FINRA FINRA-SIE Online Practice Questions and Exam Preparation

FINRA FINRA-SIE Online Questions & Answers

• Question 151:

  A customer instructs his registered representative (RR) to purchase $35,000 Class A shares of Growth Fund ABC. As the RR enters the order, she overhears her customer speaking to his wife about purchasing $100,000 of Emerging Markets Fund ABC once he gets his year-end bonus.

  Which of the following statements is true about receiving a breakpoint discount for the current purchase?

  A. It is available due to right of accumulation.
  B. It is available if the customer signs a letter of intent.
  C. It is not available as the purchase amount is less than the $50,000 initial breakpoint level.
  D. It is not available as the customer has not made the $100,000 Emerging Markets Fund purchase.
  B. It is available if the customer signs a letter of intent.

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  Explanation

  The correct answer is B, It is available if the customer signs a letter of intent (LOI). Breakpoint discounts for Class A mutual fund shares reduce the sales charge when larger investment thresholds are met. Step-by-step, the customer is currently investing $35,000, which is below the typical first breakpoint (often $50,000). However, the RR overhears the customer planning to invest an additional $100,000 in the same fund family in the near future. This is key. A Letter of Intent (LOI) allows the investor to commit to investing a larger total amount (e.g., $135,000) over a specified period (usually 13 months). By signing an LOI, the investor can immediately receive the reduced sales charge based on the total intended investment, even though the full amount has not yet been invested. Choice A is incorrect because rights of accumulation apply only to existing holdings, not future intended purchases.

  Choice C is incorrect because breakpoints can still be achieved through LOI.

  Choice D is incorrect because the future purchase does not need to be completed yet-only committed via LOI. Thus, by signing a Letter of Intent, the investor qualifies for the breakpoint discount now, making Answer B correct. Top of Form

• Question 152:

  A customer retires at age 65 and rolls over his 401(k) of $850,000 In equities into an Individual retirement account (IRA). This Is his entire portfolio, and he is concerned about the stock market collapsing and ruining his portfolio.

  The customer is most concerned with which type of risk?

  A. political
  B. Systematic
  C. Interest rate
  C. Interest rate

• Question 153:

  Which of the following is the primary purpose of a prospectus?

  A. To guarantee returns to investors
  B. To provide detailed information about a security offering
  C. To advertise investment performance projections
  D. To eliminate investment risk
  B. To provide detailed information about a security offering

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  Explanation

  Prospectus: Provides investors with essential information, including risks, fees, and objectives of a security offering.

  Incorrect Options:

  A, C, and D: Prospectuses do not guarantee returns or eliminate risk and cannot include projections.

• Question 154:

  Which of the following disclosures is a municipal securities dealer required to provide its customers once every calendar year?

  A. The firm's address
  B. The firm's financial standing
  C. FINRA violations of all registered representatives
  D. The location and availability of the MSRB investor brochure
  D. The location and availability of the MSRB investor brochure

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  Explanation

  MSRB Rule G-10: Requires municipal securities dealers to notify customers annually about the availability of the MSRB investor brochure, which explains investor protections and complaint filing procedures.

  Incorrect Options:

  A and B: Address and financial standing are not specifically required disclosures.

  C: FINRA violations are not a required disclosure under MSRB rules.

  MSRB Rule G-10 (Investor Brochure Requirement): MSRB Rule G-10.

• Question 155:

  The Options Clearing Corporation (OCC) is a registered clearing agency for which of the following products?

  A. Listed stocks
  B. Over-the-counter bonds
  C. Exchange-traded funds (ETFs)
  D. Long-term Equity Anticipation Securities (LEAPS)
  D. Long-term Equity Anticipation Securities (LEAPS)

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  Explanation

  The Options Clearing Corporation (OCC) is responsible for issuing and guaranteeing the performance of listed options contracts, including Long-term Equity Anticipation Securities (LEAPS), which are long-term options. D is correct because LEAPS are a type of listed options contract cleared by the OCC. A is incorrect because listed stocks are not options contracts. B is incorrect because over-the-counter bonds are not cleared by the OCC. C is incorrect because ETFs are not options, though ETF options may be cleared by the OCC.

  References:

  SIE Study Guide, Chapter 8: Options and Clearing

• Question 156:

  $10.00. What is the opening price once this fund trades on the ex-dividend date?

  A. $9.25
  B. $9.75
  C. $10.00
  D. $10.25
  B. $9.75

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  Explanation

  Ex-Dividend Date Pricing: On the ex-dividend date, the mutual fund's price is adjusted downward by the amount of the dividend.

  Closing Price: $10.00

  Dividend: $0.25

  Adjusted Opening Price: $10.00 - $0.25 = $9.75.

  Incorrect Options:

  A: $9.25 subtracts more than the dividend amount.

  C: $10.00 does not reflect the dividend adjustment.

  D: $10.25 adds to the price rather than subtracting the dividend.

• Question 157:

  A bond with a par value of $1,000 that is backed by the taxing power of a local government is known as:

  A. A revenue bond
  B. A Treasury bond
  C. A corporate bond
  D. A general obligation (GO) bond
  D. A general obligation (GO) bond

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  Explanation

  on its taxing power for repayment.

  Revenue Bonds: Supported by revenues from a specific project or source.

  Treasury Bonds: Issued by the federal government.

  Corporate Bonds: Issued by corporations, not municipalities.

  SEC Municipal Bond Guide: SEC GO Bonds.

• Question 158:

  Which of the following investments provides ownership in a company?

  A. Corporate bonds
  B. Preferred stock
  C. Treasury notes
  D. Commercial paper
  B. Preferred stock

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  Explanation

  Equity Ownership: Preferred stock represents ownership in a corporation, though typically without voting rights.

  Incorrect Options:

  A, C, and D: Represent debt instruments.

• Question 159:

  ON NO: 37

  Which of the following statements is true regarding the SEC's characterization of a registration statement that has just been made effective?

  A. The SEC has approved the security being offered for sale.
  B. The SEC has found the information presented to be true and accurate.
  C. The SEC has determined that no material information has been omitted.
  D. The SEC has not passed judgment on the merits of the security being offered for sale.
  D. The SEC has not passed judgment on the merits of the security being offered for sale.

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  Explanation

  SEC Registration Statements: The SEC reviews registration statements for completeness and compliance but does not judge the merits, approve, or endorse the securities being offered.

  Other Options:

  SEC Bulletin on Registration Statements: SEC Registration Process.

• Question 160:

  Which of the following responses is the annual contribution limit for Coverdell education savings accounts?

  A. $2,000
  B. $6,500
  C. $75,000
  D. The national annual average for qualified higher education expenses in a public college or university
  A. $2,000

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  Explanation

  The correct answer is A, $2,000. A Coverdell Education Savings Account (ESA) is a tax-advantaged account designed to help families save for qualified education expenses, including both K-12 and higher education costs. One of the key features tested on the SIE exam is the annual contribution limit, which is $2,000 per beneficiary per year, regardless of the number of contributors. This contribution limit is relatively low compared to other education savings vehicles, such as 529 plans, which generally allow much higher contributions. Additionally, contributions to a Coverdell ESA are not tax-deductible, but earnings grow tax-deferred, and withdrawals are tax-free if used for qualified education expenses. The other answer choices are incorrect because they do not reflect IRS rules. $6,500 is closer to IRA contribution limits, not Coverdell accounts. $75,000 is far above any permitted annual contribution and is unrealistic for this type of account. Choice D refers to a concept used in 529 plan withdrawal limits for room and board but has no relevance to ESA contribution limits. Thus, remembering the fixed $2,000 annual contribution cap is essential for SIE exam success.