SIE Practice Exam 2

The SIE Practice Exam 2 has 25 multiple-choice questions designed to be similar to those you might find on the actual SIE exam.

The correct answer will be revealed instantly (in case you got it wrong), along with a detailed explanation for each question that you answered. At the end of practice exam 2, you will be able to see your score, review your mistakes, and check if you have achieved the 70% passing rate.

You can retake this free SIE practice exam 2 as many times as you like.

SIE Practice Exam 2: Understanding Products and Their Risks

Our 2nd batch of SIE practice questions focuses on various financial products and their characteristics. This practice exam covers topics such as equities, debt instruments, options, packaged products, direct participation programs, real estate investment trusts, hedge funds, and exchange-traded products.

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

1. Which of the bonds listed below would have the greatest price volatility?

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

2. Passive losses generated by a limited partnership may be used to reduce which of the following?

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

3. The least liquidity in the securities shown below would be found:

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

4. Allowable ways to qualify for a breakpoint when purchasing front-end load mutual funds include:

I. Exchange or conversion privilege with a fund family

II. Reinvesting dividends and/or capital gains distributions under an LOI.

III. 13 month LOI

IV. ROA — rights of accumulation

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

5. What type of order should Martin enter if his objective is to buy 500 shares of Cisco stock as soon as possible at the best price available?

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

6. A significant number of public investors do not have a solid understanding of how common stock is offered to the public. Two methods are the secondary offering and the follow-on offering. Which of the below are true statements regarding these methods?

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

7. The threshold to qualify for a sales charge discount on a mutual fund is $75,000. An investor places an order for $72,500 of this fund and is not informed by the registered rep that he would be entitled to a sales charge discount if he invests an additional $2,500. This is an example of a

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

8. Recommending a limited partnership DPP investment to a customer would be a defendable recommendation for a client:

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

9. Single stock, or single sector, risk is more generally in the category described as:

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

10. A customer requests in writing that the firm hold his account statements while he spends the winter in Florida. In response to the customer’s request, the firm is permitted to honor the request

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

11. Joe is a registered rep currently employed by MidWest Broker-Dealer, a St. Louis based firm. Joe likes to leave downtown and drive through the rural fields of the Midwest on the weekends. He so enjoys the open plains that he chats with his 12 closest family members to borrow $200,000 and open his very own farm. Which of the following is true regarding this action?

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

12. An individual contacts her financial representative to sell her mutual fund shares. The price she will receive is

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

13. During the accumulation phase of a variable annuity, dividends, interest, and capital gains

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

14. As interest rates rise, which of the below will change the least in price?

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

15. A husband and wife wish to open a brokerage account in which the husband will own 60% and the wife 40%. At either owner’s death, the owner’s portion will be liquidated and distributed to his/her beneficiary. What type of account should they open?

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

16. To avoid double taxation on dividends paid to shareholders, REITs must invest what portion of their total assets in real estate?

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

17. Trader R hears news from an underwriter that his firm will buy a large block of XYZ Co stock. If R buys shares of the stock before the news is made public, he is engaged in

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

18. When growth is the principal objective of the investor, each of the below could be suitable except:

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

19. In order to receive a dividend, a shareholder must own stock as of the

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

20. An 80-year-old individual would be least likely to purchase a

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21. Investors whose bonds have been called as interest rates have fallen are now facing

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

22. Choose from among the below ratings the one which is the higher credit rating in the speculative category as defined by Standard & Poors rating service would be:

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

23. Diversification is a very effective way for an investor to mitigate:

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

24. When comparing rights and warrants, which of the following statements is TRUE?

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

25. A company “reverse splits” its stock on a 1-for-10 basis. If an investor holds 800 shares before the event, what will be the impact of the split, if any, on the total value of the investors’ shares?

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

26. A municipal finance professional at JoeBrokerDealer contributed $500 to the candidate in a local election, resulting in a ban on underwriting activity. A month later, the MFP joined a new municipal securities firm, JaneBrokerDealer. The remainder of the two-year ban will apply to

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27. Sweeteners as that term is used in the investment banking community refers to issue enhancements which include:

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

28. For existing customer accounts, how often do broker-dealers required to send a written notice to the customer for verification of account information?

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

29. Bonds that are issued by state and local governments but benefit a private corporate are

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30. The “third market” is a marketplace where

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

31. The credit quality of an exchange-traded note is

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

32. Pre-emptive Rights and Stock Warrants have a number of similarities. Which of the below represent characteristics these products have in common?

I. Each has a fixed price at which the holder may purchase shares of the issuer’s common stock.

II. The fixed exercise price for both products is initially set at a level below the current market value of the common stock.

III. These products are tradable on securities exchanges

IV. Both have relatively short-term expiration dates

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33. When the market price of a bond is lower than its par value,

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

34. A representative’s personal account has been identified for review because of account activity in which securities were bought and quickly sold, often on the following day. This may be evidence of the prohibited practice called

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

35. ETPs (exchange-traded products) generally include:

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

36. An investor has 100 shares of XYZ stock at $90 per share. After a 3-for-1 split, the investor can expect to own

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37. All of the below are typical features of an ETF except:

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

38. Noreen and her husband Jeff, residents of New York City, have just had their first child Ali. They are interested in opening a 529 Plan for Ali to save for her future college education. As a registered representative, it would be most appropriate to tell them

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

39. Accrued interest is calculated from the

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Category: SIE Practice Exam 2: Understanding Products and Their Risks

40. With regard to the price of closed-end fund shares held by investors, which of the following statements is TRUE?

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Looking for More Practice Questions?

If you’ve already mastered our SIE Practice Exam 2 or want to test your knowledge of SIE with regard to other topics, you can check out our other sets of practice tests.