SIE Exam Section 2: Understanding Products and Their
Risks with all Correct & 100% Verified Answers |Already
Graded A+
Common Stock ✔Correct Answer-Is a security that represents ownership in a corporation.
Exercise control by electing a board of directors and voting on corporate policy.
Are on the bottom of the priority ladder for ownership structure
Have rights to a company's assets only after bondholders, preferred shareholders and other
debt holders are paid in full.
Preferred Stock ✔Correct Answer-Is a class of ownership in a corporation that has a higher
claim on its assets and earnings than common stock.
Generally have a dividend that must be paid out before dividends to common shareholders, and
the shares usually do not carry voting rights.
Preferred stock combines features of debt, in that it pays fixed dividends, and equity, in that it
has the potential to appreciate in price. The details of each preferred stock depend on the issue
Rights ✔Correct Answer-_________ offering is a group of rights offered to existing
shareholders to purchase additional stock shares, known as subscription warrants, in proportion
to their existing holdings. In a rights offering, the subscription price at which each share may be
purchased is generally discounted relative to the current market price. Rights are often
transferable, allowing the holder to sell them in the open market.
Warrants ✔Correct Answer-are a derivative that give the right, but not the obligation, to buy
or sell a security—most commonly an equity—at a certain price before expiration.
An American depositary receipt (ADR) ✔Correct Answer-is a negotiable certificate issued by a
U.S. bank representing a specified number of shares (or one share) in a foreign stock traded on
a U.S. exchange.
Control & Restrictions SEC Rule 144 ✔Correct Answer-When you acquire restricted securities
or hold control securities, you must find an exemption from the SEC's registration requirements
to sell them in a public marketplace. Rule 144 allows public resale of restricted and control
securities if a number of conditions are met.
, A Treasury Bill (T-Bill) ✔Correct Answer-is a short-term debt obligation backed by the Treasury
Department of the U.S. government with a maturity of less than one year, sold in
denominations of $1,000 up to a maximum purchase of $5 million on noncompetitive bids.
________ have various maturities and are issued at a discount from par.
A Treasury Note ✔Correct Answer-is a marketable U.S. government debt security with a fixed
interest rate and a maturity between one and 10 years.
Treasury Receipts ✔Correct Answer-is a zero-coupon bond that does not pay interest at
regular intervals between the date of issue and maturity, but instead accrues the interest and
pays it with the principal at maturity.
A Treasury bond (T-bond) ✔Correct Answer-is a marketable, fixed-interest U.S. government
debt security with a maturity of more than 10 years. Treasury bonds make interest payments
semiannually, and the income received is only taxed at the federal level. Treasury bonds are
known in the market as primarily risk-free; they are issued by the U.S. government with very
little risk of default.
An asset-backed security (ABS) ✔Correct Answer-is a financial security collateralized by a pool
of assets such as loans, leases, credit card debt, royalties or receivables.
A mortgage-backed security (MBS) ✔Correct Answer-is a type of asset-backed security that is
secured by a mortgage or collection of mortgages.
Corporate Bonds ✔Correct Answer-is a debt security issued by a corporation and sold to
investors. The backing for the bond is usually the payment ability of the company, which is
typically money to be earned from future operations. In some cases, the company's physical
assets may be used as collateral for bonds.
Municipal Securities ✔Correct Answer-A municipal bond is a debt security issued by a state,
municipality or county to finance its capital expenditures, including the construction of
highways, bridges or schools. Municipal bonds are exempt from federal taxes and most state
and local taxes, making them especially attractive to people in high income tax brackets.
General obligation (GO) bonds ✔Correct Answer-A general obligation bond (GO) is a
municipal bond backed by the credit and taxing power of the issuing jurisdiction rather than the
revenue from a given project. General obligation bonds are issued with the belief that a
municipality will be able to repay its debt obligation through taxation or revenue from projects.
No assets are used as collateral.
Revenue Bonds ✔Correct Answer-is a municipal bond supported by the revenue from a
specific project, such as a toll bridge, highway or local stadium. Revenue bonds are municipal
bonds that finance income-producing projects and are secured by a specified revenue source.
