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

The custodian bank for a mutual fund(A) provides security in the event of corporate bankruptcy of one of the securities held by the fund(B) is responsible for the safekeeping of the fund’s cash and securities(C) provides loans for investors purchasing securities on margin(D) redeems investor
Mutual fund redemptions must be completed within(A) 5 days(B) 5 business days(C) 7 days(D) 7 business days
Under the Investment Company Act of 1940, which of the following would be unlawful regarding the use of a mutual fund prospectus?(A) Using a prospectus to help elicit a sale(B) Sending a prospectus to someone who didn’t ask for it(C) Not reading over the prospectus yourself prior to sending it
For an investment company to be considered diversified, what is the maximum percentage of outstanding shares that the investment company can own of another company?(A) 1%(B) 5%(C) 10%(D) 15%
All of the following would violate the political contributions rule (MSRB Rule G-37)EXCEPT(A) $100 contribution to a candidate for whom a municipal finance professional(MFP) may vote(B) $100 contribution to a candidate for whom a municipal finance professional(MFP) may not vote(C) $400 contribution
Which TWO of the following statements are TRUE?I. Municipal securities dealers can guarantee against loss.II. Municipal securities dealers cannot guarantee against loss.III. A municipal securities firm may share in the losses or gains in a customer’s account.IV. A municipal securities firm may
Under MSRB rules, a broker-dealer should do due diligence to make sure any customer trades are executed at(A) the highest available bid price or the lowest available ask price(B) the highest available ask price or the lowest available bid price(C) the average bid price or average ask price of all
Under MSRB rules, how long do customer complaints need to be held by a broker-dealer?(A) 2 years(B) 4 years(C) 6 years(D) For the life of the firm
According to MSRB rules, municipal securities dealers have to keep which of the following records?I. Blotters II. Political contribution records III. Customer complaints IV. Account records for each customer account(A) I only(B) I and II(C) I, II, and III(D) I, II, III, and IV
According to MSRB Rule G-37, what is the maximum contribution allowed for a municipal finance professional to a person running for local government office?(A) $250 per year(B) $250 per election(C) $2,500 per year(D) $2,500 per election
According to MSRB rules, which of the following are considered forms of advertising?I. Market letter II. Seminar text III. Official statements IV. Offering circulars(A) I only(B) I and II(C) I, II, and III(D) I, II, III, and IV
Under MSRB rules, how often must brokerdealers and municipal securities dealers send out investment brochures to their customers stating that they are registered with the SEC and MSRB?(A) Once, prior to the customer opening the account(B) Once, within 60 days of the customer opening the account(C)
Investors would be able to find information about a municipal issuer’s financial condition by examining the(A) official statement(B) indenture(C) notice of sale(D) prospectus
A principal at a municipal securities firm must approve all of the following EXCEPT(A) each new account(B) each transaction(C) advertisements sent out by the firm(D) the preliminary official statement
Where would you tell a potential investor that they can find the most information about a municipal bond issue?(A) The official notice of sale(B) The final prospectus(C) The bond indenture(D) The official statement
In a municipal bond underwriting, an unqualified legal opinion means that the(A) issue is without condition or restriction(B) issuer has exceeded its debt limit(C) attorney giving the opinion is not approved by the MSRB to give a legal opinion(D) issue is low rated
A municipal bond counsel is responsible for all of the following EXCEPT(A) making sure that the issue is valid and binding on the issuer(B) making sure that the issue will be federally tax-free(C) preparing the legal opinion(D) guaranteeing timely payment of interest
The legal opinion for municipal bonds is prepared by the(A) trustee(B) municipal issuer(C) syndicate manager(D) bond counsel
Which of the following would be found on the indenture of a revenue bond?I. The legal opinion II. The rating III. Covenants IV. Flow of funds(A) I, II, and III(B) I, III, and IV(C) II, III, and IV(D) I, II, III, and IV
