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

Power of attorney is required for I. discretionary accounts II. custodial accounts III. joint accounts IV. fiduciary accounts(A) I only(B) I and II(C) I, II, and IV(D) I, II, III, and IV
An UGMA account is a(n)(A) joint account(B) individual account(C) custodial account(D) trust account
Which of the following is NOT TRUE about UGMA accounts?(A) Taxes are the responsibility of the minor.(B) Certificates are endorsed by the minor.(C) The custodian cannot give anyone else power of attorney over the account.(D) The custodian cannot be compensated for services.
Regarding UGMA accounts, which TWO of the following are TRUE?I. The minor is responsible for taxes.II. The custodian is responsible for taxes.III. There may be more than one custodian per UGMA account.IV. There may be only one custodian per UGMA account.(A) I and III(B) I and IV(C) II and III(D) II
In order for a corporation to open a cash account, it would need to send a brokerage firm a copy of a(A) corporate charter(B) corporate resolution(C) corporate charter and corporate resolution(D) neither the corporate charter nor corporate resolution
Which of the following accounts may a client open up without a written power of attorney?(A) An account for a spouse(B) An account for a minor daughter(C) An account for a business partner(D) None of the above
You may open up a joint account for each of the following couples EXCEPT(A) a parent and a minor daughter(B) three unrelated individuals(C) a husband and wife(D) an individual and their 71-year-old mother
Pam Platinum would like to open an UGMA account for a 10-year-old daughter. Pam is also interested in being the custodian for the account. Which of the following governs investments purchased for UGMA accounts?I. The legal list II. The FINRA list of approved investments for minors’ accounts III.
What happens when one partner in an account set up as joint with tenants in common dies?(A) That partner’s portion of the account is transferred to their estate.(B) That partner’s portion of the account is transferred to the remaining partners in the account.(C) That partner’s portion of the
Which of the following occurs under the Uniform Gifts to Minors Act when a minor reaches the age of majority?(A) The account must be changed to an UTMA account.(B) The account is transferred to the donor.(C) The account is closed, and the former minor receives a check from the broker-dealer equal
Most married couples set up this type of account.(A) A partnership account(B) Joint with tenants in common(C) Joint tenants with rights of survivorship(D) Custodial account
Three unmarried business partners have set up a joint tenants with rights of survivorship account. All of the following is true of the account EXCEPT(A) all of the partners typically would have trading authority(B) if one partner dies, that partner’s portion in account is passed on to the
Your clients, a husband and wife, open a joint account as tenants in common. If one spouse dies, what must be done with the account?(A) The entire account is transferred to the survivor.(B) The deceased party’s portion of the account is transferred to their estate.(C) The account is divided up on
What type of joint account is typically set up for unrelated individuals where the estate is the beneficiary?(A) Joint tenants with rights of survivorship(B) Tenancy in common(C) Discretionary account(D) Custodial account
Mr. and Mrs. Faber opened a joint account several years ago as a JTWROS. Mr. Faber was involved in a sky-diving accident and didn’t survive. Upon receiving confirmation of Mr. Faber’s passing, what must be done with the account?(A) The entire account would be transferred to Mrs. Faber.(B) Mr.
