SIE Full-Length Mock Exam 2

SIE Full-Length Mock Exam 3

Welcome to the SIE Practice Simulator

Welcome! This simulator helps you practice your pacing and test your knowledge under real exam conditions. The test consists of 75 scored questions and 10 unscored questions (85 total). Total Time Allowed: 1 Hour and 45 Minutes (105 Minutes).

Exam Structure & Timing

Content Area	Questions	Weight
Knowledge of Capital Markets	12	16%
Understanding Products and Their Risks	33	44%
Understanding Trading, Customer Accounts & Prohibited Conduct	23	31%
Overview of Regulatory Framework	7	9%
Total	85	100%

Testing Rules & Guidelines

Basic Calculators Only: Financial calculators, graphing calculators, and smartphones are strictly prohibited.
Closed-Book: Do not use notes, study guides, or internet searches.
No Penalty for Guessing: Scores are based solely on correct answers. Make sure to answer every question.
Passing Score: The official FINRA passing benchmark is 70%.

Ready to start? Clear your desk, focus, and manage your time wisely.

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A. The Federal Reserve primarily uses open market operations to:

A. influence the money supply

B. regulate insurance companies

C. approve IPO registrations

D. supervise mutual funds

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B. A recession is generally characterized by:

A. rapid economic expansion

B. declining economic activity

C. rising inflation only

D. strong corporate earnings

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C. The secondary market is where:

A. new securities are issued

B. mutual funds calculate NAV

C. Treasury securities are printed

D. investors trade existing securities

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D. Which of the following is considered a lagging economic indicator?

A. Building permits

B. Factory orders

C. Unemployment rate

D. Housing starts

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E. When the Federal Reserve lowers interest rates, bond prices generally:

A. decline

B. rise

C. remain unchanged

D. become worthless

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F. The Securities Act of 1933 primarily focuses on:

A. disclosure requirements for new issues

B. regulating secondary trading

C. monetary policy

D. banking regulations

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G. A bull market is associated with:

A. declining stock prices

B. increased unemployment

C. falling economic activity

D. rising investor optimism

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H. Which type of risk cannot be eliminated through diversification?

A. Business risk

B. Unsystematic risk

C. Systematic risk

D. Credit risk

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I. NASDAQ is best described as:

A. a physical auction market only

B. an electronic trading marketplace

C. a Treasury auction system

D. a bond insurance agency

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J. Fiscal policy is controlled by:

A. Congress and the President

B. the Federal Reserve

C. FINRA

D. the SEC

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K. Inflation generally reduces the purchasing power of:

A. goods and services

B. investments only

C. money

D. Treasury securities only

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L. Corporations issuing bonds are primarily seeking to:

A. raise debt capital

B. raise equity capital

C. reduce liabilities

D. increase dividends automatically

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M. Common stockholders typically have:

A. creditor status

B. ownership interest in a corporation

C. guaranteed dividends

D. priority over bondholders in liquidation

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N. Treasury notes generally mature in:

A. less than 1 year

B. 2 to 10 years

C. more than 30 years

D. exactly 20 years

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O. A bond trading above par value is trading:

A. at a premium

B. at a discount

C. flat

D. without accrued interest

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P. Preferred stockholders generally receive:

A. voting control

B. guaranteed profits

C. fixed dividends before common shareholders

D. Treasury-backed income

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Q. Which investment generally carries the LEAST credit risk?

A. Corporate bond

B. Municipal revenue bond

C. Preferred stock

D. Treasury security

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R. An investor seeking aggressive growth would MOST likely invest in:

A. Treasury bills

B. growth stocks

C. money market funds

D. certificates of deposit

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S. ETFs are similar to mutual funds because they:

A. represent diversified portfolios

B. guarantee returns

C. trade only once daily

D. are not regulated

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T. Mutual fund shares are purchased and redeemed:

A. on exchanges only

B. at NAV

C. at negotiated prices

D. only through market makers

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U. Revenue bonds are backed by:

A. taxing authority

B. Treasury guarantees

C. project-generated revenues

D. corporate earnings

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V. An investor purchasing a call option expects stock prices to:

A. decline

B. remain unchanged

C. rise

D. split downward

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W. Options are classified as:

