85 SIE Practice Exam Questions with Correct Answers

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85 SIE Practice Exam Questions with Correct Answers The Sierra Verde Coffee Company recently developed a new flavor, jasmine chili salted mocha. Unfortunately, the coffee has a horrible taste, and ... the company discontinues the flavor. The costs involved in bringing the new product to market combined with the drop in sales and a reputational hit have translated into a significant drop in the price of the stock. This is an example of what type of risk? A) Market risk B) Interest rate risk C) Business risk D) Default risk >>> C) Business risk Risk that arises out of a poor business decision is business risk. Interest rate risk and default risk impact bond values. Market risk impacts the entire market. Which of the following is an example of systematic risk? A) Interest rate risk B) Default risk C) Call risk D) Business risk >>> A) Interest rate risk Interest rate risk affects all fixed-income investments in a similar way due to the inverse relationship. Business and default risk are issuer specific. Call risk is issue specific, and is generally seen as unsystematic. In the event of a corporate bankruptcy, which of the following is true? A) A shareholder's liability is limited to the amount invested when shares were purchased. B) A shareholder has unlimited liability as an owner of the corporation. C) A shareholder can be obligated to liquidate personal assets to meet the liabilities of the corporation. D) A shareholder can be required to rebate all dividends received during ownership to meet the liabilities of the corporation. >>> A) A shareholder's liability is limited to the amount invested when shares were purchased. Shareholders have limited liability and are personally at risk only for the amount that was invested. Which of the following is not reported on Form U4? A) Aliases B) Marital status C) Employment history D) Residency history >>> B) Marital status Marital status is not on Form U4. The form requires a 5-year residency history, 10-year employment history, and any aliases you use. Risk that is difficult to reduce by diversification within an asset class is called which of these? A) Financial risk B) Unsystematic risk C) Nonsystematic risk D) Systematic risk >>> D) Systematic risk Systematic risk affects an entire asset class in the same way, so diversification does little to reduce systematic risks. Market and interest rate risk are examples. Unsystematic and nonsystematic risk are different terms for the same class of risk. Financial risk is a specific nonsystematic risk. An investor with no other positions in LMN stock purchases 600 shares at the market. This investor is: A) short LMN stock and bullish. B) short LMN stock and bearish. C) long LMN stock and bullish. D) long LMN stock and bearish. >>> C) long LMN stock and bullish. With no other positions in LMN stock, the purchase was an opening transaction. Having purchased the stock in an opening transaction, the investor now has a long position in LMN stock and is bullish—wanting to see the stock rise in value. An IRA can be funded using all of the following except: A) stocks and bonds. B) an investment company. C) securities. D) works of art. >>> D) works of art. IRAs can be funded with stocks, bonds, investment company securities (open- and closed-end funds), U.S.-minted gold and silver coins, and many other securities. There are, however, certain investments that are ineligible in an IRA such as collectibles, antiques works of art, and others. As participants in a firm commitment underwriting agreement, the underwriters know that: [Show More]

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