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Free SIE Exam Braindumps (page: 5)

Page 5 of 42
PDF with 164 Questions

A rating agency downgrades a corporation's credit rating.
Which of the following effects is this action most likely to have on the yield and price of the corporation's outstanding bonds?

  1. Yield will fall; price will fall.
  2. Yield will fall; price will rise.
  3. Yield will rise; price will fall.
  4. Yield will rise; price will rise.

Answer(s): C

Explanation:

Credit Downgrade: Increases perceived risk, causing bond prices to drop and yields to rise.

Yield-Price Relationship: Yields move inversely to bond prices. Lower prices lead to higher yields as investors demand more return for increased risk.


Reference:

SEC Guidance on Bond Ratings: SEC Bond Ratings.



Which of the following responses best describes a short sale?

  1. A sale of securities that results in a loss
  2. A sale of securities that the investor does not own
  3. A sale of securities that results in an unsecured debit balance in the investor's account
  4. A sale of securities that the investor had purchased in his cash account but had not yet paid for

Answer(s): B

Explanation:

Short Sale Definition: Involves selling borrowed securities with the expectation of repurchasing them at a lower price.

Investor Ownership: Short sales do not involve securities already owned by the seller.

Other Options: None of the other choices accurately define a short sale.


Reference:

SEC Regulation SHO (Short Selling): SEC Short Sales.



A registered representative who is terminated from a broker-dealer must notify FINRA of a residential address change for what period of time after termination?

  1. One year
  2. Two years
  3. Three years
  4. Six years

Answer(s): B

Explanation:

FINRA Rule 1122: Requires that registered representatives update their residential address with FINRA for two years post-termination.

Purpose: This ensures accurate records for potential regulatory inquiries during the statutory two- year period when a terminated individual remains subject to FINRA's jurisdiction.


Reference:

FINRA Rule 1122 (Filing False or Misleading Information): FINRA Rule 1122.



A registered representative (RR) owns 500 shares of a thinly traded security. A customer of the firm calls the RR to place a sell order for 10,000 shares of the same security. The RR sells his shares before entering the customer's order to sell.
Which of the following activities has the RR just engaged in?

  1. Selling away
  2. Front running
  3. Insider trading
  4. Market manipulation

Answer(s): B

Explanation:

Front Running Definition: Occurs when a broker executes a personal trade ahead of a customer's order to profit from the anticipated market movement.

Thinly Traded Security: Front running is particularly impactful in low-liquidity securities.

Other Options:

Selling Away: Involves unapproved securities transactions outside the employing firm.

Insider Trading: Involves trading on material non-public information.

Market Manipulation: Encompasses activities like wash trading or spoofing, not specific to this scenario.


Reference:

FINRA Rule 5270 (Front Running of Block Transactions): F, I, N, R, A Rule 5270.






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