A. equity securities

B. Treasury obligations

C. money market instruments

D. derivatives

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X. Zero-coupon bonds are generally issued:

A. with monthly interest payments

B. at a discount

C. at a premium

D. with floating coupon rates

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Y. Money market mutual funds invest in:

A. short-term debt securities

B. speculative growth stocks

C. real estate

D. commodities

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Z. Variable annuities provide:

A. FDIC insurance

B. tax-deferred growth potential

C. guaranteed stock profits

D. Treasury-backed income

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AA. Foreign investments expose investors to:

A. currency risk

B. split risk

C. elimination risk

D. coupon risk

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AB. Diversification helps reduce:

A. systematic risk

B. inflation risk

C. unsystematic risk

D. interest rate risk

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AC. Closed-end funds typically trade:

A. directly with the issuer

B. on exchanges

C. only at NAV

D. through insurance companies only

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AD. Corporate bonds generally pay:

A. fixed periodic interest

B. guaranteed dividends

C. voting rights

D. equity ownership benefits

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AE. Convertible bonds may be exchanged for:

A. Treasury securities

B. municipal bonds

C. money market shares

D. common stock

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AF. REITs primarily invest in:

A. foreign currencies

B. commodities

C. real estate

D. Treasury securities

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AG. An investor seeking current income may prefer:

A. dividend-paying stocks

B. speculative options

C. leveraged ETFs

D. growth-only equities

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AH. Long-term bonds are highly sensitive to:

A. political risk

B. interest rate risk

C. split risk

D. exchange risk

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AI. An ADR represents:

A. ownership in foreign company shares

B. a Treasury bill

C. a municipal bond

D. a money market fund

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AJ. Which investment generally has the HIGHEST volatility?

A. Treasury bills

B. Blue-chip stocks

C. Investment-grade bonds

D. Penny stocks

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AK. Common stockholders generally have:

A. fixed interest payments

B. voting rights

C. liquidation priority over creditors

D. guaranteed dividends

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AL. Bondholders are MOST concerned with:

A. voting rights

B. dividend increases

C. repayment ability of the issuer

D. stock splits

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AM. Preservation of capital investors typically prioritize:

A. aggressive growth

B. principal safety

C. speculation

D. leverage

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AN. A stock split generally causes:

A. fewer shares outstanding

B. increased company debt

C. guaranteed gains

D. proportionally lower stock prices

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AO. Municipal bonds may be attractive because they often provide:

A. guaranteed profits

B. tax-free income

C. FDIC insurance

D. equity ownership

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AP. Callable bonds expose investors to:

A. reinvestment risk

B. elimination risk

C. split risk

D. exchange risk

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AQ. Open-end investment companies are commonly known as:

A. REITs

B. hedge funds

C. mutual funds

D. closed-end funds

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AR. An investor seeking liquidity and safety would MOST likely invest in:

A. leveraged ETFs

B. penny stocks

C. options contracts

D. Treasury bills

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AS. Diversification’s greatest advantage is:

A. elimination of all risk

B. guaranteed returns

C. reduction of company-specific risk

D. increased volatility

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AT. A market order is executed:

A. at a guaranteed price

B. at the best available price

C. only at market close

D. after SEC approval

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AU. A buy limit order is typically entered:

A. above market price

B. after execution

C. without a price limit

D. below market price

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AV. Discretionary authority in a customer account requires:

A. written customer authorization

B. verbal approval only

C. SIPC approval

D. Treasury approval

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AW. Insider trading involves:

A. trading on public information

B. trading on material nonpublic information

C. investing in ETFs

D. trading mutual funds frequently

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AX. SIPC protects investors against:

A. market losses

B. inflation

C. broker-dealer insolvency

D. interest rate changes

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AY. Churning refers to:

A. excessive trading for commissions

B. diversification

C. long-term investing

D. hedging strategies

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AZ. Which account registration includes survivorship rights?

