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SIE Exam: 1001 Practice Questions For Dummies 1st Edition Steven M. Rice (Author) - Solutions
An investor sold DEF common stock at a loss. Which of the following securities may the investor buy back immediately without violating the wash sale rule?(A) DEF convertible bonds(B) DEF call options(C) DEF warrants(D) DEF preferred stock
One of your clients has the following investments for the current year:Capital gains: $14,500 Capital losses: $21,000 What is the tax status for this investor?(A) They have a $6,500 loss for the current year.(B) They have a $3,000 loss for the current year and $3,000 carried over to the following
A security purchased on September 30 would become long term on(A) September 30 of the following year(B) September 31 of the following year(C) October 1 of the following year(D) December 31 of the current year
A client would like to sell short ABC common stock but is unfamiliar with the tax treatment of short sales. You should inform them that(A) all gains are taxed as ordinary income(B) all gains or losses are taxed as passive income or losses(C) all gains or losses are considered short term(D) all
A customer purchased 100 shares of ABC stock at $40 per share on March 24.On March 24 of the following year, the customer sold the stock at $46 per share.Which TWO of the following are TRUE regarding these transactions?I. They would be taxed as a short-term capital gain.II. They would be taxed as a
Short-term capital gains would be realized on a security sold at a profit if held for(A) more than six months but less than a year(B) less than one year(C) one year or less(D) more than one year but no more than two years
An investor buys 1,000 shares of a stock at$40. If the stock increases in value to $60, how would the result be categorized?(A) As a profit(B) Ordinary income(C) Appreciation(D) Capital gain
Jake Jones and his wife, Melinda, received cash dividends in their brokerage accounts as follows:Jake: $2,000 Melinda: $1,000 Joint: $1,500 How much of these dividends are subject to taxation if they file their taxes jointly?(A) $0(B) $1,500(C) $3,000(D) $4,500
Which of the following is TRUE of an investor who receives a stock dividend?(A) The dividend will be taxable at their current tax bracket.(B) Their cost basis on the stock owned will be reduced.(C) If they’ve held the stock for more than a year, the dividend may be taxable at a lower
Which of the following is taxable for an investor for the year on which it occurs?(A) Interest received from corporate bonds, interest received from T-bonds, and cash dividends(B) Interest received from corporate bonds, stock dividends, and cash dividends(C) Interest received from T-bonds, stock
Dirk Diamond purchased 100 shares of UPP preferred stock, paying a yearly dividend of$6 per share. Dirk originally purchased the stock one year ago and three months prior to the first dividend being paid. Exactly one year later to the day, Dirk sold the stock for a profit of $320. Which TWO of the
Which of the following is NOT a type of investment income?(A) ADR dividends(B) Interest from T-bonds(C) Dividends from a balanced fund(D) Running a business
Interest on U.S. government T-bonds is subject to(A) state tax but not federal tax(B) federal tax but not state tax(C) neither state tax nor federal tax(D) both state and federal tax
One of your clients who lives in Utah purchased an Atlantic City, New Jersey, municipal revenue bond. The interest is I. subject to state tax II. exempt from state tax III. subject to federal tax IV. exempt from federal tax(A) I and III(B) I and IV(C) II and III(D) II and IV
An investor purchased a municipal bond fund, and the fund paid this investor a dividend based on the interest they received.That dividend is(A) taxable on all levels(B) exempt from state tax(C) exempt from federal tax(D) exempt from both federal and state tax
Losses from a limited partnership can be written off against I. passive income II. interest income III. capital gains IV. earned income(A) I only(B) II and III(C) I, II, and III(D) I, II, III, and IV
Which of the following are taxable to investors?I. Stock splits II. Stock dividends III. Cash dividends IV. Corporate bond interest(A) I and II(B) III and IV(C) I and III(D) II, III, and IV
Earning income includes(A) wages(B) bonuses(C) commissions(D) all of the above
Income received from a limited partnership is considered(A) capital gains(B) dividend income(C) earned income(D) passive income
Portfolio income includes I. income from an oil and gas DPP II. income from stock dividends III. interest from corporate bonds IV. capital gains from the sale of municipal bonds(A) I, II, and III(B) II, III, and IV(C) II and III(D) I, II, III, and IV
Earned income includes all of the following EXCEPT(A) capital gains(B) salary(C) bonuses(D) income received from active participation in a business
Property tax is a I. flat tax II. graduated tax III. regressive tax IV. progressive tax(A) I and III(B) I and IV(C) II and III(D) II and IV
Which of the following taxes are regressive?I. Income II. Gas III. Alcohol IV. Sales(A) I and III(B) II and IV(C) II, III, and IV(D) I, II, and III
All of the following taxes are progressive EXCEPT(A) personal income(B) gift(C) estate(D) sales
Which of the following is TRUE of retail investors?(A) They are considered nonprofessional investors.(B) They trade for their own accounts.(C) They often trade in much smaller amounts than institutional investors.(D) All of the above.
