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Knopman Marks SIE Practice Exam Questions with Correct Answers
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Knopman Marks SIE Practice Exam Questions with Correct Answers
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Knopman Marks SIE Practice Exam Questions withCorrect Answers
When a broker-dealer acts on an agency basis to help a customer
complete trades, the firm normally is compensated through
A. commissions.
B. mark-ups.
C. asset-based fees.
D. transaction surcharges. Correct Answer-A. commissions
Acting as an agent, broker-dealers normally charge commissions. Acting
as principals, they markup securities sold from their own inventory
Investment company financial statements are sent to shareholders
A. monthly.
B. quarterly.
C. semiannually.
D. annually. Correct Answer-C. semiannually
According to the Investment Company Act of 1940, financial statements
are required to be sent to shareholders on a semiannual basis at the
minimum.
,The credit quality of an exchange-traded note is
A. primarily connected to the strength of the underlying security.
B. based on the credit worthiness of the issuer, typically the investment
bank that structures the note.
C. usually very strong, since they are commonly sold by broker-dealers
who must meet minimum capital standards.
D. always difficult to determine owing to the lack of disclosure required
when selling these products to the public. Correct Answer-B. based on
the credit worthiness of the issuer typically the investment bank that
structures the note
The credit quality of an exchange-traded note is based on the
creditworthiness of the issuer, usually an investment bank that structures
the note and sets its terms. Importantly, the credit quality is not based on
the underlying portfolio for which the performance of the investment is
based upon.
When opening a margin account, the agreement that customers sign to
pledge their securities as collateral for a loan from the broker-dealer is
the
A. margin agreement.
B. hypothecation agreement.
C. re-hypothecation agreement.
D. loan agreement Correct Answer-B. hypothecation agreement
,Customers that open margin accounts must sign a hypothecation
agreement to pledge their securities as collateral for loans from the
broker-dealer for margin account purchases. The broker-dealer may then
rehypothecate the securities to the bank, meaning that they are pledged
to the bank as collateral for loans to the broker-dealer for lending to
customers.
When comparing rights and warrants, which of the following statements
is TRUE?
A. Warrants have shorter expiration periods than rights
B The exercise price of a right is generally below the price of the stock
when the right is issued; the exercise price of the warrant is generally
above the price of the stock when it is issued.
C. Rights are often added to bond issues as sweeteners; warrants are
offered to existing shareholders to permit them to maintain their
proportionate interest in the company when additional shares are issued
D. Warrants protect shareholders against dilution, rights do not Correct
Answer-B. the exercise price of a right is generally below the price of
the stock when the right is issued; the exercise price of the warrant is
generally above the price of the stock when it is issued
Rights are short-term instruments that allow a shareholder to purchase
the stock below its market price for a period that usually expires after 4-
6 weeks. They are issued to existing shareholders in proportion to their
ownership interest, so that if exercised, they allow the shareholder to
maintain their percentage of ownership, or protect against dilution.
, Warrants are long term instruments and are often used as sweeteners in
corporate bond issues. They do not protect shareholders from dilution.
A registered representative located in California makes a 7:30pm cold
call to a potential customer in New Jersey. This is
A. permitted as long as the potential customer is not on the do-not-call-
list.
B. permitted as long as the registered rep had prior verbal consent from
the potential customer.
C. permitted because the call occurred between the hours of 8am and
9pm.
D. prohibited because cold calls can only be made between 8am and
9pm in the potential customer's time zone. Correct Answer-D. prohibited
because cold calls can only be made between 8am and 9pm in the
potential customers time zone
Cold calls can be made between 8am and 9pm in the customer's time
zone. Although it is 7:30pm in California, it is actually 10:30pm in New
Jersey because of the difference in time zones. Therefore, this call is
prohibited
Investors whose bonds have been called as interest rates have fallen are
now facing
A. credit risk.
B. inflation risk.
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