Securities Industry Essentials Exam (SIE) (SIE) Free Practice Test

Question 1

When the index level and strike price of a listed index option are the same, the option is:

A. In the money.

B. Out of the money.

C. Trading at intrinsic value only.

D. At the money.

Correct Answer: D

Explanation: Only visible for TestSimulate members. You can sign-up / login (it's free).

Question 2

Which of the following statements is true regarding Treasury securities?

A. They are issued by states and municipalities.

B. They are only traded in the primary market.

C. Interest earned is subject to federal tax.

D. They are FDIC-insured.

Correct Answer: C

Explanation: Only visible for TestSimulate members. You can sign-up / login (it's free).

Question 3

A currency devaluation impacts a country ' s economic activity in which of the following ways?

A. Increases imports from merchandise trade countries

B. Makes exports cost less in merchandise trade countries

C. Decreases gross domestic product (GDP)

D. Decreases inflation

Correct Answer: B

Explanation: Only visible for TestSimulate members. You can sign-up / login (it's free).

Question 4

A husband and wife are interested in purchasing unregistered securities in an SEC Regulation D offering for their joint account. In order to be considered accredited, they must have had a combined annual income for each of the past two years and current expectations for this year of at least what amount?

A. $500,000

B. $400,000

C. $200,000

D. $300,000

Correct Answer: D

Explanation: Only visible for TestSimulate members. You can sign-up / login (it's free).

Question 5

A Treasury bill is issued under which of the following terms?

A. At a stated rate of interest

B. At a discount

C. At par plus interest

D. At par

Correct Answer: B

Explanation: Only visible for TestSimulate members. You can sign-up / login (it's free).

Question 6

Which of the following product types is used by a portfolio manager utilizing a passive investment strategy?

A. Index exchange-traded funds (ETFs)

B. Bonds

C. Alternative Investments

D. Equities

Correct Answer: A

Explanation: Only visible for TestSimulate members. You can sign-up / login (it's free).

Question 7

Which of the following scenarios may cause a firm to consider placing a registered representative on heightened supervision?

A. A felony arrest but no charge

B. Placement of trades in a discretionary account without first consulting the customer

C. A recent history of customer complaints

D. A recently obtained large home equity line of credit

Correct Answer: C

Explanation: Only visible for TestSimulate members. You can sign-up / login (it's free).

Question 8

Which of the following groups are members of NASAA?

A. Broker-dealers

B. State securities regulators

C. Self-regulatory organizations (SROs)

D. Major stock exchanges

Correct Answer: B

Explanation: Only visible for TestSimulate members. You can sign-up / login (it's free).

Question 9

A customer wants to open an account to trade covered calls and puts. Which of the following communications must be provided to the customer prior to approving the account for trading?

A. Options disclosure document (ODD)

B. Prospectus

C. Margin disclosure statement

D. MSRB Investor Brochure

Correct Answer: A

Explanation: Only visible for TestSimulate members. You can sign-up / login (it's free).

Question 10

A real estate investment trust (REIT) is required to invest what percentage of total assets in real-estate-related assets to maintain favorable tax treatment?

A. At least 90% of total assets

B. At least 50% of total assets

C. 100% of assets

D. At least 75% of total assets

Correct Answer: D

Explanation: Only visible for TestSimulate members. You can sign-up / login (it's free).

Question 11

An investor writes a call option with a strike price of $35.00 on underlying XYZ stock with an expiration date of March 15. On March 15, XYZ is priced at $36.50. The call option:

A. will expire worthless.

B. is at the money.

C. is out of the money by $1.50.

D. is in the money by $1.50.

Correct Answer: D

Explanation: Only visible for TestSimulate members. You can sign-up / login (it's free).

Question 12

A 50-year-old customer wants to establish an individual retirement account (IRA) that will allow tax-free withdrawals when they retire in 15 years. Which of the following account types will satisfy their needs?

A. Savings Incentive Match Plan for Employees (SIMPLE) IRA

B. Traditional IRA

C. Simplified Employee Pension (SEP) IRA

D. Roth IRA

Correct Answer: D

Explanation: Only visible for TestSimulate members. You can sign-up / login (it's free).

Question 13

A registered representative (RR) at Broker-dealer ABC receives a large sell order from a customer. The RR places an order in his own account to sell shares of the same security prior to placing the customer ' s order.
Which of the following best describes this type of activity?

A. Short-term trading

B. Front running

C. Short selling

D. Churning

Correct Answer: B

Explanation: Only visible for TestSimulate members. You can sign-up / login (it's free).

Question 14

Which of the following statements best describes the permissibility of a borrowing arrangement between a registered representative (RR) and a customer who is also the RR ' s grandfather?

A. It is permissible if the loan was made on commercially reasonable terms.

B. It is permissible if the grandfather agrees in writing.

C. It is permissible provided that the loan was made in accordance with the firm ' s policies.

D. It is permissible subject to FINRA approval.

Correct Answer: C

Explanation: Only visible for TestSimulate members. You can sign-up / login (it's free).

Question 15

When an investor is subject to a limitation on his ability to sell his investment, he is most likely to experience which of the following types of risk?

A. Liquidity risk

B. Prepayment risk

C. Political risk

D. Market risk

Correct Answer: A

Explanation: Only visible for TestSimulate members. You can sign-up / login (it's free).

Welcome to TestSimulate

FINRA Securities Industry Essentials Exam (SIE) (SIE) Free Practice Test