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SIE Exam: 1001 Practice Questions For Dummies 1st Edition Steven M. Rice (Author) - Solutions
All of the following are true regarding limited partners EXCEPT(A) they have access to unlimited financial information regarding the partnership(B) they may participate in management decisions since they have a tremendous amount of risk(C) they may vote to terminate a partnership(D) they may invest
Marge is a 54-year-old investor from Utah who is looking to add some liquidity to her portfolio. All of the following investments would help Marge meet that goal EXCEPT(A) an aggressive growth fund(B) an oil and gas limited partnership(C) blue-chip stocks(D) Treasury bills
Which two of the following corporate characteristics are the easiest for a limited partnership to avoid?I. Having perpetual life II. Providing limited liability III. Having centralized management IV. Having free transferability(A) I and III(B) I and IV(C) II and III(D) II and IV
Reps selling variable life or variable universal life policies must have(A) a securities license(B) an insurance license(C) both a securities license and an insurance license(D) both a securities principal license and an insurance license
Which of the following are TRUE about variable universal life insurance policies?I. The minimum death benefit is guaranteed.II. The minimum death benefit is not guaranteed.III. The minimum cash value is guaranteed.IV. The minimum cash value is not guaranteed.(A) I and III(B) II and III(C) I and
The ___________ will affect the value of a variable life insurance policy.(A) age of the policyholder(B) insurance company’s investments(C) payout option chosen by the policyholder(D) performance of the securities in the separate account
Which of the following life insurance products has a fixed premium?(A) Variable life(B) Variable universal life(C) Both (A) and (B)(D) Neither (A) nor (B)
Which TWO of the following are TRUE about variable life insurance policies?I. The minimum death benefit is guaranteed.II. The minimum death benefit is not guaranteed.III. The minimum cash value is guaranteed.IV. The minimum cash value is not guaranteed.(A) I and III(B) II and III(C) I and IV(D) II
An investor is depositing $500 per month into a variable annuity. Which of the following is true?(A) The investor is buying a fixed number of annuity units each month.(B) The investor is buying a varying number of annuity units each month.(C) The investor is buying a fixed number of accumulation
An investor would like to purchase an annuity that will pay him for a minimum of 10 years or the balance of their life, whichever is later. Which of the following would meet this investor’s needs?(A) Life with period certain(B) Joint life with last survivor(C) Straight life annuity(D) Unit refund
A widowed mother would like to purchase an annuity that would cover the mother and a divorced daughter. Which of the following annuity purchase options would best suit their needs?(A) Life with period certain(B) Joint life with last survivor(C) Straight life annuity(D) Unit refund
Investors holding a variable annuity receive payments for life. This is called a(A) life payment guarantee(B) mortality guarantee(C) deferred guarantee(D) post-payment guarantee
One of your clients is interested in purchasing a variable annuity that would provide the largest monthly payment. Which of the following options would be most suitable for this client?(A) Life income annuity(B) Life with period certain annuity(C) Joint and last survivor annuity(D) Not enough
Which of the following payout options for variable annuities would provide the largest monthly payment to annuitants?(A) Straight-life annuity(B) Life with period certain(C) Joint and survivor annuity(D) Unit refund
Which of the two following are true about accumulation and annuity units of a variable annuity?I. The number of accumulation units remains the same during the surrender period.II. The number of accumulation units varies during the surrender period.III. The number of annuity units liquidated remains
John Silverhouse has been investing in a variable annuity for 30 years and is about to retire. When receiving payouts from the variable annuity will John receive?(A) A variable number of accumulation units based on the value of the annuity units(B) A variable number of annuity units based on the
A 68-year-old investor owns a nonqualified variable annuity. They invested a total of $38,000. The annuity now has a value of $47,000. They decide to take a lump-sum withdrawal of $12,000. What is their tax liability if they are in the 28% tax bracket?(A) $0(B) $840(C) $2,520(D) $3,360
All of the following are ways a variable annuity can be purchased EXCEPT(A) immediate annuity(B) payment deferred immediate annuity(C) single payment deferred annuity(D) periodic payment deferred annuity
