25. Which of the following mutual fund types focuses mainly on generating current income?

International small-cap fund

Sector technology fund

Bond income fund

Aggressive growth fund

#26. Which of the following statements about index funds is TRUE?

They aim to outperform the market through active stock selection

They are not subject to market risk

They seek to replicate the performance of a specific market index

They are priced throughout the trading day like stocks

#27. Which of the following best describes an asset allocation fund?

A money market fund limited to T-bills

A fund that invests only in foreign bonds

A fund concentrated in one industry sector

A fund that adjusts its mix of stocks, bonds, and cash to meet objectives

#28. Dollar-cost averaging works by:

Investing a fixed dollar amount at regular intervals regardless of price

Investing a fixed number of shares each month

Investing only when prices decline sharply

Investing only at the market high

#29. Which of the following best describes a balanced fund?

It invests only in common stocks

It invests exclusively in money market instruments

It invests solely in municipal securities

It invests in a mix of stocks and bonds for growth and income

#30. Which of the following is TRUE about closed-end fund shares?

They are always issued and redeemed at NAV

They cannot be purchased on margin

They must be redeemed directly with the fund

They can trade at a premium or discount to NAV

#31. Which of the following is a primary feature of an ETF compared to a mutual fund?

It is not subject to market volatility

It is priced once daily after market close

It guarantees a fixed return

It can be bought and sold intraday at market prices

#32. What is one potential advantage of an ETF over an actively managed mutual fund?

No exposure to market risk

Higher sales loads for investors

Guaranteed outperformance of the market

Typically lower expense ratios

#33. Which of the following best describes a direct participation program (DPP)?

A government-guaranteed bond

A money market instrument with daily liquidity

A type of index mutual fund

An investment that passes through income and losses to investors

#34. Which of the following is a major disadvantage of DPPs for many investors?

FDIC insurance limits

Daily trading volumes are extremely high

Exemption from all risk

Lack of liquidity and difficult secondary market

#35. Which of the following investments is MOST likely structured as a DPP?

Exchange-traded index fund

U.S. savings bond

Treasury money market fund

Oil and gas limited partnership

#36. Which of the following investors would be MOST suitable for a hedge fund investment?

A retiree needing predictable monthly income

An accredited investor willing to accept high risk and illiquidity

A conservative investor with a short time horizon

A college student with limited savings

#37. Which of the following securities is MOST appropriate for a customer seeking tax-free income at the federal level?

Municipal bond fund

Common stock index fund

Taxable money market fund

Corporate bond fund

#38. Which of the following risks is reduced the MOST by diversifying among different asset classes?

Systematic risk

Nonsystematic risk

Interest-rate risk

Inflation risk

#39. Which of the following is a leading economic indicator?

Personal income after taxes

Average duration of unemployment

New orders for consumer goods

Consumer price index (CPI)

#40. Which of the following is TRUE during an economic expansion?

Business failures rise sharply

Consumer spending falls dramatically

GDP declines for two consecutive quarters

Unemployment tends to decrease

#41. Which of the following is typically considered a lagging economic indicator?

Average duration of unemployment

New orders for durable goods

Stock market prices

Housing starts

#42. Which of the following is a primary effect of an easy monetary policy?

Reduction in bank reserves

Immediate deflation of consumer prices

Higher interest rates and decreased lending

Lower interest rates and increased money supply

#43. Which of the following describes fiscal policy?

Use of government spending and taxation to influence the economy

Regulation of securities markets by FINRA

Setting of margin requirements by broker-dealers

Management of money supply by the Federal Reserve

#44. Which of the following best describes progressive taxation?

Only investment income is taxed

All taxpayers pay the same percentage of income

Higher income levels are taxed at higher rates

Sales tax rates vary with income

#45. Which of the following summarizes the tax treatment of interest from corporate bonds?

Tax-free at all levels

Taxable only when the bond is sold

Taxable at federal, state, and local levels

Exempt from state income tax

#46. Under Regulation BI, a broker-dealer’s recommendation must:

Favor products with the highest commissions

Guarantee a profit to the customer

Always minimize the broker-dealer’s costs

Be in the best interest of the retail customer

#47. Form CRS is required to:

Provide a brief relationship summary to retail investors

Report insider trading violations

Disclose all historical fund performance

Register new securities offerings

#48. Which of the following best describes correspondence under FINRA rules?

Television advertisements aimed at the general public

Any mass mailing to the public

Written or electronic communication sent to 25 or fewer retail investors in 30 days

Communication intended only for institutional investors

#49. Which type of communication is defined as written communication distributed to more than 25 retail investors in a 30-day period?

Public appearance

Retail communication

Institutional communication

Correspondence

#50. Which of the following is considered institutional communication?

