SIE Predictor exam caril. Review
Questions & Answers. Latest version.
100% Accurate.
What type of risk is unique to a specific industry, business enterprise, or investment type? - ✔✔-
Nonsystematic risk
Under whic
...
SIE Predictor exam caril. Review
Questions & Answers. Latest version.
100% Accurate.
What type of risk is unique to a specific industry, business enterprise, or investment type? - ✔✔-
Nonsystematic risk
Under which of the following circumstances is an investor in a position to acquire stock? - ✔✔-Buy a call,
sell a call (The holder of a call has the right to buy stock at the strike price if exercised. The seller of a put
is obligated to buy stock at the strike price if exercised)
Options- a premium - ✔✔-the cost of an option contract, expressed in dollars per share of the
underlying stock
Options- strike price - ✔✔-The price at which the stock will be bought or sold if the contract is exercised,
expressed in dollars per share
A customer believes that ABC's price will go up but does not have the money to buy 100 shares right
now. How could the customer use options to profit from an increase in the stock's price? - ✔✔-buy calls,
write puts (both are bullish)
A corporation's offer to current stockholders of the ability to purchase a proportionate number of new
shares at a specific price for a limited time is called a - ✔✔-right (they usually expire in 30-45 days)
American depositary receipts (ADRs) - ✔✔-issued by banks, represent a specific number of shares of a
foreign company, and trade and pay dividends in dollars
Which of the following records must be maintained for 6 years? - ✔✔-Customer ledgers (statements)
While underwriters can assist with preparation and filing, the accuracy and adequacy of these
documents is the responsibility of the - ✔✔-Issuing corporation
What institutions serve as depository and clearing facilities? - ✔✔-Depository Trust Company and
National Securities Clearing Corporation (most specifically) then carrying and clearing firms can act as
these as well.
What is a transfer agent? - ✔✔-(often a bank) for a corporation is responsible for ensuring that its
securities are issued in the correct owner's name, canceling old and issuing new certificates, maintaining
records of ownership, and handling problems relating to lost, stolen, or destroyed certificates
What is the function of the clearing corporation? - ✔✔-Acting as an intermediary in a trade, examples of
these can be a commercial bank, can be a broker-dealer but doesn't have to be
Who is considered a control person (security) - ✔✔-those owned by directors, officers, or persons
(which include corporations, trusts, etc.) who own or control 10% or more of the issuer's equity
securities (an unaffiliated person would have to own 10% or more of the outstanding shares)
What are the two components of Return on Investment? - ✔✔-Capital gains and income
To expand the overall economy, we want to - ✔✔-buy securities via open-market operations, pushing
interest rates down
To meet a Regulation T margin call, a customer would have how long? - ✔✔-settlement plus 2 additional
business days (or S + 2)
What is A fully disclosed broker-dealer - ✔✔-one that introduces its business to a carrying firm to clear
transactions
The regulation enacted by the SEC to protect the privacy of customer information is known as - ✔✔-
Regulation S-P
A market maker that does not honor its firm quote is said to be - ✔✔-"backing away"
A deficit in the U.S. balance of payments can occur if - ✔✔-interest rates in foreign countries are higher
than U.S. domestic rates and U.S. consumers are purchasing (importing) foreign goods
The general partner of a limited partnership has responsibility of - ✔✔-Organizing and managing the
partnership, assumes unlimited liability, and is responsible for paying all partnership debts
To grow or expand the economy, U.S. fiscal policy should be to - ✔✔-cut taxes (so consumers have more
money to spend) and increase government spending for programs and development (to create more
jobs)
What is the federal funds rate - ✔✔-the rate commercial money center banks charge each other for an
overnight, unsecured loan
The Federal Open Market Committee (FOMC) - ✔✔-buy or sell Treasury securities in the open market.
Purchases add money to the economy, making the money available to lend more plentiful, and sales
take money out of the economy, making money available to lend less plentiful.
Reports of rising inventories generally occur during which period of the business cycle? - ✔✔-
Contraction, due to a lack of consumer demand
Who is exempt from registering with SIPC? - ✔✔-Those who deal exclusively with US Government
securities (i.e.-Treasury bonds), exclusively municipality securities, and in redeemable investment
company securities
Retail investor - ✔✔-An individual who makes investments such as the purchase of securities for his or
her account rather than for an organization
Market maker - ✔✔-Any entity, individual or organization, willing to accept the risk of holding a
particular security in its own account to facilitate trading and provide liquidity in that security
When the Federal Reserve Board wants to expand (loosen) the money supply, it will - ✔✔-buy Treasury
securities from banks in the open market
SROs functioning under the SEC include... - ✔✔-FINRA, MSRB and CBOE
Mild inflation can - ✔✔-encourage growth and stimulate the economy
Discount rate - ✔✔-The rate the FRB charges member banks
Prime rate - ✔✔-The rate commercial banks (Wells Fargo) charges their most creditworthy investors
(Lincoln Financial). Prime rate decreases when banks sell securities because there's money money in the
market and don't need to charge as much. Raise the rate when they buy securities.