Which of the following would be considered institutional investors?I. Commercial banks II. Pension funds III. Real Estate Investment Trusts IV. Endowment funds(A) II and IV(B) I, II, and III(C) II and III(D) I, II, III, and IV
Institutional investors include all of the following EXCEPT(A) joint investors(B) insurance companies(C) hedge funds(D) commercial banks
One spouse is a pilot, and the other spouse is a pediatrician. They have a combined income that exceeded $400,000 per year for the last several years and is only expected to get better this year. They would be considered(A) a qualified institutional buyer(B) a joint couple(C) an accredited
Which of the following would be considered accredited investors?I. Banks II. An individual investor with a net worth of $2,000,000 excluding their primary residence III. A corporation with a net worth of$10,000,000 IV. Insurance companies(A) II and IV(B) I, II, and III(C) II and III(D) I, II, III,
The __________ provides reliability to the global financial system.(A) CBOE(B) FINRA(C) IRS(D) DTCC
Which TWO of the following are FALSE regarding unsolicited orders?I. They cannot be accepted without prior approval from a principal.II. They can be accepted without prior approval from a principal.III. They must be limited in size.IV. They are not limited in size.(A) I and III(B) I and IV(C) II
Which of the following customer orders are discretionary?I. Buy 1,000 shares of a growth company.II. Buy or sell 500 shares of LMN.III. Buy or sell as many shares of TUV as you think I can handle.(A) I and II(B) II and III(C) I and III(D) I, II, and III
Mrs. Rice purchased 100 shares of MKR stock at $42 per share. Six months later, with MKR trading at $47, Mrs. Rice would like to sell stock if it goes up to $50 or drops to $45. What type of order should be placed?(A) A limit order(B) A stop order(C) An alternative order(D) A stop-limit order
A customer calls up their registered representative and says that they want to purchase 100 shares of DDD common stock.Which of the following is TRUE of that order?(A) It is a limit order.(B) It must be marked as unsolicited.(C) It is a stop order.(D) Because the customer placed the order, a
A registered representative placed a discretionary order for a customer. Which of the following is TRUE regarding that order?I. They must be approved by a principal.II. The order ticket must be marked as discretionary.III. They require prior verbal approval from a customer before being entered.IV.
A DNR is used for what type of orders?(A) Market and stop(B) Stop and limit(C) Stop and at-the-open(D) Limit and at-the-close
If an at-the-open order is not executed at the opening price, what happens to the order?(A) It is cancelled.(B) It becomes a market order.(C) It becomes a day order.(D) It becomes a limit order.
All-or-none orders(A) must be executed in their entirety immediately, or the order is canceled(B) must be executed in their entirety, or the order is canceled(C) must be at least partially executed immediately, or the order is canceled(D) must be at least partially executed, or the order is canceled
Which TWO of the following are TRUE regarding immediate-or-cancel orders?I. They must be executed entirely.II. They allow for partial execution.III. They must be executed in one attempt immediately.IV. They may be executed in several attempts.(A) I and III(B) I and IV(C) II and III(D) II and IV
Which TWO of the following are TRUE of fill-or-kill orders?I. They must be executed entirely.II. They allow for partial execution.III. They must be executed in one attempt immediately.IV. They may be executed in several attempts.(A) I and III(B) I and IV(C) II and III(D) II and IV
A not held order gives a broker discretion as to(A) which security is traded(B) the time at which a security is traded(C) whether to purchase, sell, or sell short a security(D) all of the above
A customer places an open order to sell 1,000 shares of MKR common stock at $35 stop. Which of the following are TRUE of this order?I. The order will stay in place until cancelled.II. The order is good for the day.III. If the order is triggered, the stock will be sold at the next bid price.IV. If
A customer places an order to buy 100 shares of RST at 50.Which TWO of the following are TRUE of this order?I. It is a limit order.II. It is a market order.III. It is good for the day.IV. It is good until canceled.(A) I and III(B) I and IV(C) II and III(D) II and IV
Which of the following orders guarantee the order is executed at a specific price or better?(A) Buy limits and sell stops(B) Buy limits and sell limits(C) Sell limits and buy stops(D) Buy stops and sell stops
Regulation SHO covers(A) margin requirements for municipal and U.S. government securities(B) the short sale of securities(C) margin requirements for commodities(D) portfolio margining rules
Melissa R. owns 1,000 shares of JKL common stock at $42. Melissa is concerned that the price of JKL will drop below $40, but if it does, she wants to make sure she gets at least $39.75 per share. What type of order should Melissa place?(A) A sell stop order to sell 1,000 shares of JKL at $39.75(B)
Darla Diamond purchases 1,000 STU at $42.After STU increases to $47, Darla would like to protect the profit on her investment. Out of the following choices, which of the following orders should you recommend?(A) Sell limit at $50(B) Sell limit at $45(C) Sell stop at $46(D) Sell stop at $48
