Kaplan Securities Industry Essentials (SIE) Practice Test

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• Which of the following tax treatments is NOT associated with a traditional IRA?
• Which is NOT a function of the Securities and Exchange Commission (SEC)?
• How do common stocks differ from preferred stocks?
• What does a CMO consist of?
• What are the three main components of the securities industry?
• In terms of economic indicators, what is the purpose of M2?
• What requirements does the 'Know Your Customer' (KYC) rule impose on financial institutions?
• Which type of bond typically has the lowest default risk?
• What is a 'stock split'?
• Systematic risk impacts which of the following?
• What is the function of the Securities and Exchange Commission (SEC)?
• What is a bull market?
• What is BigCo's dividend yield if it trades at $30 per share and pays a $0.30 dividend?
• If a customer in Utah owns bonds issued by Puerto Rico, what is the tax status of the bond interest?
• How is diversification defined in investment strategy?
• What does the term ‘retail investor’ refer to?
• What is the impact of increasing the money supply through M2 measures?
• Which of the following statements regarding economic solutions is true?
• Which of the following dates is not declared by the board of directors of a corporation?
• What type of investment is most aligned with Gerald's objectives of income with capital preservation?
• A money market security will have all of the following characteristics except:
• What characterizes a collateral trust bond?
• What is meant by the secondary market?
• Why are credit ratings critical in the financial market?
• How would fiscal policy typically address a recession?
• Which regulator sets the minimum requirement for borrowing in a margin account?
• Which document is not required when opening a partnership account?
• What does the term "coupon" refer to in bond investing?
• Which statement is false regarding trusts set up for the purpose of holding commercial property or mortgages?
• Which of the following is a money market security?
• In what situation would a buy-and-hold strategy be most beneficial?
• D/B/A is another term for which type of business organization?
• What penalty applies to someone who fails to meet their required minimum distribution from a traditional IRA?
• What is the primary purpose of the Securities Industry Essentials (SIE) exam?
• Your customer asks about a bond carrying a very attractive yield with a B rating. Which term is not typically used to describe a B-rated bond?
• Which organization is responsible for overseeing the securities industry in the United States?
• Your customer has a strong preference for investing in equity securities; which option is least suitable for generating current income?
• Which financial instruments are included in M2?
• What type of document is a prospectus?
• What type of risk can portfolio diversifying help to reduce?
• Which of these strategies is generally prohibited for mutual funds but employed by hedge funds?
• Which type of risk is generally nondiversifiable?
• A 75-year-old client withdrew $20,000 from her IRA. How much will she owe the IRS if the withdrawal was short of her required minimum distribution?
• What does a dividend yield measure?
• Your customer lives in a state with no income tax and wants an income-producing investment that is tax-free. Which option meets their needs?
• What is the purpose of the Dodd-Frank Act?
• Which transaction is not covered by Rule 144?
• What is one of the primary roles of an intermediary in the securities industry?
• Which of the following accurately describes fiscal policy?
• What is a crucial function of the SIPC?
• Which type of broker-dealer is most likely to have correspondent firms?
• What type of account allows for a custodian to manage funds until the beneficiary reaches a certain age?
• What does the term ‘underwriting’ refer to in the context of securities?
• Which factor can inhibit the effectiveness of fiscal policy?
• What happens to the interest in a JTWROS account if some of the owners pass away?
• How does arbitrage benefit investors?
• An order that becomes a limit order when triggered is referred to as a?
• Which scenario describes a company that must register with the SEC?
• For a company to be exempt from registration under Rule 147, which of the following would not qualify?
• What are 'financial derivatives'?
• What is a characteristic of business risk?
• Who qualifies as an investment adviser?
• For tax purposes, how long must a security be held to qualify for long-term capital gains treatment?
• What type of real estate investment trust (REIT) owns and operates properties directly?
• Which of these securities would likely provide the greatest potential for capital appreciation?
• What characteristic differentiates cumulative voting from statutory voting?
• What is a 'buy-and-hold' strategy?
• What is considered a limitation of fiscal policy?
• The wash-sale rule prevents an investor from doing which of the following after selling a stock at a loss?
• What is the interest rate called when a broker-dealer borrows money to fund margin purchases?
• The sale of shares belonging to a significant shareholder, like Clarence from Modulux, Inc., is an example of what?
• Why might a municipality choose to issue revenue bonds over general obligation bonds?
• Who are the typical investors in a local government investment pool?
• What is the purpose of a stop order in trading?
• What is the main advantage of margin trading?
• Which investment fund typically uses a variety of strategies to earn active returns?
• Which scenario would increase the U.S. balance of payments deficit?
• What does short selling involve?
• In a financial context, what does the acronym 'SEC' stand for?
• What is the defining feature of a fixed-income security like a bond?
• Your customer purchased 1,000 shares of SmallCo Stock at $10 a share and sold them a year later for $12 a share. What is the nature of the capital gain realized?
• What voting rights does a holder of participating preferred shares typically have?
• What does the term ‘blue chip stocks’ refer to?
• What are the primary functions of the Federal Reserve?
• Which market is characterized by the creation of new securities?
• In a statutory voting system, what is true about Jon's voting rights in Bayside Fishing Company?
• Which type of firm usually has a more complex business model, due to trading on their own accounts?
• Which of the following is not a feature of a 529 college savings plan?
• What does the Securities Investor Protection Corporation (SIPC) do?
• A notice from the Wetlands Maintenance and Drainages Act affecting New Haven Farms' land usage is an example of which type of risk?
• What is the primary role of a market maker in the financial market?
• Which strategy would effectively cover a client who has shorted a call?
• In what order would dividends be paid on cumulative preferred stock?