A 25-year-old investor has just received a very large inheritance and would like to purchase a variable annuity. Which of the following purchase options would be best for this investor?(A) Immediate annuity with deferred payment(B) Periodic payment deferred annuity(C) Single payment immediate
Which of the following annuity options would hold accumulation units?I. Single payment deferred annuity II. Periodic payment deferred annuity III. Immediate annuity(A) II only(B) I and II(C) I and III(D) I, II, and III
The owner of a variable annuity dies during the accumulation phase. The death benefit will be paid to(A) the IRS(B) the account holder’s estate(C) the insurance company(D) the designated beneficiary
The investment risk in a variable annuity is assumed by(A) the holder of the policy(B) the insurance company(C) 60% by the insurance company and 40% by the policyholder(D) none of the above
One of your clients has a variable annuity contract with an AIR of 4.25%. Last month, the actual net return to the separate account was 5.75%. If your client is currently in the payout phase, how would this month’s payment compare to the AIR?(A) It will be the same.(B) It will be higher.(C) It
All of the following are true of variable annuities EXCEPT(A) the securities held in the separate account are professionally managed(B) securities held in the separate account may be mutual funds(C) investors are protected against capital loss(D) they are more likely to keep pace with inflation
All of the following securities are covered under the Investment Company Act of 1940 EXCEPT(A) open-end funds(B) fixed annuities(C) closed-end funds(D) variable annuities
Which of the following is exempt from the Investment Company Act of 1940?(A) Mutual funds(B) Closed-end funds(C) Fixed annuities(D) Variable annuities
Which of the following is true regarding the early withdrawal penalty for an annuity?(A) It applies to investors under the age of 59½.(B) The penalty is 10% added to the investor’s tax bracket.(C) There may be a waiver of penalty for first-time home buyers or disability.(D) All of the above.
Variable annuities must be registered with I. the SEC II. the State Banking Commission III. the State Insurance Commission IV. the NYSE(A) I and II(B) II and IV(C) I and III(D) II, III, and IV
Investors of variable annuities should be most concerned about(A) the performance of the securities held in the insurance company’s general account(B) the credit rating of the insurance company’s bonds(C) the insurance company’s profits or losses(D) the performance of the securities held in
A fixed annuity is not considered a security because(A) there is a fixed portfolio of securities held in the separate account(B) it can’t be traded(C) the payout is guaranteed by the insurance company(D) all of the above
Which of the following is true regarding the mortality guarantee on a variable annuity?(A) Payments will continue for the life of the annuitant.(B) The amount of the payment will not change for the life of the annuitant.(C) Payments will continue for the expected life of the annuitant.(D) The
Which of the following securities are most likely to make payments to the investor on a monthly or quarterly basis for the entire life of the investor?(A) Variable annuities and closed-end funds(B) Variable annuities and face-amount certificate companies(C) Fixed annuities and open-end funds(D)
The investment return on a variable annuity is based on(A) the performance of the securities held in the separate account(B) the annuity’s assumed interest rate(AIR)(C) the performance of the insurance company’s general account(D) a calculation based on the consumer price index (CPI)
One of your clients is bearish on the market.Which of the following investment choices would be appropriate for this client?(A) Selling short an index fund(B) An inverse exchange-traded fund(C) A hedge fund(D) Selling short a dual-purpose fund
Purchasers of outstanding exchange traded funds would pay(A) the bid price plus a commission(B) the NAV plus a commission(C) the ask price plus a commission(D) either (A) or (B)
A(n) __________ fund would most likely have the most price volatility.(A) international(B) balanced(C) income(D) money market
This type of fund provides a check-writing feature as a way of redeeming shares.(A) International fund(B) Balanced fund(C) Money market fund(D) Specialized fund
This type of fund is looking for both growth and income.(A) Global fund(B) Balanced fund(C) Money market fund(D) Specialized fund
This type of fund invests in more speculative common stocks.(A) Growth fund(B) Sector fund(C) Balanced fund(D) Income fund
Alyssa Smith purchased shares of a mutual fund. Alyssa will be expected to pay the(A) current bid price(B) current ask price(C) next computed bid price(D) next computed ask price