A social media post for the public

A report sent only to insurance companies and banks

A brochure for prospective retirees

An email to 30 retail customers

#51. A registered representative who recommends frequent trades in a customer’s account primarily to generate commissions is engaging in:

Churning

Selling away

Front-running

Cross-trading

#52. Front-running occurs when a firm or representative:

Places personal trades ahead of a large customer order

Routes orders for best execution

Executes unsolicited customer orders

Rebalances a customer’s portfolio annually

#53. Selling away refers to:

Executing unsolicited trades

Transferring customer accounts to another firm

Selling securities below market value

Participating in private securities transactions without firm approval

#54. Which of the following is REQUIRED under the USA PATRIOT Act?

Implementation of an anti-money laundering program

Guarantee of customer investment performance

Use of only government securities in customer portfolios

Provision of FDIC insurance for all accounts

#55. A Currency Transaction Report must be filed for:

Cash transactions exceeding $10,000 in a single business day

Any wire transfer to another country

All transactions over $1,000

All deposits of checks from other banks

#56. A Suspicious Activity Report must generally be filed:

Immediately upon account opening

Within 30 days of detecting suspicious activity

Only at year-end

Only if requested by the customer

#57. Which of the following statements about options accounts is TRUE?

The customer must receive an options disclosure document before trading

All options trades are exempt from suitability rules

No special documentation is required

Options can only be traded in cash accounts

#58. Which of the following is a required element of an options account agreement?

Customer acknowledgement of financial information and risks

Promise that options will only be exercised, never traded

Guarantee of minimum annual return

Waiver of all suitability requirements

#59. Which of the following investors would be MOST suitable for uncovered options writing?

A retiree seeking stable income with preservation of principal

A first-time investor with limited assets

A minor investing through a custodial account

An experienced investor with high risk tolerance and sufficient capital

#60. Which of the following is TRUE about joint tenants with rights of survivorship (JTWROS)?

The deceased owner’s share goes to their estate

The account is permitted only for business partners

Only one owner may authorize trades

The deceased owner’s interest passes to the surviving owner

#61. Which document is typically required to open a partnership account?

Corporate bylaws

A copy of the partnership agreement

Bank deposit slip

Prospectus of each security traded

#62. Which of the following accounts is specifically established for a minor with an adult managing the assets?

401(k) plan

Traditional IRA

UGMA/UTMA custodial account

Joint tenants account

#63. Which of the following accounts is most appropriate for long-term retirement savings with pretax contributions from an employer-sponsored plan?

529 college savings plan

401(k) plan

Health savings account

Roth IRA funded only with after-tax employer money

#64. Which of the following statements about traditional IRAs is TRUE?

Earnings grow tax-deferred until withdrawn

Withdrawals in retirement are always tax-free

They can be funded only by employers

All contributions are always tax-free

#65. Which of the following is generally TRUE about Roth IRA contributions?

They are made with after-tax dollars

They must be made by the employer

They require minimum distributions starting at age 73

They are fully deductible on federal tax returns

#66. Which of the following best describes a defined benefit plan?

A plan in which benefits depend solely on investment performance

A plan that promises a specific retirement benefit based on a formula

A plan available only to self-employed individuals

A plan that allows only employee pretax contributions

#67. Which of the following accounts is designed specifically for higher education expenses with tax advantages?

401(k) rollover account

529 savings plan

Traditional IRA

UGMA custodial account

#68. Which of the following is TRUE regarding time horizon for an investor?

Investors with long time horizons should hold only cash

Time horizon has no impact on investment choices

A longer time horizon generally allows for greater risk tolerance

Short time horizons favor aggressive equity strategies

#69. A client with high current income and a need to reduce taxable interest is MOST suitable for:

Taxable high-yield bond fund

Treasury bill money market fund

Investment-grade municipal bond fund

Aggressive growth stock fund

#70. Which of the following would be MOST appropriate for an investor whose main goal is current income with moderate risk?

Cryptocurrency index fund

Emerging markets equity ETF

Investment-grade corporate bond portfolio

Long-dated zero-coupon bonds for speculation

#71. Which of the following correctly describes a speculative investment objective?

Seeking guaranteed returns backed by the government

Seeking stable income with preservation of principal

Seeking high returns while accepting a significant risk of loss

Seeking only inflation protection with no risk

#72. Which of the following is the BEST example of an investment suitable for a speculative investor?

Treasury bill fund

Government money market fund

Leveraged ETF focused on a single sector

Short-term CD ladder

#73. Which of the following describes the main purpose of asset allocation in a portfolio?

Ensuring all holdings are in one sector

Balancing risk and return by diversifying across asset classes

Eliminating all forms of investment risk

Maximizing trading frequency for higher commissions

#74. Which of the following risks is MOST directly reduced by diversifying a stock portfolio across many industries?

Systematic risk

Interest-rate risk

Business risk

Inflation risk

#75. Which of the following is TRUE about market risk?

It applies only to individual companies

It affects nearly all securities and cannot be diversified away

It can be eliminated through sector rotation

It impacts only fixed-income investments

ARE YOU READY?

LET’S PRACTICE!