Which of the following people CANNOT open a joint account?(A) A parent and a minor daughter(B) Two close friends(C) A husband and wife(D) Three business partners
A registered representative may open which of the following accounts?I. A minor’s account by a custodian II. A corporate account by a designated officer III. A partnership account by a designated partner IV. An account in the name of Mr. Rice for Mrs. Rice(A) I and IV(B) II and III(C) I, II, and
You have a new client who would like to open a numbered account. To open that account, what must occur?(A) The client must sign a written statement attesting to ownership of the account.(B) The client would need to receive permission from FINRA.(C) The client would need to receive permission from
Chael Weidman wants to open an account at MMA Broker-Dealer. Chael does not want their name to appear on the account. How would MMA Broker-Dealer handle this request?(A) MMA would open a numbered account for Chael.(B) MMA would set up a street-named account for Chael if they are an accredited
Which of the following would be the BEST recommendations for an investor who has an investment objective of speculation?I. Sector funds II. Blue chip stocks III. Zero-coupon bonds IV. Technology stocks(A) I and II(B) II and III(C) I and IV(D) I, II, and IV
One of your wealthy clients is in the highest tax bracket and has a portfolio with a nice mixture of corporate bonds and stocks.What would be the BEST recommendation to help the client round out their portfolio?(A) U.S. Treasury securities(B) Municipal bonds(C) REITs(D) CMOs
If a client is interested in investing in liquid securities, which TWO of the following would you NOT recommend:I. Municipal bonds II. Direct participation programs III. Mutual funds IV. Blue chip stocks(A) I and II(B) III and IV(C) II and III(D) I and IV
Which of the following investments would be proper for investors interested in capital growth?(A) T-bonds(B) Municipal bonds(C) The stock of new corporations(D) REITs
Which of the following must occur before a registered representative makes an investment recommendation to their client?(A) The registered representative must determine the client’s suitability.(B) The registered representative must receive written approval from a principal.(C) The registered
Your client has an investment objective of total return. They currently have 100% of their portfolio invested in common stocks and common stock mutual funds. What would you suggest they add to their portfolio to help them meet their investment objective?(A) Blue chip stocks(B) Preferred stocks(C)
Which of the following is the MOST important consideration when making investment recommendations to a client?(A) The client’s age(B) The client’s marital status(C) The client’s financial needs(D) The client’s investment objectives
Whose signature is required on a new account form?I. The customer’s II. The registered rep’s III. A principal’s(A) I and II(B) I and III(C) II and III(D) I, II, and III
As a registered representative, you need to keep track of each client’s investment objectives. Which of the following changes may affect a client’s investment objectives?I. Aging II. Getting divorced III. Having a child IV. Winning $5 million in the lottery(A) I and III(B) II and III(C) I, III,
Changes inwhich of the following nonfinancial information might change an investor’s investment objectives?I. The investor growing older II. Getting married or divorced III. Investment experience IV. Family responsibility(A) II and IV(B) I, II, and III(C) I, II, and IV(D) I, II, III, and IV
Which signatures are not required on a new account form?(A) The customer’s(B) The registered rep’s(C) The principal’s(D) All are required
Under the USA Patriot Act, all banks and brokerage firms must maintain __________ to help prevent money laundering and the financing of terrorist operations.(A) CIPs(B) SDNs(C) OFACs(D) FinCEN
As part of the USA Patriot Act of 2001, all financial institutions must maintain(A) customer identification programs(B) a fidelity bond(C) SIPC coverage(D) all of the above
Which of the following needs to be filled out on a new account form?I. The customer’s name and address II. The customer’s date of birth III. The type of account IV. The customer’s investment objectives(A) I and II(B) I, II, and III(C) I, II, and IV(D) I, II, III, and IV
You are in the process of opening a new customer account. Which of the following information do you need?I. The customer’s Social Security number or tax ID II. The customer’s investment experience III. The customer’s occupation and employer IV. The customer’s legal name and address(A) I and
A client’s nonfinancial considerations are typically as important as their financial considerations. Nonfinancial considerations include(A) the client’s age(B) the client’s marital status(C) the client’s employment status(D) all of the above
All of the following information must be obtained from a new individual customer EXCEPT(A) the individual’s Social Security number(B) the individual’s date of birth(C) the individual’s educational background(D) the individual’s residential address
