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SIE Exam: 1001 Practice Questions For Dummies 1st Edition Steven M. Rice (Author) - Solutions

A recession occurs when there is a negative gross domestic product (GDP), increases in unemployment, falling retail sales, and a lowering of income and manufacturing for a period of(A) 60 days(B) 1 year(C) 1 quarter(D) 2 consecutive quarters
Which of the following is a coincidental economic indicator?(A) Personal income(B) M2 money supply(C) Corporate profits(D) Unemployment rate
Which of the following is a lagging economic indicator?(A) Personal income(B) Industrial production(C) Prime rate(D) Fed Funds rate
Which of the following is a leading economic indicator?(A) Industrial production(B) The unemployment rate(C) Building permits(D) GDP
All of the following are leading indicators EXCEPT(A) the prime rate(B) M2 money supply(C) the discount rate(D) stock prices
The U.S. dollar has been steadily falling against the euro. If the pattern continues, which of the following statements would be TRUE?I. The amount of U.S. exports would likely increase.II. The amount of U.S. exports would likely decrease.III. This would most likely happen during a tight-money
Which of the following will likely happen if the U.S. dollar weakens against foreign currencies?(A) An increase in U.S. exports and a surplus in the balance of payments(B) An increase in U.S. exports and a deficit in the balance of payments(C) An increase in U.S. imports and a deficit in the
Which of the following interest rates is considered the most volatile?(A) The prime rate(B) The rate on one-year T-bills(C) The Fed Funds rate(D) The discount rate
The U.S. dollar has been on a steady decline to foreign currencies. If this continues, which of the following are likely to occur?(A) U.S. exports are likely to fall.(B) The Euro will buy fewer U.S. dollars.(C) U.S. products will cost more for foreign consumers.(D) U.S. exports will increase.
The Federal Reserve Board would likely be inclined to increase the money supply in which of the following conditions?(A) Rising home prices(B) Declining GDP(C) Decreasing interest rates(D) Decreasing bond yields
Which of the following would cause an increase in the balance of trade deficit?I. An increase in imports of foreign goods II. An increase in exports of U.S. goods III. Overseas investors buying land in the United States IV. U.S. investors buying ADRs(A) II and III(B) I and IV(C) I, III, and IV(D)
If the federal government believes the economy is running too hot, what can they do to slow the economy?(A) Give out stimulus checks.(B) Increase government spending.(C) Purchase U.S. government securities from banks.(D) Increase taxes.
If the Fed increases the discount rate, all of the following would likely occur EXCEPT(A) inflation increases(B) yields on bonds increase(C) stock prices decrease(D) the call loan rate increases
Which of the following actions may the Federal Reserve take to ease the money supply?I. Increase reserve requirements.II. Lower reserve requirements.III. Buy U.S. government securities.IV. Sell U.S. government securities.(A) I and III(B) I and IV(C) II and III(D) II and IV
The Federal Reserve Board (Fed or FRB) is responsible for which of the following?(A) Setting Regulation T(B) Setting reserve requirements(C) Easing the money supply(D) All of the above
The Fed Funds rate is(A) the interest rate that banks charge each other for overnight loans(B) the interest rate that the banks charge their best customers for loans(C) the interest rate that the Fed charges banks for loans(D) the interest rate charged in margin accounts
Which type of company is most adversely affected by increasing interest rates?(A) A brewery(B) Household appliances(C) Utilities(D) Tobacco
If the Fed increases the discount rate, all of the following would occur EXCEPT(A) bond yields increase(B) stock prices decrease(C) the federal funds rate increases(D) inflation increases
The discount rate is(A) the interest rate that banks charge their best customers for loans(B) the interest rate that the Fed charges banks for loans(C) the interest rate charged in margin accounts(D) the interest rate that banks charge each other for overnight loans
Which of the following actions may the Fed take to tighten the money supply?I. Increase reserve requirements.II. Lower reserve requirements.III. Raise the discount rate.IV. Lower the discount rate.(A) I and III(B) I and IV(C) II and III(D) II and IV
Which of the following outstanding bonds will likely decrease MOST in price if the Fed increases the discount rate?(A) T-bills(B) T-notes(C) T-bonds(D) Cannot be determined
The Federal Reserve Board is responsible for all of the following EXCEPT(A) open market operations(B) setting the prime rate(C) setting the discount rate(D) setting minimum margin requirements
Which of the following is the tool MOST commonly used by the Fed to control the money supply?(A) Open market operations(B) Changing the federal funds rate(C) Changing the discount rate(D) Changing reserve requirements
Which TWO of the following actions may the Fed take to ease the money supply?I. Purchase T-bills II. Sell T-bills III. Increase reserve requirements IV. Decrease reserve requirements(A) I and III(B) I and IV(C) II and III(D) II and IV