Results

#1. Which of the following statements about the Securities Act of 1933 is TRUE?

#2. Which of the following offerings involves a publicly traded issuer selling additional shares to raise capital?

#3. Which of the following securities is LEAST likely to be considered an exempt security under the Securities Act of 1933?

#4. Which market is sometimes called the new issue market?

#5. Which of the following describes a broker-dealer acting in a principal capacity?

#6. Which of the following best describes the role of a trader at a broker-dealer?

#7. Which of the following corporate securities offers ownership with limited liability for investors?

#8. Holders of common stock generally have which of the following rights?

#9. Cumulative preferred stock is attractive to investors because:

#10. Which of the following is TRUE about convertible preferred stock?

#11. Which of the following statements is TRUE about warrants?

#12. Which risk is most associated with purchasing ADRs of foreign issuers?

#13. Which of the following best describes commercial paper?

#14. Which type of bond has the greatest price volatility when interest rates change?

#15. Which of the following BEST describes a serial bond issue?

#16. Which of the following municipal issues would most likely be backed by user fees from a toll bridge?

#17. Which of the following is TRUE regarding general obligation (GO) bonds?

#18. Which of the following statements about Treasury bills is TRUE?

#19. Which of the following is a characteristic of Treasury notes?

#20. Which of the following describes a zero-coupon bond?

#21. Which of the following risks is an investor in zero-coupon bonds MOST exposed to?

#22. Which of the following securities is MOST appropriate for an investor seeking preservation of capital and daily liquidity?

#23. Which of the following investments would be MOST suitable for an investor seeking long-term growth and willing to accept volatility?

#24. Which of the following is a feature of a growth fund?

#25. Which of the following mutual fund types focuses mainly on generating current income?

#26. Which of the following statements about index funds is TRUE?

#27. Which of the following best describes an asset allocation fund?

#28. Dollar-cost averaging works by:

#29. Which of the following best describes a balanced fund?

#30. Which of the following is TRUE about closed-end fund shares?

#31. Which of the following is a primary feature of an ETF compared to a mutual fund?

#32. What is one potential advantage of an ETF over an actively managed mutual fund?

#33. Which of the following best describes a direct participation program (DPP)?

#34. Which of the following is a major disadvantage of DPPs for many investors?

#35. Which of the following investments is MOST likely structured as a DPP?

#36. Which of the following investors would be MOST suitable for a hedge fund investment?

#37. Which of the following securities is MOST appropriate for a customer seeking tax-free income at the federal level?

#38. Which of the following risks is reduced the MOST by diversifying among different asset classes?

#39. Which of the following is a leading economic indicator?

#40. Which of the following is TRUE during an economic expansion?

#41. Which of the following is typically considered a lagging economic indicator?

#42. Which of the following is a primary effect of an easy monetary policy?

#43. Which of the following describes fiscal policy?

#44. Which of the following best describes progressive taxation?

#45. Which of the following summarizes the tax treatment of interest from corporate bonds?

#46. Under Regulation BI, a broker-dealer’s recommendation must:

#47. Form CRS is required to:

#48. Which of the following best describes correspondence under FINRA rules?

#49. Which type of communication is defined as written communication distributed to more than 25 retail investors in a 30-day period?

#50. Which of the following is considered institutional communication?

#51. A registered representative who recommends frequent trades in a customer’s account primarily to generate commissions is engaging in:

#52. Front-running occurs when a firm or representative:

#53. Selling away refers to:

#54. Which of the following is REQUIRED under the USA PATRIOT Act?

#55. A Currency Transaction Report must be filed for:

#56. A Suspicious Activity Report must generally be filed:

#57. Which of the following statements about options accounts is TRUE?

#58. Which of the following is a required element of an options account agreement?

#59. Which of the following investors would be MOST suitable for uncovered options writing?

#60. Which of the following is TRUE about joint tenants with rights of survivorship (JTWROS)?

#61. Which document is typically required to open a partnership account?

#62. Which of the following accounts is specifically established for a minor with an adult managing the assets?

#63. Which of the following accounts is most appropriate for long-term retirement savings with pretax contributions from an employer-sponsored plan?

#64. Which of the following statements about traditional IRAs is TRUE?

#65. Which of the following is generally TRUE about Roth IRA contributions?

#66. Which of the following best describes a defined benefit plan?

#67. Which of the following accounts is designed specifically for higher education expenses with tax advantages?

#68. Which of the following is TRUE regarding time horizon for an investor?

#69. A client with high current income and a need to reduce taxable interest is MOST suitable for:

#70. Which of the following would be MOST appropriate for an investor whose main goal is current income with moderate risk?

#71. Which of the following correctly describes a speculative investment objective?

#72. Which of the following is the BEST example of an investment suitable for a speculative investor?

#73. Which of the following describes the main purpose of asset allocation in a portfolio?

#74. Which of the following risks is MOST directly reduced by diversifying a stock portfolio across many industries?

#75. Which of the following is TRUE about market risk?