4 stages of the business cycle - ✔✔-expansion (recovery), peak (prosperity), contraction (decline),
trough, and then expansion (recovery) again
Securities Act of 1933 - ✔✔-(The Paper Act, Prospectus Act, New Issues Act) requires that issuers who
want to raise capital by making a public offering of securities to the public, provide full and fair
disclosure of all material facts about the company and the securities being offered.
To contract or slow economic growth U.S. fiscal policy should be to - ✔✔-raise taxes and cut
government spending for programs and development
Out of the federal funds rate, discount rate, prime rate and broker call loan rate, which is the most
volatile? - ✔✔-Federal funds rate because of the overnight offerings (short-term)
The shelf offering (registration) provision under the Securities Act of 1933 allows - ✔✔-issuers to quickly
raise capital when needed or when market conditions are favorable.
Types of direct participation programs (DPPs) - ✔✔-real estate, gas and oil, and leasing programs
Long vs short investor - ✔✔-Long (buy), short (sell)
Debenture - ✔✔-a debt obligation of a corporation backed only by its word and general
creditworthiness, written promises of the corporation to pay the principal at its due date and interest on
a regular basis.
Municipal revenue bonds - ✔✔-bonds issued to finance a project or facility with the bonds' debt service
backed by the facility's revenue stream. The revenue might come from rents, tolls, or admission fees,
among other sources.
Build America Bonds (BABs) - ✔✔-Taxable municipal securities. Two types: Direct Payment ( provide the
municipal issuer with payments from the U.S. Treasury) and Tax Credit, or Issuer (provide the
bondholder with a federal income tax credit)
Long 1 XYZ January 50, put at 2. What is the max. potential gain? - ✔✔-"Investor BOUGHT 100 shares of
XYZ in January at $50 per share, the premium is $2."
Maximum gain for a long put is calculated by subtracting the premium from the strike price (50 − 2 = 48
per share). One contract represents 100 shares, so the buyer's maximum gain is $4,800 (this occurs if
the stock becomes worthless).
Adjusted cost basis problem - ✔✔-see example on page 129 under dividends
When must a suspicious activity report (SAR) be filed with FinCEN after noticing suspicious activity in an
account? - ✔✔-within 30 calendar days, the client may not know he is subject to an SAR.
When can corporate accounts trade on margin? - ✔✔-Only when it is not listed as being restricted for
doing so.
When securities are held in street name, who is the beneficial owner? - ✔✔-The security is put in the
broker-dealers name, but the customer is still the beneficial owner.
What are the requirements of a business continuity plan (BCP) if there is a major business disruption in
the firm? - ✔✔-Data backup and recovery (hard and electronic copies), alternate business location for
employees, and prompt customer access to funds and securities
What securities can be purchased on margin? - ✔✔-Equities, bonds and warrants. Mutual funds cannot
be purchased on margin, but can be used as collateral after being held for 30 days.
Spin-off - ✔✔-When one company sells all of the shares of another it own
Stagflation - ✔✔-When inflation and stagnation occur simultaneously: a period of high unemployment
and lack of growth and business activity (stagnation) and high unemployment and lack of growth and
business activity (inflation)
Keynesian theory - ✔✔-Government intervention in the economy is a significant force in creating
prosperity by engaging in activities that affect aggregate demand.
Deflation - ✔✔-a general decline in prices occurring during severe recessions and the unemployment
rate is rising.
Fourth market - ✔✔-market for institutional investors in which blocks of stock trade through electronic
communications networks (ECNs) that are open 24 hours a day acting as agents
bullish position are... - ✔✔-long (owning/buying a security in hopes that they can resell it at a higher
price later & owning securities that can be converted into rights, warrants and long calls)
bearish positions are... - ✔✔-short
An investor purchased 100 shares of Acme Shoelace stock for $20 per share. Four years later, the
investor sold the stock for $28 per share. This investor would report these transactions, on a per share
basis, as - ✔✔-$20 cost base, $8 capital gains (cost base: the price paid for the security, capital gain/loss:
difference between the cost base and price security sold for later)
A member firm holding stock in street name may vote the shares as it sees fit if - ✔✔-the customer does
not return the signed proxy statement by the 10th day before the shareholders' meeting, and if the
matters to be voted on are of minor importance.
What records have to be maintained for 6 years? - ✔✔-Blotters, general ledger, stock ledger, customer
ledger, and customer account records
Churning - ✔✔-Excess trading in a customer's account, can happen in discretionary and
nondiscretionary accounts
What will be found in a trade confirmation? - ✔✔
[Show More]