A municipal securities broker-dealer sells 100 GO bonds to a customer on a principal basis. How much of a markup may the broker-dealer charge?(A) 5% of the selling price(B) 8% of the selling price(C) 8½% of the selling price(D) Whatever is fair and reasonable
Which of the following is considered a gift violation according to MSRB Rule G-20?(A) Buying a $320 round-trip airline ticket for a client to come to the firm(B) Spending $120 on business lunch with a client(C) Buying a client season passes to the Yankees(D) Sending a client a picture of yourself
Advertisements relating to municipal GO bonds must be approved by(A) the Fed(B) the SEC(C) the MSRB(D) a municipal securities principal
All municipal advertisements must be kept by the firm(A) for a minimum of 2 years(B) for a minimum of 3 years and easily accessible for 2 years(C) for a minimum of 4 years and easily accessible for 3 years(D) for a minimum of 6 years and easily accessible for 2 years
Under MSRB rules, all of the following must be included on the confirmation of a trade EXCEPT(A) the issuer’s name(B) the name of the broker-dealer(C) the customer’s signature(D) the trade date
Municipal bonds settle the regular way in(A) 1 business day after the trade date(B) 2 business days after the trade date(C) 3 business days after the trade date(D) 3 calendar days after the trade date
Which of the following must be included on a customer’s confirmation of a municipal securities transaction?I. The customer’s name II. The capacity of the broker-dealer III. Par value IV. Trade date and time of execution(A) I and IV(B) I, II and III(C) I, II, and IV(D) I, II, III, and IV
Gary Golden is a resident of Atlantic City, New Jersey. Gary purchased 20 New Jersey municipal bonds. What is the tax treatment of the interest that Gary earns on his New Jersey bonds?(A) It is exempt from local taxes only.(B) It is exempt from state taxes only.(C) It is exempt from federal taxes
Which of the following securities would provide the best after-tax return for an investor in the 24% tax bracket?(A) 5% municipal general obligation (GO)bond(B) 4.5% T-bond(C) 6.25% corporate bond(D) 6.10% corporate convertible bond
Which of the following factors should you determine before recommending a municipal bond to a client?I. The client’s state of residence II. The client’s tax bracket III. The client’s investment objectives(A) I and II(B) II and III(C) I and III(D) I, II, and III
You are in the process of convincing one of your clients to invest in triple tax-free municipal bonds. Which of the following U.S. territories issues municipal bonds that are triple tax-free?I. U.S. Virgin Islands II. Puerto Rico III. Guam IV. Hawaii(A) I and IV(B) I, II, and IV(C) I, II, and
Mr. Jones is in the 31% tax bracket and owns a 6% corporate bond. What is the municipal equivalent yield?(A) 3.96%(B) 4.14%(C) 5.11%(D) 5.42%
One of your clients who is in the 28% tax bracket is interested in two different debt securities. One of them is a 6% corporate bond, and the other is a 5% municipal general obligation bond. Which of the following is TRUE regarding his investment choices?(A) The general obligation bond has a higher
Which of the following investments would provide the BEST after-tax return for an individual in the 28% tax bracket?(A) 4.25% treasury bond(B) 5% AA rated corporate bond(C) 4% GO bond(D) 5.5% preferred stock
Tito Sonnen lives in Oregon and is considering purchasing a bond. He has settled on either a 4% municipal bond offered by Oregon or a 6% corporate bond offered by Ground and Pound Corp., which has headquarters in Oregon. Tito needs some guidance and would like you to help him determine which bond
Which of the following bonds generally have the lowest yields?(A) AA rated corporate bonds(B) GO bonds(C) T-bonds(D) Cannot be determined
All of the following is subject to federal taxation EXCEPT I. interest on municipal bonds II. interest on U.S. government bonds III. capital gain on municipal bonds IV. cash dividends on stocks(A) I only(B) I and III(C) II, III, and IV(D) II and III
Which of the following is true regarding taxes on municipal bonds?(A) The interest and any capital gains are federally tax free.(B) The interest is federally taxable, but any capital gains are tax free.(C) The interest is not taxable, but any capital gains are federally taxable.(D) The interest and
