SIE Midterm Exam Student Version
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© Kaplan, Inc. Name: Date SIE Midterm Exam 1. Which of the following represents securities normally included in the financial markets? A.
Stocks and bonds B.
Equity, debt, and currency, but not derivative products C.
Equity, debt, currency, and derivative products D.
Equity, debt, derivatives, and commodities 2. Your firm has a number of clients who like to speculate with penny stocks; therefore, it is important to be familiar with the definitions and rules applicable to them. Which of the following statements is false
? A.
A penny stock includes both listed and unlisted securities trading at less than $5 per share. B.
Customers holding penny stock positions must receive a monthly account statement regardless of activity in the account. C.
Before an initial penny stock transaction, a new customer must receive a copy of a risk disclosure statement, and sign and date an acknowledgment of its receipt. D.
Established or existing customers are exempt from the suitability statement requirements, but not the risk disclosure requirements. 3. The COO of the West Side Property Management Corporation has purchased restricted securities of the company in a private placement. Under Rule 144, the affiliate A.
cannot divest of the shares until the affiliation with the issuer ceases. B.
can sell shares immediately with no restrictions. C.
can sell shares immediately but is subject to volume restrictions. D.
can sell shares after a six-month holding period, but is subject to volume restrictions. 4. A corporate bond purchased several years ago at $1,200 matures. At maturity, the bondholder will receive principal in what amount? A.
$825 representing return of the purchase price B.
$175 representing the difference between the purchase price and par C.
$1,000 face value D.
An amount to be calculated based on the current yield at the time of maturity
SIE Midterm Exam Page 2 © Kaplan, Inc. 5. How many basis points are in a yield of 4.35%? A.
35 B.
3.5 C.
0.35 D.
0.035 6. One of your new clients explains that she prefers investments paying income with a fixed rate of return, but also allows for the possibility of realizing greater gain potential. She would likely favor investments in A.
common shares. B.
convertible bonds. C.
corporate bonds. D.
adjustable-rate preferred shares. 7. A corporate bond has a stated yield set at the time of issuance. This stated yield is also known as A.
the coupon rate or nominal yield. B.
the current yield. C.
the yield to maturity. D.
the yield to call. 8. Which of the following funds would likely fall the most in a rising interest rate environment? A.
A money market fund B.
An intermediate-term corporate bond fund C.
A long-term corporate bond fund D.
A T-bill fund 9. Which of the following statements regarding a bond issued with a 4¾% coupon and now trading in the secondary market is true? A.
If interest rates rise, the bond's price also rises in the secondary market. B.
If interest rates drop, the coupon will remain at 4¾%. C.
If interest rates fall, the bond's current yield will rise. D.
If the bond falls in price, the current yield will also fall.
SIE Midterm Exam Page 3 © Kaplan, Inc. 10. Which of the following statements regarding put and call features on debt securities is correct? A.
A callable bond is likely to be called when interest rates are rising. B.
Call features benefit the bondholder. C.
A puttable bond is likely to be put back when interest rates are falling. D.
Put features benefit the bondholder. 11. An investor has purchased a bond where the issuer will repay the bond's principal in a series of substantially equal portions representing 10% of the issue over a period of five years, then the remaining 50% in the final year. This is A.
a serial maturity schedule. B.
a term maturity schedule. C.
a balloon maturity schedule. D.
a series maturity schedule. 12. Which of the following is not a benefit of common stock ownership? A.
Priority of claims against a company, should it dissolve or be forced to liquidate assets B.
The opportunity to collect income from the distribution of corporate profits C.
Liability limited to the extent of one's investment in the case of corporate failure D.
Limited access to the corporation’s books and records 13. The BBB Corporation is liquidating under a Chapter 7 bankruptcy. What is the order of payout? A.
General creditors, senior bondholders, preferred shareholders, and common shareholders B.
Common shareholders, preferred shareholders, general creditors, and senior bondholders C.
Secured bondholders, senior bondholders, subordinated bondholders, and then common shareholders D.
Senior bondholders, preferred shareholders, common shareholders, and general creditors 14. A corporation deposits 20-year Treasury bonds into a trust in order to secure a loan. The loan for this type of arrangement would be facilitated by the corporation issuing A.
equipment trust certificates. B.
Treasury guaranteed bonds. C.
mortgage bonds. D.
collateral trust bonds.
