FINRA SIE Exam Questions with Answers 2023/2024 latest updated, Exams of Business Economics

Download FINRA SIE Exam Questions with Answers 2023/2024 latest updated and more Exams Business Economics in PDF only on Docsity! FINRA SIE Exam Questions with Answers 2023/2024 latest updated Page 1 of 90  If interest Rates fall the issuer will most likely call which bonds first? - Correct answer High Dividend Rate preferred issues trading at a premium  What are some actions by a corporation will affect an individuals common shareholder's equity - Correct answer Conversion Page 2 of 90 Can be callable by issuer, both have periodic payments. Both are senior securities to common stock.  Neither have voting rights  Preferred is paid dividends on a percentage of face value much like the yield of a bond.  Preferred stock has no maturity date and can be held perpetually while bonds have a set maturity date. Page 5 of 90  Payments to preferred stock are not mandatory unless a declared dividend has been issued to common stock  Payments to bond holders are mandatory  When are common dividends declared and paid? - Correct answer Quarterly for both Page 6 of 90  A customer owns 256 shares of ABC common stock. ABC declares a rights offering, with the terms being that for every 15 rights a shareholder may purchase one additional share.at $24 a share. Any fractional rights may be rounded up to buy an additional share.  How many shares may the customer buy with these right? - Correct answer A Page 7 of 90 Correct answer 10,000 Shares with $560.,000  Explanation  400 BP x $1.4 = 560  $560,000 / 560 BP/share = 10,000 Shares of XXYZ  Preferred Stock market valuation is based primarily on what? Page 10 of 90  Performance of stock?  Inflation?  Interest rates? - Correct answer Interest Rates is the correct answer, remember that preferred stock is much like a bond in that it has fixed payments and is considered fixed income. Page 11 of 90  Long term market interest rate levels determine the valuation.  Rights are? - Correct answer Exerciserable, Negotiable (can be traded), Giftable  Dividends can be paid in the form of? - Correct answer Cash or products Page 12 of 90  US Treasury Bonds  Treasury Bills  Prime Commercial Paper  Prime Banker's Acceptances - Correct answer 3) Prime commercial paper is not traded by the Federal Reserve therefore does not settle in Fed Funds Page 15 of 90  Prime Banker's Acceptances, T Bills, T Bonds, are all settled in Fed Funds  All of the following are sources of income that can be used to service debt on municipal revenue bonds Except?  Toll Fees  Park Fees  Capitalized interest Page 16 of 90  Sales Tax - Correct answer Capitalized interest (property tax) is not used in revenue bonds, it is only used in General Obligation Bonds  A corporation issued a 7% AA sinking fund debenture at par. Three years later, similar issues are being issues at 8%. Which of the following is true about the outstanding 7% issue? How does the current Page 17 of 90  How would you quote a US Government bond with a dollar price of  $1012.50? - Correct answer 101-8  US GOVT bonds are quoted on a percentage of par at 1/32nds Page 20 of 90  101 + 8/32 = 101.25 then multiply by 10x to get to par  $1012.50  A corporation has issued 9%, $1,000 par convertible debenture which convert at $50. The common stock is currently trading at $60. If the bond and the common stock are trading at parity a customer purchasing 5M of Page 21 of 90 the bonds will pay: - Correct answer Answer $6,000.  The bonds are convertible at $50, based on a $1,000 par value therefore each bond convert into 20 shares at $50. If the common stock is trading at $60 the bond must be trading at $60 x 20 = $1,200 Page 22 of 90 nominal yield. The dollar price of the bond will be at a premium.  Nominal (stated) = .08  Market price of bond = .08/.07 = 1,143  Current Yield = 80 / 1143 = .06999 Page 25 of 90  New issues of Government debt are issued in what form?  Fully registered  Fully registered to principal  Book entry  Mega super registered to a bro - Correct answer Book entry Page 26 of 90  All new corporate bonds are issued in what form?  Fully registered  Book entry  Mega man entry  Registered to principal - Correct answer Book entry  zero coupon bond - Correct answer a bond that makes no coupon payments Page 27 of 90  Treasury notes and Bonds are registered in? o Bearer securities o Registered to interest only o Registered to principal only o Fully registered in book entry form - Correct answer D Page 30 of 90  Government and Corporate are registered in book entry form  Which statements are true regarding the relationship interest rates and preferred stock? - Correct answer When interest rates rise preferred stock prices will fall Page 31 of 90  When interest rates fall the preferred stock prices will rise.  They are inverse! Similar to Bonds  At the time of "when and as if issued" trade the: Page 32 of 90 Investment Company Act of 1940 - Correct answer 1) Management Company  2) Unit Investment Trust  3) Face Amount Certificate Company  ( Real Estate Investment Trust are not considered under this act) Page 35 of 90  Constitutional Debt Limits are imposed on the issuance of? - Correct answer General Obligation bonds  (Moral obligation bonds are not subject to debt limits they are issued in desperation) Page 36 of 90  Which of the following pay dividends?  I Warrants  II ADR's  III Preferred Stocks  IV Real Estate Investment Trust Shares - Correct answer II , III , IV Page 37 of 90  (Voting for BOD, Voting for the adviser, Receive reports)  Trust indenture of a Bond contains the following information? - Correct answer Interest Rate  Maturity  Collateral backing the issue Page 40 of 90  Call Provisions  Which of the following statements are TRUE about tax shelters about tax shelters that invest in raw land? - Correct answer Tax shelters for Raw land are NOT Allowed Page 41 of 90  The main reason to invest in Raw land would be appreciation potential  Sell Limit Orders?  