This type of municipal fund security provides a way for cities, counties, school districts, and so on to invest their excess funds on a short-term basis.(A) BAN(B) ABLE(C) LGIP(D) QTP
This type of municipal fund security is designed for people with provable disabilities and their families.(A) BAN(B) ABLE(C) LGIP(D) QTP
This type of municipal fund security provides for educational savings accounts that are available to investors.(A) TRAN(B) ABLE(C) LGIP(D) 529
Municipal fund securities include(A) qualified tuition plans(B) TANs(C) growth funds(D) RANs
Which of the following IS NOT a type of municipal fund security?(A) Section 529 plans(B) ABLE account(C) LGIPs(D) LTGOs
Qualified Tuition Plans (QTPs) must be sold by(A) a prospectus(B) a preliminary prospectus(C) an official statement(D) a statement of additional information
Municipal bond rating companies are mainly concerned with(A) likelihood of default(B) tax implications of the issue(C) potential of market decline of the issue(D) all of the above
All of the following municipal securities could have a rating of MIG3 EXCEPT(A) PNs(B) TRANs(C) CLNs(D) GOs
Which of the following is Moody’s lowest investment grade rating for municipal notes?(A) D(B) SP1(C) MIG1(D) MIG3
Which of the following is the highest rating for a bond anticipation note?(A) AAA(B) Aaa(C) MIG1(D) MIG3
MIG ratings are applied to(A) municipal GO bonds(B) municipal notes(C) municipal revenue bonds(D) Build America Bonds
Which of the following are types of municipal notes?I. PNs II. TRANs III. GANs IV. RANs(A) II and IV(B) I, III, and IV(C) III and IV(D) I, II, III, and IV
The holders of grant anticipation notes(GANs) are paid from(A) federal government funds(B) a revenue producing facility owned by the municipality(C) property taxes(D) state funds
Suffolk County is experiencing a temporary cash flow shortage that is expected to last about three months. Which of the following would Suffolk County MOST likely issue to meet its current obligations?(A) Construction loan notes(B) Tax anticipation notes(C) Revenue bonds(D) general obligation bonds
All of the following are types of municipal notes EXCEPT(A) PNs(B) AONs(C) TRANs(D) CLNs
RANs, BANs, TANs, and CLNs are issued by municipalities to(A) provide short-term financing(B) provide intermediate-term financing(C) provide long-term financing(D) provide flexible-term financing
Which of the following municipal bonds pays interest that is federally taxable?(A) General obligation (GO)(B) Revenue(C) Public Housing Authority (PHA)(D) Build America Bonds (BABs)
Which of the following municipal bonds allows municipality to receive from the U.S.government tax credit payments of 35% of the amount of interest paid?(A) IDRs(B) Direct payment BABs(C) Tax credit BABs(D) Special assessment bonds
Which of the following types of municipal bonds would MOST likely be issued to build a bridge?(A) BABs(B) PHAs(C) IDRs(D) LRBs
Akron, Ohio, has issued revenue bonds to build a local stadium. The indenture of the bonds states that emergency funding from the Ohio State legislature would be pursued in the event that the debt service exceeds revenues. What type of bond is this?(A) A moral obligation bond(B) A double-barreled
Clint, one of your clients, is interested in investing in municipal bonds for the first time. Clint is primarily interested in safety. Which of the following should you recommend?(A) Moral obligation bonds(B) Public housing authority bonds(C) Special assessment bonds(D) Double-barreled bonds
For clients looking for a safe investment, new housing authority bonds would be acceptable because(A) they are backed by U.S. government subsidies(B) they are backed by the taxing power of the municipal issuer(C) they are backed by rental income, which remains constant(D) they are typically backed
A double-barreled bond is a combination of I. revenue bonds II. special tax bonds III. Build America Bonds IV. general obligation bonds(A) I and II(B) II and III(C) II and IV(D) I and IV
A municipality issues revenue bonds. The revenues are not sufficient to meet the debt service payments. If the municipality is able to meet the debt service obligation of the revenue bonds by backing it with its taxing power, the debt is termed(A) moral obligation bonds(B) special situation
Which of the following is TRUE of special assessment bonds?(A) They are backed by charges on the benefitted property.(B) They are backed by excise taxes.(C) They require legislative approval to be issued.(D) They are backed by a revenueproducing facility.