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SIE Midterm Exam Page 4 © Kaplan, Inc. 15. Which of the following is not specific to general obligation (GO) bonds? A.
Being subject to statutory debt limits B.
Interest and principal payments from tax revenue C.
The type of issuer borrowing the funds D.
The requirement for voter approval 16. Rank the following government-issued securities from shortest to longest maturity. A.
Treasury bills, notes, and bonds B.
Treasury bonds, notes, and bills C.
Treasury notes, bills, and bonds D.
Treasury bills, bonds, and notes 17. Which of the following is not considered a money market instrument? A.
Money market funds B.
Banker's acceptances (BAs) C.
Commercial paper D.
Negotiable jumbo certificates of deposit (CDs) 18. A client has just purchased a SBCC June 65 call at 6 when the stock is trading at 69. What is the contract's premium? A.
Two points of intrinsic value and six points of time value B.
Four points of intrinsic value and two points of time value C.
Eight points of time value D.
Eight points of intrinsic value 19. Which of the following option contracts is in the money if ELN stock is currently trading at $80 per share? A.
Feb 80 call B.
Mar 80 put C.
Jan 85 call D.
Jan 85 put
SIE Midterm Exam Page 5 © Kaplan, Inc. 20. Your customer is long 1 SBRD July 60 call at 2. You explain to the customer that to break even, SBRD stock must be trading at A.
0. B.
58. C.
60. D.
62. 21. A registered options principal (ROP) at your broker-dealer has just approved an options account for one of your new clients. What is the waiting period before options trading may take place in the account? A.
No waiting period B.
15 days C.
30 days D.
1 business day 22. Which of the following statements regarding both mutual funds and closed-end funds is true? A.
Both may be purchased in a primary offering. B.
Both issue full and fractional shares. C.
Both issue equity and debt securities. D.
Both are priced using the same method. 23. A customer of your broker-dealer has invested in a variable annuity (VA). She makes several comments about them. Which of her statements is inaccurate? A.
VAs are securities. B.
VA returns are fixed and steady. C.
VAs guarantee an income stream for life. D.
Premiums are invested in a diversified portfolio with an investment objective that the purchaser gets to choose. 24. Which of the following limited partnership investments is least likely to be associated with intangible costs, depreciation, and depletion allowances? A.
Oil and gas income program B.
Real estate existing property program C.
Equipment leasing program D.
Real estate raw land program
SIE Midterm Exam Page 6 © Kaplan, Inc. 25. An investor has purchased a senior, unsecured debt security that trades on an exchange and is issued by a financial institution. It is backed only by that institution's good faith and credit. The security tracks the performance of a particular market index, but does not represent ownership in a pool of securities the way share ownership in a mutual fund does. This security that pays no interest and has a stated maturity date is known as A.
an exchange-traded fund. B.
a call option or put option contract. C.
a REIT. D.
an exchange-traded note. 26. All of the following are other terms for the Securities Act of 1933 except
A.
the People and Places Act. B.
the Prospectus Act. C.
the Truth in Securities Act. D.
the Paper Act. 27. A company, in order to raise capital for expansion, wants to sell shares of stock to investors. The company’s common stock is not currently trading in the secondary market. This offering is known as A.
an additional public offering (APO). B.
a subsequent public offering (SPO). C.
an initial public offering (IPO). D.
a combination offering. 28. For initial public offerings (IPOs) of common stock, which of the following would be considered restricted persons? A.
The sibling of an associated person’s father B.
A member firm C.
Fiduciaries acting on behalf of an associated person D.
A person owning at least 5% of the member firm 29. All of the following are examples of issuer transactions except
A.
a CFO. B.
an APO. C.
an IPO. D.
an SPO.
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SIE Midterm Exam Page 7 © Kaplan, Inc. 30. Which of the following is true of an additional public offering? A.
The issuer receives all of the proceeds from the sale. B.
The issuer receives some of the proceeds, and existing shareholders receive some of the proceeds from the sale. C.
The investors are a combination of institutional and retail investors, and the issuer receives none of the proceeds from the sale. D.
Existing shareholders receive all of the proceeds of the sale. 31. A registration statement for a new debt offering of BuyStuff, Inc., a well-known seasoned issuer, has been filed with the Securities and Exchange Commission (SEC). The accuracy and adequacy of the registration statement is the responsibility of A.
the exchanges where the shares will trade. B.
the underwriters. C.
the issuer. D.
the SEC. 32. Which of the following firms would not normally be part of an initial public offering (IPO)? A.
