SIE Exam Practice Questions & Answers
Latest update: Quiz & Correct answers
all of the following accounts are for unincorporated business except:
sole proprietorship accounts
corporate accounts
partnership accounts
...
SIE Exam Practice Questions & Answers
Latest update: Quiz & Correct answers
all of the following accounts are for unincorporated business except:
sole proprietorship accounts
corporate accounts
partnership accounts
limited liability company accounts - ✔✔corporate accounts - corporations are incorporated
In an irrevocable trust may or must do which of the following?
I. May change the terms of the trust
II. Must give up ownership of items placed in the trust
III. May reduce estate taxes
IV. May retain ownership of items placed in the trust - ✔✔II and III - The grantor may be able to avoid
some of the tax consequences because he gives up ownership of items in the trust and cannot change
the terms of the trust once established.
A customer wants to save some money for his grandson's college education in an IRA account. Which of
the following regarding a Coverdell Education Savings Account (ESA) is true?
A)The maximum contribution permitted is $3,000 annually.
B)The funds must be distributed by the time the grandchild attains age 30, unless they are rolled over.
C)The customer may take a deduction for the amount contributed.
D)The customer may make annual contributions until the grandson graduates from college. - ✔✔B -Any
unused balance must be rolled over or distributed by the time the beneficiary attains age 30.
Craig and Judy have just married. It is a second marriage for both of them and they both have kids from
a prior marriage. Craig would like his portion of their account to go to his kids when he dies and Judy
would like her portion to go to her kids when she dies. As new partners in marriage, while they are both
alive they would both like to have full access to the account. What type of account(s) should they set
up?
A)A partnership account
B)Each should set up their own individual TOD account with limited POA
C)Joint tenants with rights of survivorship
D)Joint tenants in common (TIC) - ✔✔D - The TIC account does exactly what the requested the JTWOS
does not separate their assets at death. Instead the whole account would go to the surviving spouse
individual accounts with limited POA and TOD would not give both full access to the account. The
partnership account is for business accounts.
One difference between an UTMA account and an UGMA account is - ✔✔an UTMA account has a wider
set of allowed investments.
Sam Malloy owns a small business and has built a substantial estate both with his business success and
his early career as a pro athlete. He would like to begin to move assets out of his estate in a way that will
allow him to benefit from the assets, but also allows for an easy transfer to his heirs when he dies. He
needs to lower the size of his estate before he passes and hates the idea of a public hearing that is part
of probate. Sam should
A)place his assets in a transfer on death account.
B)establish a revocable living trust.
C)establish an irrevocable living trust.
D)create a last will and testament. - ✔✔C) establish an irrevocable living trust.
Your customer, Jim, wants to deposit money into a 529 College Savings plan for his great-niece
Penelope. He states four reasons why he likes the 529 plan. Unfortunately, you need to tell him he is
incorrect on one point. Which of his following points is not considered a feature of a 529 College Savings
Plan?
A)The money grows tax deferred.
B)The growth can be tax free if used for qualified education expenses.
C)She has to use the money by the time she turns 30, so she will not be able to put it off too long.
D)If she gets into a good prep school the money can be used for that as well as college. - ✔✔C) She has
to use the money by the time she turns 30, so she will not be able to put it off too long.
Sam Malloy owns a small business and has built a substantial estate both with his business success and
his early career as a pro athlete. He wants to set up his estate in a way that he will control the assets
until he passes away or becomes incapacitated. Once that time comes, he wants control to transfer
easily and he wants to avoid probate. Sam should
A)establish an irrevocable living trust.
B)establish a revocable living trust.
C)place his assets in a transfer on death account.
D)create a last will and testament. - ✔✔B) establish a revocable living trust.
Which of the following are true of both qualified plans and nonqualified plans?
A)Contributions are not tax deductible
B)Contributions are tax deductible
C)The accounts grow tax deferred
D)Tax on interest and dividends are deferred, but not on capital gains - ✔✔C)
The accounts grow tax deferred
Each of the following investments and practices are deemed ineligible for an IRA or any other retirement
plan except
A)variable annuities.
B)margin account trading.
C)life insurance.
D)collectible fine art. - ✔✔A)
variable annuities.