An investor decides to redeem shares of a mutual fund. At what price will the trade be executed?(A) The current bid price(B) The current ask price(C) The next computed bid price(D) The next computed ask price
Which two of the following are true regarding exchange traded funds?I. They can be traded throughout the day.II. They can only be purchased or sold at the end of the trading day.III. They have low expense ratios.IV. They have high expense ratios.(A) I and III(B) I and IV(C) II and III(D) II and IV
Out of the choices listed, which of the securities would most likely have the lowest expense ratio?(A) Variable annuity(B) ETF(C) Growth fund(D) Municipal bond fund
Which two of the following are true regarding ETFs and mutual funds?I. ETFs can be purchased on margin.II. Mutual funds can be purchased on margin.III. ETFs have forward pricing.IV. Mutual funds have forward pricing.(A) I and III(B) I and IV(C) II and III(D) II and IV
Exchange traded funds I. are purchased and sold at a price based on supply and demand II. are purchased and sold at a price that reflects the current NAV III. are purchased and sold based on forward pricing IV. are purchased and sold that the current bid and ask prices(A) I and III(B) I and IV(C)
When explaining the difference between exchange-traded funds and mutual funds, you can say that unlike mutual funds exchange-traded funds I. can be sold short II. can be purchased on margin III. represent a basket of securities IV. real-time pricing(A) I, II, and III(B) II and III(C) II, III, and
John Lavinsky purchased 500 shares of a municipal bond fund. Which of the following statements are TRUE?I. Dividends are taxable.II. Dividends are not taxable.III. Capital gains distributions are taxable.IV. Capital gains distributions are not taxable.(A) I and IV(B) I and III(C) II and III(D) II
One of your clients would like to purchase a mutual fund on margin. You should inform them that(A) mutual funds cannot be purchased on margin(B) to purchase on margin they must sign a letter of intent(C) the minimum deposit to purchase mutual funds on margin is $25,000(D) the minimum deposit to
A tax-free fund invests in(A) municipal bonds(B) U.S. government bonds(C) both (A) and (B)(D) neither (A) nor (B)
An advantage to investing in a UIT as compared to a mutual fund is(A) the initial investment is usually lower(B) they are redeemable(C) an investment manager who may be quicker to adjust to adverse market conditions(D) lower operating costs
Which of the following types of investment companies invests in a fixed portfolio of securities and charges no management fees?(A) UIT(B) REIT(C) Face amount certificate company(D) Mutual fund
This investment company does not charge a management fee.(A) Face amount certificate company(B) UIT(C) A closed-end fund(D) An income fund
Which of the following is not an investment company?(A) Unit investment trust(B) Face amount certificate company(C) Variable annuity(D) Closed-end fund
Which of the two of the following are true about unit investment trusts (UITs)?I. They issue redeemable securities.II. They issue non-redeemable securities.III. They offer securities one time.IV. They continuously offer new securities.(A) I and III(B) I and IV(C) II and III(D) II and IV
Which of the following types of investment companies is most similar to a zero-coupon bond?(A) Mutual fund(B) Closed-end fund(C) Unit investment trust(D) Face amount certificate company
Class C shares are most suitable for investors who are(A) inexperienced(B) expecting to redeem their shares in a short-period of time(C) speculative looking for high risk, and high potential return(D) expecting to leave the money in the mutual fund for a long period of time
Which of the following is the most common way investors pay a sales charge on mutual funds?(A) Front-end load(B) Back-end load(C) Level load(D) Cannot be determined
Which of the following classes of fund shares are no load?(A) Class A(B) Class B(C) Class C(D) Class D
Which of the following classes of fund shares have a front-end sales charge?(A) Class A(B) Class B(C) Class C(D) Class D
Which of the following investments is sold at its NAV?(A) ETFs(B) Mutual funds(C) ETNs(D) Closed-end funds
FerdCo Communications Fund has a NAV of$14.20 and a POP of $15.02. FerdCo offers breakpoints for large dollar purchases.If FerdCo is only charging a 4% sales charge for purchases between $20,000 and$30,000, how many shares would Mr. Smith receive if purchasing $25,000 worth?(A) 1,597.225 shares(B)
Alyssa H. purchased $1,000 worth of Zenith corporate bond fund. The public offering price was $56.40 at the time of purchase. This means that Alyssa was able to purchase 17 full shares and have $41.20 left over. What will happen to that $41.20?(A) It will be used to purchase fractional shares.(B)
