Pass the FINRA General Securities Representative SIE Questions and answers with ValidTests

Step by Step Explanation:

Priority in Bankruptcy: Preferred stockholders have a higher claim on a company’s assets than common stockholders during liquidation. Common stockholders are residual claimants.

Dividend Priority: Preferred stockholders are entitled to fixed dividends before common stockholders receive any dividends.

Incorrect Options:

A & B: Common and preferred stocks are treated differently in bankruptcy and dividend payments.

C: Common stock dividends are subordinate to preferred stock dividends.

Step by Step Explanation:

Interest Rate Risk: Treasury securities are sensitive to changes in interest rates. When rates rise, Treasury prices fall, exposing investors to price risk.

Incorrect Options:

Credit Risk: Virtually nonexistent for Treasuries, as they are backed by the U.S. government.

Liquidity Risk: Treasuries are highly liquid.

Prepayment Risk: Applies to mortgage-backed securities, not Treasuries.

Step by Step Explanation:

Backing Away: Refers to the failure of a market maker to honor a firm quote when a customer attempts to trade at that price. It is a violation of market rules.

Incorrect Options:

Freeriding: Involves selling securities before paying for them in a cash account.

Interpositioning: Involves unnecessary intermediaries in trades, which can harm customers.

Market Manipulation: Covers a range of deceptive practices, such as wash trading or spoofing, not specific to honoring quotes.

Step by Step Explanation:

403(b) Accounts: These tax-advantaged retirement plans are specifically for employees of public schools, tax-exempt organizations, and certain other nonprofit employers, such as hospitals.

Incorrect Options:

Volunteer Workers: Ineligible unless they are also employees.

Small Business Owners and Military Personnel: These groups typically qualify for other retirement plans, not 403(b).

Technology stocks are considered high-risk investments due to their volatility and sensitivity to economic cycles, regulatory changes, and technological advancements. While they may offer significant growth potential, they carry greater risk than blue chip stocks, corporate bonds, or government bonds.

C is correct because technology stocks are subject to high volatility and risk.

A is incorrect because blue chip stocks are generally stable and lower-risk.

B is incorrect because corporate bonds carry moderate risk, depending on the issuer’s creditworthiness.

D is incorrect because government bonds are considered low-risk due to the backing of the issuing government.

Step by Step Explanation:

Call Option Writer: When writing (selling) a call option, the writer has the obligation to sell the underlying stock at the strike price if the buyer exercises the option.

Incorrect Options:

A & B: Only the option buyer has rights, not the writer.

D: Obligations to buy stock apply to put option writers, not call option writers.

An unrealized gain occurs when the value of an asset increases but has not yet been sold. If the customer sells the stock, the unrealized gain becomes a realized gain.

B is correct because the increase in value without selling the stock is an unrealized gain.

A is incorrect because interest income refers to earnings from fixed-income securities.

C is incorrect because operating profit relates to a company’s earnings, not an investor’s portfolio.

D is incorrect because "out of the money" is a term used for options, not stocks.