SIE Practice Quiz
Questions: 16 · 10 minutes
1. An investor owns a conventional fixed-rate bond. If market interest rates rise substantially, what will generally happen to the bond's market price?
It will rise because its fixed payments become more valuable
It will remain at par until maturity regardless of market rates
It will fall because newer bonds can offer more competitive yields
It will automatically convert into common stock
2. A SIPC-member brokerage firm fails, and customer securities are missing from accounts. Which organization may help restore eligible customer assets within applicable limits?
The Federal Reserve Board
The Securities Investor Protection Corporation
The Municipal Securities Rulemaking Board
The Federal Deposit Insurance Corporation
3. Which organization administers and enforces federal securities laws in the United States?
The Federal Deposit Insurance Corporation (FDIC)
The Financial Industry Regulatory Authority (FINRA)
The Securities Investor Protection Corporation (SIPC)
The Securities and Exchange Commission (SEC)
4. At what price are purchases and redemptions of open-end mutual fund shares generally executed?
At a price fixed for the entire calendar month
At an intraday price negotiated directly with another investor
At the fund's original public offering price
At the next calculated net asset value, adjusted for any applicable charges
5. An employee has most of a retirement account invested in the stock of the employee's own company. Which action would most directly reduce company-specific risk?
Buying additional shares whenever the stock price falls
Spreading investments across different issuers, industries, and asset types
Holding the shares for a longer period without changing the allocation
Replacing the shares with one other company's stock
6. An investor wants to buy a stock only if it can be purchased for $30 per share or less. Which order is appropriate?
A sell stop order at $30
A buy stop order at $30
A market order entered when the stock approaches $30
A buy limit order at $30
7. A corporation sells newly issued shares to investors to raise money for expansion. In which market does this transaction occur?
The auction market
The primary market
The secondary market
The money market
8. Which statement describes a common federal tax feature of municipal bonds?
Their interest is always exempt from every federal, state, and local tax
Interest from most municipal bonds is generally exempt from federal income tax
Their principal is guaranteed by the federal government
Their capital gains are never taxable
9. What is a primary responsibility of FINRA?
Regulating member broker-dealers under SEC oversight
Insuring bank deposits against bank failure
Setting federal income-tax rates for investment gains
Issuing Treasury securities to finance federal spending
10. A bond has a $1,000 par value, pays $60 in annual interest, and currently trades for $800. What is its current yield?
7.5%
7.0%
6.0%
8.0%
11. Which feature is generally associated with common stock ownership?
Priority over all bondholders if the issuer is liquidated
A contractual promise that dividends will be paid every quarter
A residual claim on corporate assets and potential voting rights
Federal insurance against a decline in market value
12. Which statement accurately compares an exchange-traded fund with a traditional open-end mutual fund?
An ETF can trade intraday, while open-end mutual fund transactions use the next calculated NAV
An ETF guarantees its market price will always equal its net asset value
An ETF is federally insured, while an open-end mutual fund is not
An ETF always has active management, while an open-end mutual fund never does
13. The Federal Reserve purchases Treasury securities in the open market. What is the most likely immediate monetary effect?
Bank reserves decrease, placing upward pressure on short-term rates
Corporate tax rates automatically decrease
Bank reserves increase, placing downward pressure on short-term rates
The Treasury stops issuing new debt
14. An employee learns material, nonpublic information about an upcoming merger and tells a friend, who then trades on it. What is the central regulatory concern?
Potential insider trading involving a tipper and tippee
Selling an unregistered mutual fund
Market manipulation through matched orders
Improper diversification of the friend's portfolio
15. A call option has a strike price of $45, and the underlying stock is trading at $48. What right does the call holder have?
The right to sell the stock at $48
The obligation to buy the stock at $45
The right to buy the stock at $45 before expiration, subject to the contract terms
The right to receive the stock's dividends without owning or exercising the option
16. A customer prioritizes immediate execution of a stock trade and accepts uncertainty about the final execution price. Which order best matches that priority?
A good-til-canceled limit order
A buy limit order
A sell stop order
A market order