Which of the following must be verified when opening an account for new client?I. Citizenship II. Whether or not their name appears on the SDN list III. Whether they work at another brokerdealer or not IV. Whether they have any accounts at another broker-dealer(A) I and IV(B) II and III(C) I, II,
An investor who is long a call option exercises the option to purchase the stock.When does that trade settle?(A) T + 1(B) T + 2(C) T + 3(D) In 3 calendar days
A broker-dealer is assigned an exercise notice by the OCC. The broker-dealer may choose the customer to assign the exercise notice in any of the following ways EXCEPT(A) the customer holding the position for the longest period of time(B) any method fair and reasonable(C) random selection(D) the
A new customer would like to start trading options. The first entity to determine if the customer is able to handle the risk of investing in options is(A) the registered options principal(B) the registered rep(C) the Options Clearing Corporation(D) any of the above
If a customer doesn’t sign and return the option’s account agreement(A) all existing option positions must be closed(B) the customer cannot establish any new options positions(C) all existing option positions must be closed, and no new positions can be established(D) the customer’s account is
Option trades settle in __________ business day(s) after the trade date.(A) one(B) two(C) three(D) four
When the firm chooses a customer to have an option exercised, the firm may use all of the following methods EXCEPT(A) randomly(B) first in first out(C) based on size(D) any method fair and reasonable
Which of the following choices contain options of the same class?I. ABC Nov 50 call / ABC Nov 60 put II. XYZ Dec 65 put / XYZ Oct 50 put III. RST Jan 70 call / RST Mar 60 call IV. HIJ May 80 put/ HIX May 90 put(A) I and III(B) I and IV(C) II and III(D) II and IV
The OCC is responsible for setting all of the following EXCEPT(A) the exercise price(B) the amount of shares per option(C) the expiration date(D) the premium
Listed options expire(A) 3:00 p.m. EST on the business day of expiration(B) 4:00 p.m. EST on the business day of expiration(C) 5:30 p.m. EST on the business day of expiration(D) 11:59 p.m. EST on the business day of expiration
An investor must receive an options disclosure document(A) at or prior to approval of the account(B) within 15 days after the first transaction(C) only if requested(D) at some point in-between the first and second transaction
Which of the following is the riskiest option strategy?(A) Buying calls(B) Buying puts(C) Selling uncovered calls(D) Selling uncovered puts
The last time an investor can trade an option is(A) 3:00 p.m. EST on the business day of expiration(B) 4:00 p.m. EST on the business day of expiration(C) 5:30 p.m. EST on the business day of expiration(D) 11:59 p.m. EST on the business day of expiration
Declan K. is opening a new options account at a broker-dealer. Declan K. must return the signed options account agreement(A) prior to the account being approved(B) within 15 days after approval of the account(C) any time prior to the first transaction(D) sometime prior to receiving the risk
Options of the same series have the I. same stock II. same expiration date III. same strike price IV. same type(A) I only(B) I and III(C) I, II, and III(D) I, II, III, and IV
The OCC uses which of the following methods when assigning exercise notices?(A) First in, first out(B) Random selection(C) To the member firm holding the largest position(D) Any of the above
When is the last time an investor can exercise an option contract?(A) 4:00 p.m. EST on the third Friday of the expiration month(B) 5:30 p.m. EST on the third Friday of the expiration month(C) 11:59 p.m. EST on the third Friday of the expiration month(D) 11:59 p.m. CST on the third Friday of the
If an investor sells a covered call on stock owned in an account, which of the following is true?(A) The premium increases the cost basis.(B) The premium decreases the cost basis.(C) The investor has unlimited risk.(D) The trade must be executed in a margin account.
New options investors must sign an Options Account Agreement(A) at or prior to approval of the new account(B) at or prior to the investor’s first option transaction(C) within 15 days after approval of the account(D) whenever the investor sees fit
The individual responsible for approving all options accounts at a firm is(A) a registered options principal(B) a general securities principal(C) an office manager(D) the compliance officer
Place the following in order from first to last:I. Have a ROP approve the account.II. Send out an ODD.III. Have the customer sign and return the OAA.IV. Execute the options trade.(A) I, II, III, IV(B) II, I, IV, III(C) III, I, II, IV(D) IV, III, II, I
Who is the issuer and guarantor of all listed options?(A) OAA(B) OCC(C) ODD(D) FINRA
Option confirmations must include which of the following?I. The type of option II. The underlying security or index III. Whether it is a purchase or sale IV. Whether it’s an opening or closing transaction(A) I, II, and III(B) II, III, and IV(C) I and IV(D) I, II, III, and IV
What happens to open option orders on the ex-dividend date of the underlying security?(A) The strike price is raised to reflect the dividend.(B) The strike price remains the same.(C) The strike price is lowered to reflect the dividend.(D) It depends on the particular security.