A. TIC

B. JTWROS

C. Custodial account

D. Estate account

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BA. FINRA regulates:

A. commercial banks

B. Treasury auctions

C. insurance companies

D. broker-dealers

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BB. A stop order becomes a market order when:

A. the stop price is reached

B. dividends are declared

C. interest rates decline

D. the market closes

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BC. The Options Disclosure Document must be delivered:

A. before options approval

B. after the first options trade

C. annually only

D. only to institutional investors

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BD. AML regulations require firms to:

A. guarantee customer profits

B. monitor suspicious transactions

C. eliminate losses

D. reduce commissions

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BE. Margin accounts allow customers to:

A. borrow money for securities purchases

B. avoid taxes

C. eliminate investment losses

D. trade only bonds

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BF. Which activity is prohibited?

A. Asset allocation

B. Dollar-cost averaging

C. Front-running

D. Diversification

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BG. Customer confirmations provide:

A. future stock recommendations

B. tax refunds

C. guaranteed returns

D. transaction details

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BH. Suitability requires recommendations to:

A. maximize commissions

B. fit the customer’s investment profile

C. eliminate all risk

D. guarantee profits

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BI. A UTMA custodial account legally belongs to:

A. the custodian

B. the broker-dealer

C. the minor

D. FINRA

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BJ. A limit order guarantees:

A. price

B. execution

C. profits

D. dividends

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BK. Borrowing money from a customer by a registered representative is:

A. always allowed

B. permitted only under specific FINRA and firm rules

C. allowed without disclosure

D. permitted only during recessions

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BL. Wash trades are prohibited because they:

A. manipulate market activity

B. reduce liquidity

C. increase diversification

D. guarantee profits

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BM. The bid price is:

A. the seller’s asking price

B. the dividend amount

C. the buyer’s offered price

D. the coupon payment

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BN. Which account registration may divide ownership unequally?

A. JTWROS

B. TIC

C. Custodial account

D. Community property account

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BO. Regulation T governs:

A. margin requirements

B. Treasury auctions

C. mutual fund sales

D. municipal underwriting

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BP. Privacy notices are generally required:

A. only after account closure

B. at account opening

C. only after options trading approval

D. only during audits

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BQ. The Securities Act of 1933 regulates:

A. secondary market trading

B. insurance products

C. Treasury auctions

D. new securities offerings

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BR. The Securities Exchange Act of 1934 established the:

A. Federal Reserve

B. SIPC

C. FDIC

D. SEC

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BS. The Investment Company Act of 1940 regulates:

A. mutual funds

B. Treasury securities

C. commercial banks

D. insurance companies

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BT. FINRA is considered a:

A. federal agency

B. self-regulatory organization

C. Treasury division

D. commercial bank

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BU. Municipal securities are generally:

A. exempt from SEC registration

B. equity securities

C. Treasury obligations

D. insured deposits

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BV. Public companies file annual reports using:

A. Form U4

B. Form ADV

C. Form 10-K

D. Form D

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BW. The SEC’s mission is to:

A. regulate taxes

B. regulate insurance premiums

C. manage monetary policy

D. protect investors and maintain fair markets

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BX. A bond’s coupon rate refers to:

A. its market price

B. its stated interest rate

C. its inflation adjustment

D. its yield to maturity

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BY. Blue-chip stocks are generally issued by:

A. speculative startups

B. bankrupt corporations

C. large established companies

D. foreign governments

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BZ. The ex-dividend date determines:

A. who receives the dividend

B. Treasury yields

C. bond maturities

D. margin requirements

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CA. A prospectus contains:

A. guaranteed returns

B. customer account records

C. insider trading information

D. material facts about a securities offering

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CB. Aggressive growth investors generally seek:

A. low volatility

B. speculative capital appreciation

C. fixed interest payments

D. Treasury-backed guarantees

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CC. Which order guarantees execution but not price?

A. Market order

B. Limit order

C. Stop-limit order

D. Day order

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CD. When interest rates rise, bond prices generally:

A. rise

B. remain unchanged

C. fall

D. double automatically

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CE. Buying securities on margin increases:

A. guaranteed profits

B. potential gains and losses

C. diversification automatically

D. tax-free income

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CF. Money market instruments are generally:

A. long-term investments

B. speculative securities

C. short-term debt securities

D. equity securities

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CG. The ask price represents:

A. the buyer’s offered price

B. the coupon payment

C. the dividend amount

D. the seller’s offered price

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