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FINRA SIE EXAM 236 Questions with Verified Answers,100% CORRECT
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FINRA SIE EXAM 236 Questions with Verified Answers
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FINRA SIE EXAM 236 Questions with Verified AnswersWhich shares of preferred stock may increase the most if the value of the co.
common stock appreciates - CORRECT ANSWER convertible preferred stock
Convertible preferred stock can be exchanged for the common stock of the issuer.
For that reason, if the common stock's value increases, the market value of the
convertible preferred stock will also increase.
Which of the following securities trades in fractional units of 1/32 of a point? -
CORRECT ANSWER Treasury Bonds
Corporate and municipal bonds trade in increments of 1/8 of a point, while
Treasury notes and Treasury bonds trade in increments of 1/32 of a point. A
convertible bond is a type of corporate bond.
During periods of rising interest rates, an investor can expect: - CORRECT ANSWER
Long term bond prices to fall more than short term bond prices
Rising interest rates will result in the yields of bonds rising as well. Due to the
inverse relationship between bond yields and bond prices, this will result in bond
prices falling. Since long-term bonds are exposed to this risk for a longer period,
the prices of long-term bonds will fall more than the prices of short-term bonds.
The Municipal Securities Rulemaking Board (MSRB) does NOT regulate which of
the following? - CORRECT ANSWER Municipal issuers
The MSRB has the power to regulate municipal securities broker-dealers, their
personnel, and their municipal securities communications with the public.
However, the MSRB doesn't have the authority to regulate municipal issuers.
,A brokerage firm purchases 600 shares of stock from a customer and places the
securities into its inventory. In this case, the firm likely acted as a(n): - CORRECT
ANSWER Dealer
When a broker-dealer buys a security from a customer by using its own funds and
places the securities into its inventory, it has acted as a dealer (principal). In this
situation, the customer is charged a markdown on the transaction. If the firm
bought the security for a customer or sold a security to a customer without being
the other side of the transaction, it would be acting as a broker (agent) and it
would charge the customer a commission. An underwriter assists an issuer in
raising capital in the primary market by purchasing the securities from the issuer
and selling them to customers. The firm that controls trading on an exchange for
a specific stock is referred to as a designated market maker (DMM).
When warrants are issued, the exercise price is - CORRECT ANSWER Higher than
the current market price of the stock
Warrants are typically issued with a strike price that's higher than the current
market price of the stock (i.e., at a premium).
Which is true - CORRECT ANSWER sipc cover broker-dealer bankruptcy while the
fdic covers bank deposits
SIPC protects customers of a broker-dealer in the event the firm declares
bankruptcy. However, the FDIC protects bank depositors in the event the bank
cannot pay its banking customers.
Which of the following choices has the lowest priority of claims in a bankruptcy -
CORRECT ANSWER common stock
In the event a corporation goes bankrupt and it must liquidate its assets, secured
bondholders or creditors would be paid first (secured bonds are backed by
specific tangible assets), then owners of debentures (unsecured bonds backed by
the full faith and credit of the issuing corporation). Bondholders are paid first, as
they are considered creditors. Stockholders are paid next, with preferred
stockholders being third in this order of priority and common stockholders paid
last.
,The OTC Bulletin Board (OTCBB) is BEST defined as: - CORRECT ANSWER A
quotation system for securities that are not listed on either the NYSE or Nasdaq
The OTC Bulletin Board (OTCBB) is a quotation system for securities that are not
listed on either the NYSE or Nasdaq. The OTCBB has no listing requirements and
it's not an exchange. The system doesn't provide the execution services; instead,
the equity traders from broker-dealers can either contact the dealer that has
provided the quote by telephone or through a proprietary electronic delivery
system. The companies whose stock is quoted on the OTCBB either don't meet
the requirements for listing on an exchange or they've been delisted from an
exchange. A similar system is the Pink Marketplace. The third market refers to
exchange-listed securities that are traded over-the-counter or away from
traditional exchanges.
ABC Corporation's charter authorized the issuance of up to 1,000,000 shares of
stock. The company has issued 100,000 shares, but has 5,000 shares of treasury
stock. How many shares of ABC's stock are outstanding? - CORRECT ANSWER
95,000
The number of shares outstanding is equal to the number of shares issued, minus
any treasury stock (stock the company has bought back in the open market).
100,000 shares issued minus 5,000 shares of treasury stock equals 95,000 shares
outstanding.
The type of market in which an issuer raises capital by selling its securities to
investors is referred to as the: - CORRECT ANSWER Primary market
The type of market in which an issuer raises capital by selling its securities to
investors is referred to as the primary market. The secondary market is where
investors that purchased securities in the primary market then sell them to other
investors. The third market involves securities that are listed on an exchange (e.g.,
the NYSE or Nasdaq) are traded in the OTC market. The fourth market refers to
direct institution-to-institution trading and does not involve the public markets or
exchanges.
, A bondholder can find the details regarding the terms and features of her bond
from the: - CORRECT ANSWER indenture
For both corporate and municipal bonds, the issuer will disclose the terms,
conditions, and features of a bond in the indenture. The Notice of Sale is used to
announce a new municipal bond issuance to broker-dealers that may be
interested in underwriting (i.e., selling) the new bonds. The underwriting
agreement is a contract that's signed by members of a bond underwriting
syndicate. The legal opinion is a document that's created for a municipal bond
and indicates whether the bond is an enforceable obligation on the issuer and
also the tax status of the offering.
a common shareholder is not entitled to - CORRECT ANSWER appoint officers of
the corp.
Shareholders have the right to vote for the board of directors, but not to appoint
officers of the corporation.
when a bond is called, the bondholder receives the: - CORRECT ANSWER call price
plus accrued interest
The bondholder receives the call price (either at par or at a premium) plus
accrued interest earned up to the call date.
When issued, which security has a maturity of one year or less? - CORRECT
ANSWER Money market instruments
Money market instruments are short-term debt instruments and always mature
in one year or less. GNMA and FNMA bonds are both types of U.S. government
agency bonds and are issued with longer maturities, often 30 years. T-notes have
maturities that range from two to 10 years.
Which of the following securities assist in financing importing and exporting
operations? - CORRECT ANSWER Bankers' acceptances (BAs)
Of the choices given, a banker's acceptance (BA) is the only instrument that is
used as a means of financing foreign trade. Do not confuse a BA with an ADR
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