Position limits are(A) the number of option contracts that a person can hold on the same side of the market(B) the number of call option contracts(both short and long positions) an investor can hold at one time(C) the number of put option contracts(both short and long positions) an investor can
An investor is short 10 HIJ Feb 20 put options. Which of the following transactions would bring this investor into a net delta position?(A) Purchasing 100 shares of HIJ(B) Purchasing 1,000 shares of HIJ(C) Selling short 100 shares of HIJ(D) Selling short 1,000 shares of HIJ
An investor owns 100 shares of WXY common stock at $45. Which of the following would create a delta neutral position for this investor?(A) Buying a WXY 45 call option(B) Buying a WXY 50 put option(C) Buying a WXY 45 put option(D) Either (A) or (C)
A FINRA member who has been admitted to membership in the OCC is a(A) a broker-dealer(B) ROP(C) CROP(D) clearing member
An investor purchases a TUV Oct 45 call for a premium of 3.What is the aggregate exercise price?(A) $45(B) $48(C) $4,500(D) $4,800
Which of the following is TRUE regarding option contracts?I. The OCC sets the contract size.II. The OCC sets the strike prices.III. The OCC sets the premiums.IV. The OCC sets the expiration dates.(A) I and III(B) I, II, and III(C) II and III(D) I, II, III, and IV
Melissa Rice purchased 100 shares of HHH common stock at $50 per share. Two weeks later, Melissa sold 1 HHH Oct 55 call at 6.Melissa held that position for three months before selling the HHH stock at $52 per share and closing the HHH Oct 55 call at 4.What is Melissa’s gain or loss on the
An investor buys an HIJ August 90 call for 9.If the investor closes the option for 6, what is the gain or loss?(A) $300 gain(B) $300 loss(C) $600 gain(D) $600 loss
An investor buys a TTT December 60 put for 7.TTT drops to 50 just prior to expiration.The investor buys the stock in the market and exercises the put. What is the gain or loss?(A) $1,700 gain(B) $1,700 loss(C) $300 gain(D) $300 loss
Alyssa H. writes an HIJ May 40 call for 9.HIJ increases to $45 just prior to expiration, and the call is exercised. After Alyssa buys the stock in the market to meet the obligation, what is the gain or loss?(A) $400 gain(B) $400 loss(C) $900 gain(D) $900 loss
An investor buys an ABC April 60 call option for a premium of 4.ABC goes up to $75 just prior to expiration. The investor exercises the option and sells the stock in the market.What is the gain or loss?(A) $1,100 gain(B) $1,100 loss(C) $1,900 gain(D) $1,900 loss
An investor sells a TUV Sep 70 put for 5 and sells a TUV Sep 80 call for 4.If the investor closes the put for 4 and the call for 3, what is the gain or loss?(A) $200 loss(B) $200 gain(C) $400 loss(D) No gain or loss
An investor with no other position in RST writes 1 RST Dec 40 put at 3.25. If the put option is exercised when RST is trading at 37.50 and the investor immediately sells the stock in the market, what is their gain or loss excluding commissions?(A) $75 loss(B) $75 gain(C) $575 loss(D) $575 gain
One of your customers wishes to liquidate a long option. How would you mark the option order ticket?(A) Opening purchase(B) Opening sale(C) Closing purchase(D) Closing sale
Melissa previously wrote 10 MKR Aug 45 puts for 6 each when the market price of MKR was 46.MKR is currently trading at 41, and the options are one week away from expiration. Melissa would like to buy her way out of that position. If she does, how would the second option order ticket be marked?(A)
An investor writes a LMN May 40 put for 8.What is this investor’s breakeven point?(A) 48(B) 32(C) 40(D) 56
An investor writes a GHI May 45 put for 3.What is this investor’s maximum potential loss?(A) $300(B) $4,200(C) $4,800(D) Unlimited
An investor writes a JKL October 40 put for 8.What is this investor’s maximum potential gain?(A) $800(B) $3,200(C) $4,800(D) Unlimited