Distributions from IRAs are taxed at - ✔✔ordinary income tax rates on the full amount of the
distribution.
Which of the following are true of nonqualified plans but not true of qualified plans?
I. Contributions are not tax deductible.
II. Contributions are tax deductible.
III. Plan needs IRS approval.
IV. Plan does not need IRS approval. - ✔✔I and IV - Qualified plans require IRS approval and the
contributions are tax deductible. Because nonqualified plans' contributions are not deductible they do
not require IRS approval.
Which of the following are true of qualified plans but not true of nonqualified plans?
A)The plan may discriminate
B)All withdrawals are taxable above cost basis
C)All withdrawals are tax free
D)The plan cannot discriminate - ✔✔D) The plan cannot discriminate
Who benefits most from a defined benefit plan? - ✔✔Because the older employee has fewer years left
to work, the contribution made by the company will be higher.
All of the following are true of Roth IRAs except
A)Contributions may be deductible depending on income limits
B)Withdrawals are not required at age 72
C)Contributions are made after tax
D)Contributions may be able to be made after 72 - ✔✔A)
Contributions may be deductible depending on income limits
Margin calls can be met with deposits of - ✔✔cash or fully paid for marginable securities.
What must precede the first trade in an account? - ✔✔Approval of the new account by a principal
Which of the following transactions if any, must be done in a margin account?
A)Buy 100 ABC to open.
B)Sell 100 ABC to open.
C)Buy 100 ABC to close.
D)All of these must be done in a margin account. - ✔✔B)
Sell 100 ABC to open. - Selling to open (a short sell) can only be done in a margin account the others can
be done in a cash account or margin account.
Which of the following is true regarding accounts trading on margin?
A)A fiduciary account may only trade on margin if it is specifically permitted in the trust or custodial
agreement.
B)A partnership account may only trade on margin if it is specifically permitted in the partnership
resolution.
C)A corporate account may only trade on margin if it is specifically permitted in the corporate charter.
D)Joint accounts or those with more than one party titled on the account may never trade on margin. -
✔✔A) A fiduciary account may only trade on margin if it is specifically permitted in the trust or custodial
agreement.
A customer receives a Regulation T margin call for $3,200. To meet the deposit requirement, which of
the following can be deposited?
A)
Fully paid for marginable securities totaling $1,600 in market value
B)
Fully paid for marginable securities totaling $6,400 in market value
C)
Fully paid for marginable securities totaling $3,200 in market value
D)
Cash in the amount of $1,600 - ✔✔B)
Fully paid for marginable securities totaling $6,400 in market value -
When meeting a Regulation T margin call with cash, 100% of the call must be deposited—in this case,
$3,200. If using fully paid for marginable securities to meet the call, a deposit totaling twice the amount
of the call must be made—in this case, $6,400. This is because securities are only marginable to 50% of
their value.
As long as it is not restricted in any documentation, margin trading is permissible in which of the
following accounts?
I. Corporate
II. IRA
III. Partnership
IV. Fiduciary - ✔✔I and III
Which of the following would constitute improper use of a customer's securities or funds?
I. Agreeing to a stock purchase the representative thinks is beyond the client's means
II. Selling a bond at the client's insistence during a period of high interest rates
III. Lending securities for a short sale when the client has agreed to it on the phone
IV. Borrowing a client's funds without permission, though it will be repaid the same day - ✔✔III and IV
Regarding purchases on margin, which of the following is true?
A)
Neither rights nor warrants can be purchased on margin.
B)
Warrants can be purchased on margin, but rights cannot.
C)
Warrants and rights can both be purchased on margin.
D)
Rights can be purchased on margin, but warrants cannot. - ✔✔B)
Warrants can be purchased on margin, but rights cannot.
Which of the following statements is the most correct regarding customer accounts?
A)
Hypothecation agreements are required for joint cash accounts only.
B)
Only margin accounts need to be approved by an authorized principal of a broker-dealer.
C)
A customer may open both a cash and margin account at the same time.
D)
Cash accounts need to be approved by a principal promptly after the first trade. - ✔✔C)
A customer may open both a cash and margin account at the same time.
To meet a Regulation T margin call, a customer would have how long?
A)
Trade date plus two additional business days
B)
Settlement plus two additional busines
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