Investment bankers B.
Broker-dealers C.
Third-market dealers D.
Underwriters 33. Regarding a tombstone advertisement, all of the following statements are true except
A.
they are required by and filed with the SEC in order to announce a new issue to the investing public. B.
it is the only type of advertisement permitted between the time the registration statement is filed with the SEC and the effective date. C.
all such advertisements must contain an advisory stating that the ad is neither an offer to sell nor a solicitation of an offer. D.
they are limited to the information that may be contained in them.
SIE Midterm Exam Page 8 © Kaplan, Inc. 34. Underwriters for an IPO of Seabird Airlines stock have been taking indications of interest for shares of an upcoming new issue. These indications of interest are A.
binding on all parties. B.
binding on the underwriters only to make available the shares once the effective date is reached. C.
binding only on the parties who tendered the indications to purchase the shares once the effective date is reached. D.
nonbinding on all parties. 35. During the cooling-off period, underwriters may not A.
distribute the preliminary prospectus. B.
distribute sales literature to interested existing clients. C.
engage in due diligence. D.
take indications of interest from public investors. 36. The Sierra Verde Coffee Company files a registration statement with the SEC for the sale of new securities. While reviewing the registration statement, the SEC determines that it has not been filed properly and issues a deficiency letter. Sierra Verde submits a corrected registration statement. Which of the following is true regarding the 20-day cooling-off period? A.
It is halted on the day the deficiency letter is issued and may resume where it left off on the day the corrected registration is received. B.
It is halted on the day the deficiency letter is issued and must begin anew from that same date once the corrected registration is received. C.
It is halted and does not resume until 20 days after the corrected registration is received. D.
It continues and is not impacted by the issuance of the deficiency letter by the SEC. 37. Regarding a public offering and a private placement, which of the following statements is false
? A.
Both are methods of offering securities for sale to investors. B.
Both may use the services of investment bankers to facilitate the sale of securities. C.
Both allow securities to be sold to individual and institutional investors. D.
Both are subject to the cooling-off period of 20 days found in the Securities Act of 1933. 38. Which of the following statements regarding a Rule 415 shelf registration is false
? A.
It is good for two years. B.
It requires a prospectus to be filed only once. C.
It requires a supplemental prospectus to be filed before each sale. D.
It is good for three years if the issuer meets certain requirements.
SIE Midterm Exam Page 9 © Kaplan, Inc. 39. Which of the following would not be found in a final prospectus? A.
The intended use of the proceeds for such corporate actions including expansion, mergers, or acquisitions B.
The list of all investors in the offering C.
A statement by the SEC that the offering is neither approved nor disapproved D.
A history of the business including any risks to purchasers that might be unique to that business or industry 40. Primary market transactions are ones in which A.
an investor is selling securities to another investor. B.
an institutional investor is selling securities to another institutional investor. C.
an investor is liquidating securities. D.
an issuer is selling securities to investors. 41. Which of these statements regarding a fully disclosed firm is correct? A.
It can accept checks from customers made out to the fully disclosed firm or the clearing firm. B.
It can hold funds and securities for a customer. C.
It can execute both buy orders and sell orders for a customer. D.
It can clear transactions (accept cash and securities for delivery) for its customers. 42. Which of the following describes a period where the prices of goods are consistently drifting lower? A.
Deflation B.
Inflation C.
Stagflation D.
Stagnation 43. The business cycle is best characterized as A.
expansion, prosperity, contraction, and depression. B.
inflation, stagflation, deflation, and stagnation. C.
depression, recovery, prosperity, and peak. D.
trough, expansion, peak, and contraction.
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SIE Midterm Exam Page 10 © Kaplan, Inc. 44. Which of the following is not an activity of the Federal Reserve? A.
Raising or lowering the discount rate B.
Raising or lowering the reserve requirement C.
Buying and selling government securities in the open market D.
Raising or lowering the prime rate 45. Which of the following is the least accurate statement if the U.S. balance of payments is currently running at a surplus? A.
The balance of trade shows a credit. B.
Fewer dollars are flowing into the United States than out of the United States. C.
Exports are currently exceeding imports. D.
The value of the U.S. dollar is currently down against other currencies.
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