Smithtown, New York, is in the process of constructing new public sewers in one section of the town. Which of the following types of bonds would most likely have been issued to fund this project?(A) A general obligation bond(B) A special assessment bond(C) A Build America Bond (BAB)(D) A revenue
A special tax bond(A) is backed by charges on the benefitted property(B) is backed by a private user(C) is backed by excise taxes(D) requires legislative approval
Under MSRB rules, all syndicates must establish an allocation of orders, which states which orders are to be filled first.Place the typical allocation of orders in order from first to be filled to last to be filled.I. Member II. Designated III. Syndicate IV. Presale(A) IV, III, II, I(B) I, II, III,
Which of the following items can be found on the official notice of sale?I. Call provisions II. The name of the bond counsel providing the legal opinion III. Maturity structure IV. Type of bond(A) II and IV(B) I, II, and IV(C) II and III(D) I, II, III, and IV
An official notice of sale contains all of the following EXCEPT(A) the bond rating(B) interest and payment dates(C) method and place of settlement(D) the name of the bond counsel
When accepting bids for a municipal bond offering, what is the municipality looking for?(A) A syndicate that could sell the issue at the highest price(B) A syndicate that could sell the issue at the lowest price(C) A syndicate that could sell the issue with the lowest cost to the municipality(D) A
Smithtown, New York, is auctioning a block of new bonds to underwriters. What document will Smithtown use to notify potential underwriters about the auction?(A) The indenture(B) Official statement(C) Notice of sale(D) Agreement among underwriters
Which of the following is the BEST source of information about municipal bonds in the primary market?(A) The Blue List(B) The Bond Buyer(C) Thomson Municipal News(D) EMMA
Park City, Utah, decides to issue general obligation bonds to build an expansive children’s park. Which of the following characteristics of the issuer should an investor consider when analyzing this issue of bonds?I. Overall debt II. Efficiency of the government III. Rate covenants IV. Flow of
All of the following are important in analyzing a general obligation bond issued by a school district EXCEPT(A) debt ceiling(B) traffic fines(C) insurance covenants(D) property taxes
All of the following are important factors when examining the rating of a general obligation bond EXCEPT(A) the debt ceiling(B) overlapping debt(C) debt per capita(D) covenants
Which of the following would NOT affect the credit rating of a general obligation bond?(A) Rate covenants(B) Per capita debt(C) Assessed property values(D) The tax collection history of the municipality
Which of the following municipal securities might be included in the AMT calculation?(A) GO bonds(B) Special assessment bonds(C) Special tax bonds(D) Industrial development revenue bonds
Holders of which of the following municipal securities may be subject to alternative minimum tax?(A) BANs(B) Special assessment bonds(C) GO bonds(D) IDRs
Which of the following is TRUE of industrial development revenue bonds?(A) They are backed by municipal taxes.(B) They are backed by municipal revenues.(C) They are backed by a corporation.(D) None of the above.