Which of the following is a way the Fed can use to tighten the money supply?(A) Selling U.S. Treasury securities to banks(B) Increasing the discount rate(C) Increasing reserve requirements(D) All of the above
If the U.S. dollar is strong in relation to foreign currencies, which two of the following will likely happen?I. An increase in U.S. exports II. An increase in U.S. imports III. An increase in the balance of payments deficit IV. An increase in the balance of payments surplus(A) I and III(B) I and
All of the following are likely outcomes if the Fed eases the money supply EXCEPT(A) the lowering of interest rates(B) higher inflation(C) a weakening of the U.S. dollar(D) an increase in foreign imports
All of the following are likely outcomes if the Fed tightens the money supply EXCEPT(A) the lowering of inflation(B) an increase in the value of the U.S.dollar(C) the lowering of outstanding bond prices(D) increased consumer spending
Which of the following is responsible for conducting the U.S. monetary policy?(A) The Federal Reserve Board(B) The Securities and Exchange Commission(C) The Internal Revenue Service(D) All of the above
All of the following would indicate that the money supply is tightening EXCEPT an increase in the(A) prime rate(B) call loan rate(C) money available for bank loans(D) yields on Treasury bills
Which of the following are considered fiscal policies implemented by the U.S.government?(A) Changing reserve requirements and buying or selling U.S. government securities(B) Increasing or decreasing government spending and changing tax rates(C) Changing reserve requirements and changing tax
Rising corporate inventories are most likely to occur during which period of the business cycle?(A) Expansion(B) Peak(C) Trough(D) Contraction
Bearish strategies include I. selling stocks short II. buying put options III. buying inverse ETFs IV. selling uncovered put options(A) I, II, and III(B) I and IV(C) II, III, and IV(D) I, III, and IV
Looking at the stages of the business cycle, if the economy is expanding, what stages would you expect to follow placed in order from next to last?I. Trough II. Peak III. Contraction(A) I, II, III(B) II, III, I(C) III, II, I(D) I, III, II
According to the Dow theory, the reversal of a bearish trend would be confirmed by(A) advance/decline ratio(B) the amount of short interest(C) an increase in the DJIA and the DJTA(D) an increase in investors buying call options
Which of the following indexes is the most widely used to indicate the performance of the market?(A) DJIA(B) S&P 500(C) NYSE Composite(D) Wilshire
Which of the following is an index of mutual funds?(A) Wilshire(B) Russell 2000(C) S&P 500(D) Lipper
Which of the following is the balance sheet equation?(A) Assets = liabilities + shareholder’s equity(B) Assets + liabilities = shareholder’s equity(C) Shareholder’s equity + assets =liabilities(D) None of the above
If a corporation pays a cash dividend, how is its balance sheet affected?I. Assets decrease II. Liabilities decrease III. Net worth decreases IV. Net worth remains the same(A) I and III(B) II and III(C) I, II, and III(D) I, II, and IV
Which of the following Dow Jones stock indexes includes 20 listed common stocks?(A) Utilities(B) Industrial(C) Composite(D) Transportation
When assessing ABC Corporation’s stock, a technical analyst will consider all of the following EXCEPT(A) the market price(B) the trading volume(C) the earnings(D) market momentum
Where would Treasury stock be placed on a corporation’s balance sheet?(A) In the assets section(B) In the current assets section(C) In the stockholder’s equity section(D) In the intangible assets section
Which of the following would a technical analyst use to determine whether a security is a good investment?(A) The price earnings ratio(B) Balance sheets(C) Income statements(D) Trend lines
Which of the following are intangible assets?(A) Trademarks and patents(B) Patents and equipment(C) Equipment and land(D) Trademarks and treasury stock
Current liabilities of a corporation include all of the following EXCEPT(A) accounts payable(B) outstanding corporate bonds(C) wages(D) declared dividends
Fixed assets on a corporation’s balance sheet include(A) equipment(B) patents(C) trademarks(D) inventory
Analysts who believe in the Dow Theory would examine all of the following Dow Jones Indexes to indicate economic trends EXCEPT(A) industrial(B) utility(C) transportation(D) none of the above are exceptions
If a corporation issues bonds at par value, which two of the following are true?I. Net worth increases II. Net worth remains the same III. Working capital increases IV. Working capital remains the same(A) I and III(B) I and IV(C) II and III(D) II and IV
Use the balance sheet below to answer the question:Assets Liabilities Cash $10 Accts Payable $10 Securities $10 Bonds Due This Year$10 Accts Receivable$20 Bonds Due in 10 Years$30 Inventory $20 Machinery $10 Land $10 All numbers in the chart above are in millions What is the working capital?(A) $10
All of the following can be found on a corporation’s balance sheet EXCEPT(A) fixed assets(B) long-term liabilities(C) retained earnings(D) net income
The lower portion of a security’s trading range is called(A) the resistance(B) the support(C) a trading channel(D) the bottom
A fundamental analyst examines which of the following features of a corporation?(A) Earnings trends(B) Support and resistance(C) Breadth of the market(D) None of the above