What is the approximate public offering price of Dim Outlook municipal bond fund if the net asset value is $53.66 and the sales charge is 4%?(A) $55.53(B) $55.81(C) $55.90(D) $56.14
What is the approximate public offering price (POP) of BullBear aggressive growth fund if the net asset value (NAV) is $27.24 and the sales charge is 3.5%?(A) $27.89(B) $28.17(C) $28.23(D) $28.77
The public offering price (POP) of Skunky balanced fund is $37.62 and the net asset value (NAV) is $36.21, what is the approximate sales charge percent?(A) 5.01%(B) 5.08%(C) 5.22%(D) 5.91%
All of the following are true regarding breakpoints EXCEPT(A) they must be disclosed in the mutual fund prospectus(B) they are available to investment clubs(C) they are available for individuals with a joint account(D) they are discounts for large dollar purchases of a fund
Zippy income fund has a net asset value of$40.30 and a public offering price of $41.80.An investor is purchasing enough of this fund to receive a breakpoint and will pay only $41.55 per share. What is the approximate sales charge percent for this investor?(A) 3%(B) 3.1%(C) 3.4%(D) 3.6%
WXY growth fund has a net asset value of$21.40 and a public offering price of $22.60.What is the approximate sales charge percent?(A) 5.15%(B) 5.30%(C) 5.60%(D) 5.66%
What is the maximum sales charge for a mutual fund?(A) 8%, which is built into the public offering price(B) 8%, which is added to the public offering price(C) 8½%, which is built into the public offering price(D) 8½%, which is added to the public offering price
What is the maximum sales charge for mutual funds?(A) 5% of the NAV(B) 8½% of the NAV(C) 5% of the amount invested(D) 8½% of the amount
A letter of intent may be backdated up to(A) 30 days(B) 60 days(C) 90 days(D) 120 days
Which of the following is TRUE about a Letter of Intent?I. It remains in effect for 13 months.II. It may be backdated for up to 90 days.III. Shares may be held in escrow.(A) I and II(B) I and III(C) II and III(D) I, II, and III
Targeted-date funds are also known as(A) fixed unit investment trusts(B) life-cycle funds(C) face-amount certificate companies(D) a bond fund
Can an investor redeem their shares while under the letter of intent?(A) Yes, with no restrictions.(B) No, not until after the letter of intent has expired.(C) Yes, after holding the securities for at least 90 days.(D) It varies from issuer to issuer.
The maximum time an investor has to meet the terms of the letter of intent (LOI) is(A) 270 days(B) 30 days(C) 12 months(D) 13 months
You have a new 35-year-old client who is interested in investing in a mutual fund.They are looking to invest $400 per month and want a fund that will minimize risk as they get older. You should recommend a(n)(A) aggressive growth fund(B) life-cycle fund(C) money-market fund(D) tax-free municipal
You have a client who has a high current income and is in the top federal income tax bracket. They are interested in purchasing a bond fund. The best suggestion would be(A) a U.S. government bond fund(B) a municipal bond fund(C) a money market fund(D) cannot be determined
John Lavinsky purchased 500 shares of a municipal bond fund. Which of the following statements are TRUE?I. Dividends are taxable.II. Dividends are not taxable.III. Capital gains distributions are taxable.IV. Capital gains distributions are not taxable.(A) I and IV(B) I and III(C) II and III(D) II
Which of the following is true of private-equity funds?I. They are exempt from SEC registration.II. They must be registered with the SEC.III. They may purchase private companies.IV. They may not purchase private companies.(A) I and III(B) I and IV(C) II and III(D) II and IV
A fund that uses leverage, options, short sales, as well as other speculative investment strategies in an attempt to maximize gains is called a(A) balanced fund(B) growth fund(C) aggressive growth fund(D) hedge fund
A ____________ fund only invests in a specific industry.(A) sector(B) hedge(C) balanced(D) growth or aggressive growth
An individual primarily interested in current income would LEAST LIKELY buy which of the following funds?(A) A municipal bond fund(B) A sector fund investing in high-tech stocks(C) A high-yield bond fund(D) An income fund
Hedge funds(A) attempt to achieve moderate returns by holding low-risk investments(B) are available to all investors regardless of their financial position(C) attempt to achieve high returns for their investors by taking riskier strategies and investing in higher-risk investments(D) are traded on
Which of the following is true regarding a highly leveraged hedge fund?(A) They purchased a lot of call options.(B) They purchased a lot of put options.(C) They purchased a lot of securities on margin.(D) All or any of the above.