All of the following statements regarding municipal revenue bonds are TRUE EXCEPT(A) the maturity date of the issue will typically exceed the useful life of the facility backing the bonds(B) they are not subject to a debt ceiling(C) they may be issued by interstate authorities(D) the principal and
Due to an economic downturn a municipal bond backed by revenues of a facility did not make enough money over the previous few months to be able to make a debt service payment on the bonds. Which of the following is true?(A) The municipal issuer will most likely default on the next interest
Which of the following are true of municipal revenue bonds?I. They are subject to a debt ceiling.II. They are typically lower rated than general obligation bonds.III. They do not require voter approval.IV. They are backed by property taxes.(A) I, II, and III(B) II and III(C) I and IV(D) I, II, and
Municipal revenue bonds may be issued to fund which of the following projects?I. A toll road II. A sports stadium III. A public library IV. An airport(A) I, II, and III(B) I, III, and IV(C) I and IV(D) I, II, and IV
All of the following are true about GO bonds EXCEPT(A) they need voter approval to be issued(B) they are subject to a debt ceiling(C) they are issued to fund revenueproducing facilities(D) they are backed by the taxing power of the municipality
The largest source of backing for a local GO bond is(A) property tax(B) sales tax(C) income tax(D) traffic fines and parking tickets
All of the following could have overlapping debt EXCEPT(A) a town(B) a city(C) a county(D) a state
Municipal bond insurance protects investors against(A) market risk(B) liquidity risk(C) default risk(D) inflation risk
One of your new clients is interested in purchasing municipal bonds for the first time.Which of the following information should you take into consideration prior to making a recommendation?I. Your client’s tax bracket II. Your client’s home state III. The bond’s rating IV. The bond’s
Gary Goldbar is a wealthy investor who is in the highest income bracket. Gary is looking for an investment that would limit tax liability and put Gary on equal footing with investors in lower income-tax brackets.Which of the following securities would you MOST likely recommend?(A) High-yield
When helping a client compare municipal general obligation bonds from different issuers, you should compare I. population trends II. the home state III. wealth of the community IV. the diversity of industry within its tax base(A) II and III(B) II, III, and IV(C) I and II(D) I, II, III, and IV
Plano, Texas, is issuing $30 million worth of callable general obligation bonds. All of the following are TRUE about the call feature of these bonds EXCEPT(A) the call feature makes the bonds less marketable(B) callable bonds have a higher coupon rate than non-callable bonds(C) the call feature
All of the following are factors that would affect the marketability of municipal bonds EXCEPT(A) the credit rating(B) the dated date(C) the maturity(D) the issuer’s name
In which of the following instances would a municipal issuer require voter approval prior to bonds being issued?I. Bonds being issued to build a public school II. Bonds being issued to build a county jail III. Bonds being issued to build a toll road IV. Bonds being issued to build a new airport(A)
Which of the following is NOT an important factor when evaluating a revenue bond?(A) Feasibility study(B) Property taxes(C) Flow of funds(D) Rate covenants
All of the following are possible sources of funding for municipal revenue bonds EXCEPT(A) property taxes(B) toll bridges(C) sewer and water fees(D) toll roads
Municipal revenue bonds I. are subject to voter approval II. are not subject to voter approval III. are subject to a debt ceiling IV. are not subject to a debt ceiling(A) I and III(B) I and IV(C) II and IV(D) II and III
Municipal general obligation bonds are backed by(A) property taxes(B) traffic fines(C) sales taxes(D) all of the above
Which of the following is NOT a source of funding for municipal revenue bonds?(A) Airports(B) Tolls(C) Property taxes(D) User fees
Municipal bonds can be issued by I. local governments II. states III. the U.S. government IV. corporations(A) I only(B) I and II(C) I, II, and III(D) I, II, III, and IV
Which of the following municipal securities is backed by the full faith and credit of the issuer?I. GO II. Revenue III. Double-barreled IV. Moral obligation(A) I and II(B) I and III(C) II and IV(D) I, III, and IV
One of your clients is interested in purchasing municipal GO bonds and is looking for guidance. You can inform him that I. they are issued to fund revenueproducing facilities II. they are backed by the taxing power of the municipality III. they need approval of voters to be issued IV. they are
Where did the tax-free reciprocal rule for municipal bonds and U.S. government securities originate from?(A) The IRS(B) FINRA(C) The Supreme Court(D) The SEC

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