A fundamental analyst examines all of the following EXCEPT(A) earnings per share(B) balance sheets(C) income statements(D) trend lines
Which of the following is a way an investor can diversify investments?(A) Geographically(B) Investing in stocks from different sectors(C) Purchasing bonds with different maturity dates(D) All of the above
A client new to investing has $10,000 to invest and wants to build a diversified portfolio.Which of the following is the BEST investment recommendation?(A) Purchasing several different mutual funds(B) Purchasing three different types of bonds and several different blue chip stocks(C) Purchasing
One of your clients is interested in purchasing municipal securities for the first time.You would like to help them purchase a diversified portfolio of municipal securities.All of the following factors are important in municipal diversification EXCEPT(A) type(B) rating(C) amount(D) geographical
A customer of yours has preservation of capital as their primary investment objective.Which of the following securities would you recommend to help them meet their objective?I. AAA-rated corporate bonds II. An exploratory direct participation program III. Blue chip stocks IV. U.S. government
One of your new clients has a long-term investment objective of aggressive growth.However, they are planning on purchasing a fixer-upper home within the next year.Which of the following investments would you determine to be MOST suitable for their portfolio?(A) Treasury bills(B) High-yield bond
Which TWO of the following would make a corporate bond LEAST subject to liquidity risk?I. Bonds with a high credit rating II. Bonds with a low credit rating III. Bonds with a long-term maturity IV. Bonds with a short-term maturity(A) I and III(B) I and IV(C) II and III(D) II and IV
Which of the following debt securities has no reinvestment risk?(A) Municipal GO bonds(B) Equipment trusts(C) Industrial development revenue bonds(D) Treasury STRIPS
A client would like to make sure their portfolio is diversified. Which of the following are ways that a portfolio can be diversified?I. Buying different types of securities(equity, debt, options, DPPs, and packaged)II. Buying securities from different industries III. Buying bonds with different
An investor is interested in purchasing debt securities for the first time. If their biggest concern is credit risk, which of the following bonds should they NOT purchase?I. Income bonds II. High-yield bonds III. AA-rated corporate bonds IV. AAA-rated industrial development revenue bonds(A) I
Which TWO of the following statements are TRUE regarding portfolio diversification?I. Diversification reduces systematic risk.II. Diversification doesn’t reduce systematic risk.III. Diversification reduces non-systematic risk.IV. Diversification doesn’t reduce nonsystematic risk.(A) I and
If the FDA increases pollution standards that are more costly for oil companies, investors who own shares of oil company stock would most likely see the value of their shares decline due to(A) purchasing power risk(B) reinvestment risk(C) credit risk(D) regulatory risk
A client owns a large amount of Treasury bonds and long-term investment grade corporate bonds. Their main risk concern should be(A) credit risk(B) inflationary risk(C) systematic risk(D) timing risk
Which of the following securities faces the most inflationary risk?(A) T-bonds(B) Utility stocks(C) Money market securities(D) Blue-chip stocks
Which of the following is the risk of not being able to sell a security quickly if needed?(A) Reinvestment risk(B) Credit risk(C) Liquidity risk(D) Call risk
Investors who have international investments are subject to ____________ risk.(A) political(B) currency(C) regulatory(D) all of the above
Zero coupon bonds have no _________ risk.(A) reinvestment(B) purchasing power(C) market(D) interest
One of your customers wants to invest in a retirement plan that protects against purchasing power risk, Which of the following would be the most suitable investment?(A) Corporate bonds(B) Preferred stock(C) Variable annuities(D) Fixed annuities
One of your clients is interested in purchasing the common stock from several companies based in Europe. As their registered representative, you should explain to them the risks of investing in these securities.The risks include I. political risk II. market risk III. currency risk IV. interest rate
Which of the following securities is subject to the LEAST market risk?(A) GNMA(B) AAA rated GO bonds(C) AAA rated corporate bonds(D) Bond anticipation notes
Which of the following are exempt from the call time requirements of the TCPA?(A) Tax-exempt non-profit organizations(B) Existing customers(C) Calling potential customers(D) Both (A) and (B)
While cold-calling, a registered rep finds that one of the people called is not interested in investing with their firm now or any time in the future. What should the registered rep do with that information according to the Telephone Consumer Protection Act of 1991 (TCPA)?(A) A principal of the
According to the Telephone Act of 1991, which of the following is TRUE?(A) You may not make calls to potential customers before 8 a.m. or after 9 p.m.(B) You may not make calls to potential customers before 8 a.m. or after 9 p.m. local time of the customer.(C) You may not make calls to potential
