SIE Practice Exam Review Questions and Answers 2022
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Course
SIE
Institution
SIE
Preferred stock trades most like which of the following instruments?
Straight debt security
Because of the fixed dividend payment, preferred shares are influenced in the market by the same factors that impact straight debt securities. Like bonds, there is an inverse relationship between price a...
sie practice exam review questions and answers 2022
preferred stock trades most like which of the following instruments
business cycle predictability
counter cyclical stocks and correlation to over
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SIE Practice Exam Review Questions
Preferred stock trades most like which of the following instruments? - Answer Straight
debt security
Because of the fixed dividend payment, preferred shares are influenced in the market
by the same factors that impact straight debt securities. Like bonds, there is an inverse
relationship between price and interest rates.
(NOT convertible bonds)
Business cycle predictability: - Answer Business cycles are generally considered to be
random and unpredictable. While it is true that the sequence of the cycles is generally
the same, the factors and impacts differ substantially.
Counter-cyclical stocks and correlation to overall performance of the economy: - Answer
Counter-cyclical stocks are negatively correlated to the overall performance of the
economy. In other words, they perform well when the economy is declining, and less
well when the economy is strengthening. No correlation means that there is no
relationship. Counter-cyclical stocks can be very effective in hedging other cyclical
stocks against an economic decline as their price has a tendency to strengthen in a
contracting economy.
What does the Fed use reverse purchase agreements for? - Answer Tighten credit and
Remove money from the system
In reverse repurchase agreements, the Fed sells securities to primary dealer, thus
taking money out of the system. This activity tightens credit.
(A repurchase agreement (repo) is a form of short-term borrowing for dealers in
government securities. In the case of a repo, a dealer sells government securities to
investors, usually on an overnight basis, and buys them back the following day.)
Why are U.S. Treasury Securities used for conducting Open Market Operations? -
Answer Because the market for these securities is the broadest and most active in the
U.S. financial markets
(In order to manage open market operations, the Open Market Committee needs the
ability to buy and sell quickly in whatever volume of securities needed. The market for
U.S. Treasury securities offers these capabilities, as it is the broadest and most active
of U.S. financial markets.)
, In margin accounts, broker-dealers charge customers a competitive rate of interest on
the amount borrowed, which is called - Answer debit balance.
(Margin accounts allow customers to borrow against the market value of securities held
in the account. The broker-dealer acts as lender, charging a competitive rate of interest
on the amount borrowed in the "debit balance.")
A pattern day trader goes on vacation for two weeks, starting on Monday August 15.
There are no securities positions in the account when the vacation starts, and no trades
are placed while the trader is on vacation. Under FINRA rules, what is the minimum
equity the trader will need to resume trading, after the vacation ends? - Answer $25,000
(A pattern day trader must maintain minimum equity of at least $25,000, for any day that
the margin account trades. The $25,000 test is made at the close of business each day,
and trading is restricted starting the next day and continuing until equity is increased to
at least $25,000. There is no minimum equity requirement while an account is inactive,
but the $25,000 requirement must be met before trading can resume.)
What is the name of a participant-directed ERISA plan sponsored by a non-profit
organization or educational institution? - Answer 403(b)
(403(b)s are participant-directed ERISA plans sponsored by non-profit organizations
and educational institutions. Like 401(k)s, they allow participants to make elective
deferrals and manage their own investments.)
Ted inherits a Traditional IRA from his father, after the father's death. It is worth $75,000
and he takes a full immediate withdrawal. No part of it is non-deductible contributions.
Ted is 45 years old. What tax will he pay on the withdrawal? - Answer Ordinary income
tax but no penalty
(Beneficiaries pay ordinary income tax on withdrawals from Traditional IRAs. But
withdrawals by a beneficiary after the account owner's death is one exception to the
10% penalty. The exception is not available to a spouse beneficiary who elects to treat
the IRA as his/her own)
The separate account of an insurance company is managed to - Answer Help provide
inflation protection for purchasers of both life insurance and annuity products
(The separate account of an insurance company separates purchase payment for
variable life and annuity products from purchase payments for fixed products (general
account products). The separate account is designed to offer growth to keep pace with
inflation for purchasers of variable products. In exchange for growth potential,
purchasers take on investment risk.)
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