Hedge funds are allowed to do certain things that mutual funds cannot. Which of the following are true?(A) Hedge funds can purchase commodities and foreign currencies while mutual funds cannot.(B) Hedge funds can purchase U.S. government securities while mutual funds cannot.(C) Hedge funds can
This type of fund invests mainly in the stock of relatively new companies focusing on capital gains instead of current income.(A) Income fund(B) Aggressive growth fund(C) Sector fund(D) Specialized fund
An investor is looking to invest in a mutual fund that has a high rate of current income.Their best choice would be a(n)(A) hedge fund(B) growth fund(C) aggressive growth fund(D) income fund
All of the following are true about money market funds EXCEPT(A) they offer a check writing feature as a way of redeeming shares(B) investors are prohibited from redeeming the money market fund for a year(C) they are no load(D) they compute dividends daily and credit them monthly
You have a client who has never invested in mutual funds and doesn’t know where to start. You should inform them that the most important thing is a fund’s(A) sales charge(B) 12b1 fees(C) management fees(D) investment objectives
Which of the following are true regarding fixed unit investment trusts and participating unit investment trusts?I. Fixed investment trusts invest in a portfolio of debt securities.II. Participating trusts invest in a portfolio of mutual funds.III. Fixed investment trusts invest in a portfolio of
Which of the following types of funds is least likely to provide current income for its investors?(A) Asset allocation fund(B) Balanced fund(C) Growth fund(D) Corporate bond fund
All of the following types of investment companies provide a way for investors to redeem their shares EXCEPT(A) mutual funds(B) closed-end funds(C) unit investment trusts(D) face amount certificate companies
Which of the following is TRUE about closed-end funds?I. They may only issue common stock.II. They are generally listed on an exchange.III. They have a fixed number of shares outstanding.IV. They are redeemable.(A) II and III(B) I and IV(C) I, III, and IV(D) II, III, and IV
You may tell one of your clients that closed-end investment companies I. continuously issue new shares II. make a one-time offering of new shares III. may issue preferred stock IV. may issue bonds(A) II only(B) I only(C) I, III, and IV(D) II, III, and IV
Blommerman closed-end fund has an NAV of $27.65 and a POP of $27.52. Purchasers of this fund would pay(A) $27.52(B) $27.52 plus a sales charge(C) $27.52 plus a commission(D) $27.65
While reading a newspaper an investor notices that the NAV of a fund increased by$0.80 while the POP decreased by $0.20.What type of fund does this have to be?(A) Open-end(B) Closed-end(C) No-load(D) Balanced
Which of the following is not true regarding mutual funds?(A) They make it easier for smaller investors to have diversification.(B) They offer automatic investment into their funds.(C) Reinvested dividends and capital gains are taxed yearly.(D) They may be purchased on margin.
Which of the following is FALSE of openend investment companies?(A) They offer shares to the public continuously.(B) Their public offering price cannot be below the net asset value.(C) They charge commissions to customers who purchase shares.(D) They may not lend money to customers to purchase
For mutual funds, what is the limit on the quantity of shares that can be sold to investors?(A) There is no limit.(B) The limit depends on the type of mutual fund.(C) The limit is determined by the SEC.(D) The limit is on a state-by-state basis determined by each state administrator.
Which of the following is true regarding Rule 17a-6?(A) Affiliated persons of an investment company are not allowed to trade the fund’s portfolio of securities and are not allowed to buy or redeem shares of the fund.(B) Affiliated persons of an investment company are not allowed to trade the
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