Risks with all Correct & 100% Verified Answers |Already
Graded A+
Common Stock ✔Correct Answer-Is a security that represents ownership in a corporation.
Exercise control by electing a board of directors and voting on corporate policy.
Are on the bottom of the priority ladder for ownership structure
Have rights to a company's assets only after bondholders, preferred shareholders and other
debt holders are paid in full.
Preferred Stock ✔Correct Answer-Is a class of ownership in a corporation that has a higher
claim on its assets and earnings than common stock.
Generally have a dividend that must be paid out before dividends to common shareholders, and
the shares usually do not carry voting rights.
Preferred stock combines features of debt, in that it pays fixed dividends, and equity, in that it
has the potential to appreciate in price. The details of each preferred stock depend on the issue
Rights ✔Correct Answer-_________ offering is a group of rights offered to existing
shareholders to purchase additional stock shares, known as subscription warrants, in proportion
to their existing holdings. In a rights offering, the subscription price at which each share may be
purchased is generally discounted relative to the current market price. Rights are often
transferable, allowing the holder to sell them in the open market.
Warrants ✔Correct Answer-are a derivative that give the right, but not the obligation, to buy
or sell a security—most commonly an equity—at a certain price before expiration.
An American depositary receipt (ADR) ✔Correct Answer-is a negotiable certificate issued by a
U.S. bank representing a specified number of shares (or one share) in a foreign stock traded on
a U.S. exchange.
Control & Restrictions SEC Rule 144 ✔Correct Answer-When you acquire restricted securities
or hold control securities, you must find an exemption from the SEC's registration requirements
to sell them in a public marketplace. Rule 144 allows public resale of restricted and control
securities if a number of conditions are met.
, A Treasury Bill (T-Bill) ✔Correct Answer-is a short-term debt obligation backed by the Treasury
Department of the U.S. government with a maturity of less than one year, sold in
denominations of $1,000 up to a maximum purchase of $5 million on noncompetitive bids.
________ have various maturities and are issued at a discount from par.
A Treasury Note ✔Correct Answer-is a marketable U.S. government debt security with a fixed
interest rate and a maturity between one and 10 years.
Treasury Receipts ✔Correct Answer-is a zero-coupon bond that does not pay interest at
regular intervals between the date of issue and maturity, but instead accrues the interest and
pays it with the principal at maturity.
A Treasury bond (T-bond) ✔Correct Answer-is a marketable, fixed-interest U.S. government
debt security with a maturity of more than 10 years. Treasury bonds make interest payments
semiannually, and the income received is only taxed at the federal level. Treasury bonds are
known in the market as primarily risk-free; they are issued by the U.S. government with very
little risk of default.
An asset-backed security (ABS) ✔Correct Answer-is a financial security collateralized by a pool
of assets such as loans, leases, credit card debt, royalties or receivables.
A mortgage-backed security (MBS) ✔Correct Answer-is a type of asset-backed security that is
secured by a mortgage or collection of mortgages.
Corporate Bonds ✔Correct Answer-is a debt security issued by a corporation and sold to
investors. The backing for the bond is usually the payment ability of the company, which is
typically money to be earned from future operations. In some cases, the company's physical
assets may be used as collateral for bonds.
Municipal Securities ✔Correct Answer-A municipal bond is a debt security issued by a state,
municipality or county to finance its capital expenditures, including the construction of
highways, bridges or schools. Municipal bonds are exempt from federal taxes and most state
and local taxes, making them especially attractive to people in high income tax brackets.
General obligation (GO) bonds ✔Correct Answer-A general obligation bond (GO) is a
municipal bond backed by the credit and taxing power of the issuing jurisdiction rather than the
revenue from a given project. General obligation bonds are issued with the belief that a
municipality will be able to repay its debt obligation through taxation or revenue from projects.
No assets are used as collateral.
Revenue Bonds ✔Correct Answer-is a municipal bond supported by the revenue from a
specific project, such as a toll bridge, highway or local stadium. Revenue bonds are municipal
bonds that finance income-producing projects and are secured by a specified revenue source.