I Used to sell at prices that are lower than current market prices Page 42 of 90  A municipality wishes to sell a bond issue that is NOT backed by taxing power. Which of the following bonds can be issued?  I Revenue Bond  II Industrial Revenue Bond  III General obligation Bond  IV Lease rental bond - Correct answer I , II, and IV Page 45 of 90  Only General obligation bonds are required by taxing power. The rest are revenue backed  Stockholder approval is needed if a corporation wishes to do which of the following?  I Split it's stock 1 for 2  II Split its stock 2 for 1 Page 46 of 90  III Repurchases shares for it's Treasury  IV Issue convertible securities - Correct answer I II and IV  Stock splits require a vote because they change the par value Page 47 of 90  Are all ECN's  Peninsula is not an ECN  When do Mutual funds send financial statements to share holders? - Correct answer Semi-Annually  Who backs Jumbo CD's and are they considered Page 50 of 90 negotiable? Which market trades Jumbo CD's - Correct answer They are traded on the secondary market  They are backed by the issuing financial institution  They are considered negotiable Page 51 of 90  Which of the following are taxable in a year?  I Interest earned from investments  II Cash Dividends from investments  III Stock Dividends from investments Page 52 of 90 affect an individual common shareholder's equity?  I Declaration of stock dividend or Stock split  II Conversion of convertible preferred stock  III Repurchase of common shares outstanding (Stock buy back  IV Issuance of additional common shares - Correct answer II III and IV Page 55 of 90  Will all effect an individual shareholders equity  Stock splits and Stock dividends will not  ABC Corp declares a 3:1 Stock split to shareholders of record on November 10th. The price of the stock will be reduced on the ex date by: - Correct answer The stock will Page 56 of 90 be reduced on the ex date by 67%  Which of the following securities trade in the secondary market?  I Preferred  II American Depository Receipts Page 57 of 90  IV Variable rate preferred - Correct answer IV Variable Rate preferred  Bankers Acceptances  I Trade at a Premium to par  II Trade at a discount to par Page 60 of 90  III Have a thinly traded market  IV Have an active market - Correct answer II and III  They trade at a slight discount and are not traded actively Page 61 of 90  Which of the following is needed to compute the total dollar price of a municipal bond traded on a yield bases in the secondary market?  I Dated Date  II Maturity Date  III Call Date Page 62 of 90  II $10 plus commission  III The market price  IV The market price plus commission - Correct answer I $10  If a fund distributes a capital gain to shareholders which statements are true Page 65 of 90  I The capital gain is taxable if taken as a check  II The capital gain is not taxable if taken as a check  III The capital gain is taxable if it is auto reinvested Page 66 of 90  IV The capital gain is not taxable if it is auto reinvested - Correct answer I and III  The capital gain is taxable either way because it is distributed  Which of the following are types of Oil and Gas direct participation programs? Page 67 of 90  I Zero Coupon Bonds  II Low Coupon Bonds  III Medium Coupon Bonds  IV High Coupon Bonds - Correct answer IV High Coupon bonds are the most susceptible to reinvestment risk Page 70 of 90  A customer places an to buy bonds. The order reads  "Buy 5M ABC 9s M'35 @ 90 GTC"  At which of the following will the price be executed  I 89  II 90 Page 71 of 90  III 91  IV 92 - Correct answer I and II  The order is a Limit Buy so the purchase will only be initiated at or below 90  Treasury Receipts Page 72 of 90  Current Yield Formula - Correct answer Annual Interest / Current Market Price  Nominal yield Formula - Correct answer Annual Interest / Par Value  In 2018 a customer buys 5 GE 10% debentures, M'27 at 85. The interest payment Page 75 of 90 dates are Feb 1st and August 1st.  The bonds are callable as of 2022 at 103. The nominal yield is?  I 10%  II 10.81 %  III 11.76^ Page 76 of 90  IV 12.43% - Correct answer Nominal Yield  Which of the following are TRUE about GNMA Pass Through Certificates  I They are quoted on a par basis in 32nds Page 77 of 90  I Individuals  II Insurance Companies  III Trust Companies  IV Open- End Investment Companies - Correct answer II III IV Page 80 of 90  All but individuals are likely purchases of commercial paper  A Sell Stop order is executed when?  I In falling markets  II In rising markets  III at the price specified Page 81 of 90  IV At the market price - Correct answer In falling markets  at the market price  Sell stop = Stop loss to prevent further losses it becomes a market order and must fill Page 82 of 90 than the market value of the stock  III Warrants would be exercised when the stock market's price is below the warrant strike price  IV Warrants would be exercised when the stock's market price is above the warrant strike price - Correct answer I and IV Page 85 of 90  Warrants are issued with an exercise price that is higher than the market value of the stock  They would be exercised when the value of the stock is above the warrant strike price Page 86 of 90  Warrants vs Rights  Which has time value  Which has intrinsic - Correct answer Warrants have time value  Rights have intrinsic value Page 87 of 90