A customer sells short 1,000 shares of Sketchy Corporation common stock at$3.80 per share. What is the margin call?(A) $1,900(B) $2,000(C) $3,800(D) $5,000
An investor opens a margin account by selling short $5,000 worth of securities.What is the margin call?(A) $1,500(B) $2,000(C) $2,500(D) $5,000
Which of the following is true regarding Regulation T and minimum maintenance?(A) They are set by the Fed and can only be increased or decreased by the Fed.(B) The Fed sets Regulation T and maintenance, but they may be increased by the broker-dealer.(C) The Fed sets the maximum Regulation T and
In the initial transaction in a margin account, a customer purchases 100 shares at $32. What is the margin call?(A) $1,600(B) $800(C) $3,200(D) $2,000
All of the following securities can be purchased on margin EXCEPT(A) open-end funds(B) ADRs(C) warrants(D) closed-end funds
One of your customers wants to open a margin account by selling short 100 shares of GHI at $15. What is the margin call?(A) $750(B) $1,500(C) $2,000(D) $3,000
An investor opens a margin account by purchasing 1,000 shares of ABC at $15 per share and shorting 1,000 shares of DEF at $12 per share. What is the investor’s margin call as a result of these transactions?(A) $1,500(B) $3,000(C) $13,500(D) $27,000
In an initial transaction in a margin account, a customer purchases 100 shares of RRR at $18 per share. What is the margin call?(A) $900(B) $1,800(C) $2,000(D) $2,900
In an initial transaction in a margin account, Alyssa Hudson purchases 100 shares of Hopeful Corporation common stock at $12 per share. How much must Alyssa deposit to meet the margin requirement?(A) $600(B) $1,200(C) $2,000(D) Cannot be determined
What is the minimum equity requirement for a pattern day trader?(A) $5,000(B) $10,000(C) $25,000(D) $50,000
Which of the following securities can be purchased on margin by depositing the Regulation T margin requirement?I. Exchange-listed stocks II. Exchange-listed bonds III. Mutual funds IV. IPOs(A) I and II(B) III and IV(C) I and III(D) III only
Minimum maintenance is(A) 25% on a long margin account and 25% on a short margin account(B) 30% on a long margin account and 30% on a short margin account(C) 30% on a long margin account and 25% on a short margin account(D) 25% on a long margin account and 30% on a short margin account
Margined securities will be held(A) in the name of the customer but using a number instead of the customer’s name(B) in the name of the broker-dealer(C) in the name of both the customer and broker-dealer(D) in the name of the bank rehypothecating the loan
A partnership would like to trade on margin. They may do so(A) without restriction(B) under no circumstances(C) only if permitted in their partnership documentation(D) only with approval from the SEC
Which of the following transactions must be executed in a margin account?(A) The short sale of a corporate stock(B) Buying put options(C) Shorting call options(D) Buying Industrial Development Revenue Bonds
Which of the following regulations of the Federal Reserve Board regulates how much credit a bank can allow a customer for the purposes of purchasing securities on margin?(A) Regulation T(B) Regulation G(C) Regulation U(D) Regulation B
Which of the following documents must be sent to a margin customer prior to the signing of the margin agreement?(A) Credit agreement(B) Hypothecation agreement(C) Loan consent form(D) Risk disclosure document
A margin loan consent form(A) allows the broker-dealer to provide a loan to the customer(B) allows the broker-dealer to loan a customer’s margined securities to other investors(C) allows the broker-dealer to borrow money from a bank for margin accounts(D) is required for both cash and margin
One of your clients opens a long margin account and fills out the required paperwork.Which of the following are TRUE regarding this account?I. The securities in the account will be held in street name.II. Your client will be required to pay interest on the debit balance.III. A decrease in market
Which of the following margin documents discloses the interest rate to be charged on the debit balance?(A) The credit agreement(B) The hypothecation agreement(C) The loan consent form(D) The margin interest rate form
You are opening a long margin account for one of your customers. You should inform them that they will have to sign I. a credit agreement II. a risk disclosure document III. a hypothecation agreement IV. a loan consent form(A) I and II(B) I, II, and IV(C) I, III, and IV(D) II, III, and IV
AylDec Corporation would like to open a margin account at Guess Right Broker-Dealer. To open the account, Guess Right would need I. to fill out a new account form II. a copy of the corporate resolution from AylDec III. a copy of the corporate charter from AylDec IV. a signed copy of the margin
Who sets the Regulation T margin requirement?(A) FINRA(B) NYSE(C) The Federal Reserve Board(D) The Securities and Exchange Commission
A customer’s signature is required to open a(A) cash account(B) margin account(C) both a cash and margin account(D) neither a cash nor margin account
A corporate customer would like to open a cash account for their company. To open the account, you would need a copy of the(A) corporate charter(B) corporate resolution(C) corporate charter and corporate resolution(D) none of the above

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