Sell stop orders are entered(A) below the current market price(B) at the current market price(C) above the current market price(D) either at or above the current market price
One of your clients has an unrealized gain from selling short FFF common stock. If your client wants to protect their profit, you should recommend that they enter a(A) buy stop order on FFF(B) buy limit order on FFF(C) sell stop order on FFF(D) sell limit order on FFF
Why would an investor place a stop order?I. To protect the profit on a long position II. To protect the profit on a short position III. To limit the loss on a long position IV. To limit the loss on a short position(A) I and II(B) II and IV(C) III and IV(D) All of the above
Which of the following orders becomes a market order as soon as the underlying security passes a specific price?(A) Limit(B) Stop limit(C) Market(D) Stop
All of the following are TRUE of short sales EXCEPT(A) they must be executed in margin accounts(B) securities listed on an exchange may be sold short(C) short sellers have unlimited risk(D) OTCBB stocks may be sold short
All of the following securities are typically sold short EXCEPT(A) over-the-counter common stock(B) preferred stock(C) exchange-listed stock(D) municipal bonds
Which TWO of the following are TRUE of short sellers?I. They are taking a bullish position.II. They are taking a bearish position.III. They have a maximum gain potential that is unlimited.IV. They have a maximum loss potential that is unlimited.(A) I and III(B) I and IV(C) II and III(D) II and IV
A market order to buy is(A) price specific to purchase at the lowest ask price(B) price specific to purchase at the highest bid price(C) not price specific to purchase at the lowest ask price(D) not price specific to purchase at the highest bid price
A market order to sell is(A) price specific to purchase at the lowest ask price(B) price specific to purchase at the highest bid price(C) not price specific to purchase at the lowest ask price(D) not price specific to purchase at the highest bid price
All of the following are reasons why an investor might sell a security short EXCEPT(A) to take advantage of a bullish market(B) to take advantage of an arbitrage situation(C) for speculation(D) for hedging an existing position
Short sellers are(A) bullish(B) bearish(C) bullish/neutral(D) bearish/neutral
Which TWO of the following are TRUE relating to a firm that sells securities out of its own inventory?I. It is acting as a broker.II. It is acting as a dealer.III. It charges a commission.IV. It charges a markup.(A) I and III(B) I and IV(C) II and III(D) II and IV
Which of the following types of firms does not execute trades for customers?(A) Introducing brokers(B) Clearing brokers(C) Prime brokers(D) None of the above
Which of the following would not only handle orders to buy and sell, but also maintain custody of a customer’s securities and cash?(A) Introducing broker(B) Clearing broker(C) A two dollar broker(D) A designated market maker
An accredited investor is dealing with a few different broker-dealers. They would like to be able to have all of the statements combined into one. They can use the services of a(n)(A) introducing broker(B) clearing broker(C) prime broker(D) market maker
When a broker-dealer makes a market in a particular security, they are acting as a(n)(A) agent(B) broker(C) principal(D) syndicate member
Which two of the following are TRUE?I. Dealers charge a markup or markdown for trades.II. Dealers charge a commission for trades.III. Brokers charge a markup or markdown for trades.IV. Brokers charge a commission for trades.(A) I and III(B) I and IV(C) II and III(D) II and IV
A broker-dealer charges a commission for a customer’s stock purchase. The brokerdealer is acting as a(n)(A) agent(B) underwriter(C) market maker(D) principal
When can a firm act as a broker and dealer for the same trade?(A) Whenever deemed necessary(B) For trades in excess of $50,000 only(C) For trades in excess of $100,000 only(D) Under no circumstances
A member of a stock exchange who is responsible for making sure that there is liquidity for a particular security and is willing to purchase and sell during all times the market is open is called a(A) broker(B) registrar(C) transfer agent(D) market maker
In the over-the-counter market, the term spread means(A) the difference between bid and asked prices of a security(B) the difference between the opening and closing prices of a security(C) the difference between the par value and market value of a security(D) the difference between the price a
The over-the-counter market is best described as(A) an auction market(B) a negotiated market(C) unregulated market(D) Choices (A) and (C)
Which TWO of the following are true regarding commission and markups or markdowns?I. The markup or markdown must be disclosed on a dealer transaction.II. The markup or markdown need not be disclosed on a dealer transaction.III. The commission must be disclosed on a broker transaction.IV. The
A designated market maker (DMM)executes trades as a(A) broker(B) dealer(C) broker or dealer(D) market maker
Corporations too small to be placed on the OTCBB may still sell their securities in the(A) pink market(B) green market(C) blue list(D) yellow sheets
All of the following are stock exchanges EXCEPT(A) CBOE(B) NYSE(C) Nasdaq BX(D) OTCBB
