SIE PRACTICE EXAM 3 QUESTIONS &
ANSWERS RATED 100% CORRECT
All but which of the following statements are correct regarding bonds and preferred
stock?
A. If a company declares bankruptcy, bondholders are repaid before preferred stock
shareholders.
B. Preferred stocks pay dividends; bonds pay interest.
C. Bonds are subject to greater interest rate risk than preferred stock.
D. Neither bond interest nor preferred stock dividends qualify for capital gains treatment.
- Correct Answer ✔✔ C
Which of the following is correct regarding a pre-emptive right?
A. It is also referred to as a "subscription right" or a "subscription privilege."
B. It is an obligation for existing shareholders to purchase new shares of stock before
they are offered to the public.
C. Exercising a pre-emptive right can cause dilution.
D. All of the above are correct. - Correct Answer ✔✔ A
Which of the following is a characteristic of American Depository Receipts (ADRs)?
A. ADRs trade once per day like mutual funds.
B. ADR holders receive foreign tax credits for income tax paid to a foreign country.
C. ADR dividends are declared in U.S. dollars.
D. ADRs allow domestic securities to be traded in foreign countries. - Correct Answer
✔✔ B
Which of the following is the measure of a company's earnings per share if all
convertible securities were exercised and converted to common stock?
A. Converted earnings per share
B. Conversion ratio per share
C. Diluted earnings per share
D. Price/earnings per share - Correct Answer ✔✔ C
Which of the following is the voice of state securities agencies responsible for efficient
capital formation and grass-roots investor protection in the U.S.? Their fundamental
mission is to protect consumers who purchase securities or investment advice, and their
jurisdiction extends to a wide variety of issuers and intermediaries who offer and sell
securities to the public.
A. NAIC
, B. NASAA
C. NASD
D. SIPC - Correct Answer ✔✔ B
Which of the following is defined as the benefit provided to an asset manager by a
broker-dealer as a result of commissions generated from financial transactions
executed by the broker-dealer?
A. 12b-1 compensation
B. Administrative compensation
C. Hard-dollar compensation
D. Soft-dollar compensation - Correct Answer ✔✔ D
Which of the following is/are correct regarding interest paid from municipal bonds?
(1) Interest paid from municipal bonds is not taxed by the federal government.
(2) Interest paid from municipal bonds is never taxable at the state level.
A. (1) only
B. (2) only
C. Both (1) and (2) are correct.
D. Neither (1) or (2) are correct. - Correct Answer ✔✔ A
All but which of the following are correct regarding investment adviser representatives
(IARs)?
A. Every investment advisory firm must have at least one IAR registered to the firm.
B. An IAR can be a dual registrant of multiple firms in some states only.
C. There are currently no continuing education requirements for IARs.
D. An IAR does not need to be registered to an RIA firm in order to conduct investment
advisory business. - Correct Answer ✔✔ D
Which of the following is an investor protection requirement that obligates a broker-
dealer to exercise reasonable care to execute a customer's order in a way to obtain the
most advantageous terms for the customer?
A. Best execution
B. Price execution
C. Price improvement
D. Prudent man rule - Correct Answer ✔✔ A
A health savings account (HSA) allows the account holder to set aside money on a/an
__________ basis to pay for __________ medical expenses.
A. after-tax, qualified
B. after-tax, unqualified
ANSWERS RATED 100% CORRECT
All but which of the following statements are correct regarding bonds and preferred
stock?
A. If a company declares bankruptcy, bondholders are repaid before preferred stock
shareholders.
B. Preferred stocks pay dividends; bonds pay interest.
C. Bonds are subject to greater interest rate risk than preferred stock.
D. Neither bond interest nor preferred stock dividends qualify for capital gains treatment.
- Correct Answer ✔✔ C
Which of the following is correct regarding a pre-emptive right?
A. It is also referred to as a "subscription right" or a "subscription privilege."
B. It is an obligation for existing shareholders to purchase new shares of stock before
they are offered to the public.
C. Exercising a pre-emptive right can cause dilution.
D. All of the above are correct. - Correct Answer ✔✔ A
Which of the following is a characteristic of American Depository Receipts (ADRs)?
A. ADRs trade once per day like mutual funds.
B. ADR holders receive foreign tax credits for income tax paid to a foreign country.
C. ADR dividends are declared in U.S. dollars.
D. ADRs allow domestic securities to be traded in foreign countries. - Correct Answer
✔✔ B
Which of the following is the measure of a company's earnings per share if all
convertible securities were exercised and converted to common stock?
A. Converted earnings per share
B. Conversion ratio per share
C. Diluted earnings per share
D. Price/earnings per share - Correct Answer ✔✔ C
Which of the following is the voice of state securities agencies responsible for efficient
capital formation and grass-roots investor protection in the U.S.? Their fundamental
mission is to protect consumers who purchase securities or investment advice, and their
jurisdiction extends to a wide variety of issuers and intermediaries who offer and sell
securities to the public.
A. NAIC
, B. NASAA
C. NASD
D. SIPC - Correct Answer ✔✔ B
Which of the following is defined as the benefit provided to an asset manager by a
broker-dealer as a result of commissions generated from financial transactions
executed by the broker-dealer?
A. 12b-1 compensation
B. Administrative compensation
C. Hard-dollar compensation
D. Soft-dollar compensation - Correct Answer ✔✔ D
Which of the following is/are correct regarding interest paid from municipal bonds?
(1) Interest paid from municipal bonds is not taxed by the federal government.
(2) Interest paid from municipal bonds is never taxable at the state level.
A. (1) only
B. (2) only
C. Both (1) and (2) are correct.
D. Neither (1) or (2) are correct. - Correct Answer ✔✔ A
All but which of the following are correct regarding investment adviser representatives
(IARs)?
A. Every investment advisory firm must have at least one IAR registered to the firm.
B. An IAR can be a dual registrant of multiple firms in some states only.
C. There are currently no continuing education requirements for IARs.
D. An IAR does not need to be registered to an RIA firm in order to conduct investment
advisory business. - Correct Answer ✔✔ D
Which of the following is an investor protection requirement that obligates a broker-
dealer to exercise reasonable care to execute a customer's order in a way to obtain the
most advantageous terms for the customer?
A. Best execution
B. Price execution
C. Price improvement
D. Prudent man rule - Correct Answer ✔✔ A
A health savings account (HSA) allows the account holder to set aside money on a/an
__________ basis to pay for __________ medical expenses.
A. after-tax, qualified
B. after-tax, unqualified