• Thompson's experience with the board game leading to steady stock performance is labeled as what type of risk?
• Which statement accurately describes a mutual fund's structure?
• What is the main purpose of the Know Your Customer rule?
• How do the best-known indices rank in terms of the number of issues from most to fewest?
• When an investor takes a lump-sum distribution from a nonqualified variable annuity, how are the earnings taxed?
• What is the primary objective of a hedge fund?
• Which of the following is a characteristic of M1?
• Who qualifies as an accredited investor?
• In which account type do individuals have ownership stakes that can be affected by the death of one partner?
• What is ‘margin trading’?
• What does the term ‘swing trading’ mean?
• Which statement about fiscal policy is correct?
• What passive loss would investors claim for a $200 distribution and a $500 business loss per unit?
• What is a recommended option for someone wishing to control their estate until death or incapacitation while avoiding probate?
• What distinguishes an exchange-traded fund (ETF) from traditional mutual funds?
• A corporate bond with a 6% coupon rate trading on a 7% basis is trading at?
• When ABC Broker-Dealer is conducting transactions with customers using its own inventory of shares, it is acting as which type of entity?
• What is an ‘initial public offering’ (IPO)?
• Which of the following is an example of an investment risk?
• What kind of trade is it when the client provides order details without input from the representative?
• What is the main advantage of diversification in an investment portfolio?
• If Soren Aland's 4% XYZ corporate bond has a current yield of 5%, he purchased the bond at what price?
• M1 is a measure of what?
• What type of investment does a Treasury bond represent?
• What is a common characteristic of blue chip stocks?
• What is the primary objective of the anti-money laundering (AML) regulations?
• What is the correct sequence of steps for adding options trading to a new account?
• What benefit does liquidity provide to investors?
• Which type of stock typically offers less potential for capital growth?
• What type of offering is Modulux, Inc. conducting to raise capital for building a new plant?
• Which of the following scenarios best exemplifies fiscal policy?
• Which of the following is not classified as an investment company under the Investment Company Act of 1940?
• Which of the following statements about mutual funds is TRUE?
• What could a current yield of 5% indicate about a bond's purchase price?
• Your customer wants to know how much they paid for 20 bonds at 100. What would you tell them?
• What is the primary distinction between M1 and M2?
• What happens to the cost basis of shares when a stock dividend is declared?
• Your customer purchased a 5% debenture at a price of 94 maturing in 12 years. What is the yield to maturity?
• What is the primary purpose of a preferred stock?
• To raise funds for manufacturing expansion, a corporation would operate in which market?
• What roles do the U.S. president and Congress play in fiscal policy?
• What is a 'preliminary prospectus'?
• Which of the following securities are exempt from the Securities Act of 1933?
• What may a preliminary prospectus include?
• American Liquidators Corporation plans to raise capital by selling new shares; what must they do to maintain shareholders' ownership percentage?
• Another term for stocks and bonds is:
• What is GHI Corporation's EBITDA if their operating income is $50 million, with interest of $5 million and taxes of $15 million?
• The term 'spinoff' refers to what type of corporate action?
• What is the purpose of a U.S. Treasury income fund?
• What type of bond is collateralized by a trust holding real estate?
• Which risk is represented by a significant percentage of land protection limiting agricultural use?
• Which of the following best defines a bond?
• What is the goal of a market maker?
• What kind of investors typically consider unregistered securities?
• What constitutes a capital gain?
• In a wash sale, what must an investor be cautious about after selling a stock at a loss?
• What typically characterizes preferred stock?
• What characterizes a mutual fund?
• Which factor most commonly indicates a bull market?
• LMN declared a 25% stock dividend. After selling the shares three years later for $50, what statement about the adjusted cost basis is correct?
• What does equity financing allow a company to do?
• How is an index used in finance?
• If a commercial bank needs to increase its reserves, what method could it use?
• What is the disclosure document for a 529 college savings plan?
• An American depositary receipt is best described as:
• All of the following statements regarding penny stocks are true except:
• What is liquidity risk?
• The Federal Reserve uses which type of policy to pursue its dual mandate?
• What is the importance of credit ratings?
• Which statement about capital gains is accurate?
• In investment terminology, what does the term 'liquidity' refer to?
• If a stock is held for more than a year, how is the capital gain classified?
• What does FINRA stand for?
• In which scenario would an investor likely prefer a short-term investment?
• Which statement regarding Treasury bills is correct?
• Your customer has T-bonds and wants to know how taxes work for them. You explain that:
• Which of the following is not part of the secondary markets?
• A company's board of directors decides to divest all shares of a subsidiary. This action is characterized as:
• Which of these is included in M2 measurement?
• Define 'systematic risk'.
• What characterizes a primary market?
• All of the following are considered money market instruments except:
• Which of the following statements about dividends is true?
• Define ‘equity financing’.
• Equity is to debt as:
• What is the meaning of suitability in terms of investment recommendations?
• Which type of direct participation program (DPP) allows for depletion deduction claims most likely?
• What characteristic makes a bond a good candidate for a tax-exempt investment?
• What is the main goal of swing trading?
• Which type of order guarantees a specific price when executed?
• What does regulatory compliance refer to in the financial securities industry?
• Which of the following are considered primary types of securities?
• Which options position provides the best hedge for a short position in a stock?
• In the context of investing, 'risk disclosure' refers to:
• Which of the following UTMA accounts can be validly opened?
• What does 'liquidity' refer to in financial markets?
• Which of these is in the correct order of priority for a corporate liquidation?
• How does M2 differ from M3?
• What is a bear market?
• Who declares the actual ex-dividend date for NYSE-listed stocks?
• What does 'insider trading' refer to?