Which of the following are TRUE regarding listed and unlisted securities?(A) Listed securities can only be traded on an exchange, and unlisted securities can be traded on an exchange and over the counter.(B) Listed securities can only be traded on an exchange, and unlisted securities can only be
The New York Stock Exchange (NYSE) is an(A) auction market(B) negotiated market(C) free market(D) unregulated market
Who is responsible for maintaining a fair and orderly market on the NYSE trading floor?(A) Floor brokers(B) Designated market makers(C) Two-dollar brokers(D) Order book officials
A trade of securities between ABC Bank and DEF Insurance Company without using the services of a broker-dealer would be a(A) first market trade(B) second market trade(C) third market trade(D) fourth market trade
Which of the following BEST describes a third market trade?(A) Listed securities trading on an exchange(B) Unlisted securities trading OTC(C) Listed securities trading OTC(D) Institutional trading without using the services of a broker-dealer
The second market is(A) listed securities trading OTC(B) listed securities trading on an exchange(C) institutional trading without using the services of a broker-dealer(D) unlisted securities trading OTC
Which TWO of the following are true regarding primary and secondary distributions?I. Primary distributions are involved in the sale of new shares by the issuing corporation.II. Primary distributions are involved in the sale of previously issued and outstanding shares.III. Secondary distributions
Which of the following describe the secondary market?I. The trading for OTC issues II. The trading of listed securities III. The trading of outstanding issues IV. The underwriting of new issues(A) I and III(B) II and IV(C) I, II, and III(D) I, II, and IV
A corporation was authorized to sell 50 million shares to the public. In the initial public offering, they only sold 30 million shares. One year later, they now want to sell another 5 million shares. The 5 million shares being sold would be a(A) primary offering(B) first market trade(C) secondary
The first time a corporation ever sells securities is called a(n)(A) primary offering(B) first market trade(C) opening transaction(D) initial public offering
All of the following trades occur in the secondary market EXCEPT(A) a syndicate selling new issues of municipal GO bonds to the public(B) a designated market maker purchasing common stock for their own account(C) a corporation selling its shares of treasury stock to the public using the services of
This economic theory that supports controlling the money supply in order to stimulate economic growth is called(A) the FRB(B) the Keynesian theory(C) supply-side theory(D) the monetarist theory
This economic theory promotes government spending, borrowing money, and raising taxes as a way to stimulate the economy.(A) The monetary theory(B) Keynesian theory(C) Supply-side theory(D) None of the above
The economic theory that says that less government spending and lower taxes will result in economic growth is(A) the monetary theory(B) demand-side theory(C) supply-side theory(D) Keynesian theory
Which of the following are defensive industries?I. Household appliances II. Food III. Pharmaceutical IV. Tobacco(A) II, III, and IV(B) I, II, and III(C) III and IV(D) II and III
A client wants to strengthen their portfolio by adding some defensive stocks. Which of the following stocks would be defensive?I. Appliance company II. Automotive III. Pharmaceutical IV. Alcohol(A) I and II(B) III and IV(C) I, III, and IV(D) I and III
GLD stock tends to move in the opposite direction of the economy. GLD would be termed(A) defensive stock(B) blue chip stock(C) cyclical stock(D) countercyclical stock
In relation to how economic factors affect securities, which of the following is a true statement?(A) Clothing manufacturers are growth companies.(B) Alcohol companies are defensive.(C) Tourism companies are countercyclical.(D) Fast food companies are cyclical.
Growth companies include(A) clothing(B) cosmetic(C) technology(D) tobacco
Which of the following types of companies are countercyclical?(A) Discount retailers(B) Alcohol(C) Clothing(D) Tobacco
During periods of economic downturns, which of the following types of companies would be most adversely affected?(A) Food(B) Household appliances(C) Clothing(D) Pharmaceutical
Which of the following types of companies would be most adversely affected by rising interest rates?(A) Alcohol(B) Household appliances(C) Utilities(D) Pharmaceutical
Which of the following is measured in constant dollars?(A) The Fed Funds rate(B) The M2 money supply(C) The prime rate(D) The GDP
Which of the following is not a leading indicator?(A) Unemployment claims(B) Personal income(C) Reserve requirements(D) The money supply
Which of the following measures the inflation rate?(A) GDP(B) GNP(C) CPI(D) DJIA
During a period in which inflation is historically low and we have just entered a recession, the Federal Reserve will likely take which of the following actions?(A) Buy U.S. government securities in the open market.(B) Increase reserve requirements.(C) Increase Regulation T.(D) Lower the tax rate.
Which of the following is the best measure of a nation’s economic activity by its citizens?(A) GDP(B) GNP(C) CPI(D) DJIA
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