With no previous positions in an account, Mr. Jones writes an XYZ May 75 put for 6.62 while XYZ trades at 63.25. If XYZ later closes at 60.88, what is Mr. Jones’s breakeven point?(A) 54.25(B) 56.63(C) 68.38(D) 81.63
An investor is sold 1 WXYZ Jan 35 put at 3.5 when WXYZ was trading at $36.10. What is the investor’s breakeven point as a result of this transaction?(A) 31.5(B) 32.6(C) 38.5(D) 39.6
An investor sells 1 HIJ Jun 40 put at 6.What is the breakeven point?(A) 34(B) 40(C) 46(D) Cannot be determined
An investor purchases an XYZ Oct 65 put for 6.What is this investor’s maximum potential loss per share?(A) $6(B) $59(C) $71(D) Unlimited
An investor purchases an LMN Oct 60 put fo 4.What is this investor’s breakeven point?(A) 56(B) 60(C) 64(D) 68
Declan Goldbar buys an ABC March 50 put for 6.What is Declan’s maximum potential gain?(A) $600(B) $4,400(C) $5,600(D) Unlimited
The breakeven point for an investor who is short a put is(A) the market price minus the premium(B) the market price plus the premium(C) the strike price minus the premium(D) the strike price plus the premium
Ayla K. sold an FGH July 45 call for a premium of 4.5. What is Ayla’s breakeven point?(A) 40.5(B) 45(C) 49.5(D) 54.5
An investor writes an EFG Dec 65 call for 7.What is the maximum potential loss for this investor?(A) $700(B) $5,800(C) $7,200(D) Unlimited
An investor shorts a DEF Aug 60 call for 7.What is the maximum potential gain for this investor?(A) $700(B) $5,300(C) $6,700(D) Unlimited
An investor buys an OPQ June 30 call for a premium of 6.5. What is the investor’s breakeven point?(A) 23.5(B) 30(C) 36.5(D) 40
An investor buys an LMNO May 35 call for a premium of 3.5. What is the maximum potential loss?(A) $350(B) $3,150(C) $3,850(D) Unlimited
An investor buys an XYZ May 60 call for a premium of 5.What is the maximum potential gain?(A) $500(B) $5,500(C) $6,500(D) Unlimited
An investor wrote 10 uncovered puts on DWN common stock. What is the maximum potential loss?(A) Unlimited(B) The premium received(C) (Strike price – the premium) × 100 shares × 10 options(D) (Strike price + the premium) × 100 shares × 10 options
Mr. Drudge writes a naked put option on WIM common stock. What is the maximum loss per share that Mr. Drudge can incur?(A) Strike price minus the premium(B) Strike price plus the premium(C) The entire premium received(D) Unlimited
Use the following exhibit to answer this questionWhat is the maximum potential gain for an investor who sells an RST Dec 50 put?(A) $150(B) $415(C) $4,585(D) Unlimited BID OFFER ZAM Dec45 cell ZAM Dec45 put 5 5,25 4 4.25 ZAM Dec50 cell 1 1.25 ZAM Dec50 put 7 7,25
When selling an uncovered put, an investor would realize a profit in all of the following situations EXCEPT(A) the price of the underlying stock increases in value above the strike price of the option(B) the premium of the put option decreases(C) the option expires unexercised(D) the option is
What is the breakeven point for an investor who writes a Sep 40 call for 3?(A) 37(B) 40(C) 43(D) 34
An investor writes an RST Dec 60 call for 7.What is this investor’s maximum potential gain?(A) $700(B) $5,300(C) $6,700(D) Unlimited
The breakeven point on a put option is(A) the stock price plus the premium(B) the stock price minus the premium(C) the exercise price plus the premium(D) the exercise price minus the premium
Mr. Couture is long 1 MMA Feb 40 call at 1.75. If MMA is currently trading at $39.50, what is Mr. Couture’s breakeven point?(A) $37.75(B) $38.25(C) $41.25(D) $41.75
An investor who is long a call option will realize a profit if exercising the option when the underlying stock price is(A) above the exercise price plus the premium paid(B) below the exercise price(C) below the exercise price minus the premium paid(D) above the exercise price

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