SIE Exam: Understanding Products and Their Risks Practice Test 6

1. Which share class would be most suitable to an investor with a short-term to medium-term time horizon and may be open to eventually changing to a long-term investment?

A. Class A shares which convert to Class C shares

B. Class B shares which convert to Class A shares

C. Class C shares which convert to Class T shares

D. Class T shares which convert to Class B shares

2. Which share class allows investors to see fees most clearly?

A. Class A

B. Class B

C. Class T

D. Clean shares

3. Which of the following statements is NOT true regarding mutual funds and UITs?

A. The units of many UITs trade throughout the trading day on an exchange, whereas a mutual funds' orders are executed only after the trading day ends.

B. A UIT's assets are typically fully invested, whereas a mutual fund's assets are usually not.

C. Mutual funds and UITs both issue an initial public offering (IPO), and both may occasionally have a follow-on offering.

D. A mutual fund's share value is determined daily, but its shares do not trade on an exchange, as a UIT may.

4. Which of the following is correct regarding variable contracts?

A. They typically have less guarantees than mutual funds or UITs, so their internal fees are lower.

B. Representatives are typically paid lower commissions for selling variable contracts than for other investment products.

C. FINRA Rule 2330 requires the company issuing the variable contract and the representative soliciting and recommending the variable contract to assure the suitability of the contract as a whole and the suitability of the selection of specific investment choices (subaccounts) for the investor.

D. An owner of a variable contract typically does not need to hold cash equivalents because of the availability of policy loans from the variable contract.

5. Which of the following is NOT an expected part of recommending an investor replace an annuity or life insurance product in order to fund the purchase of a variable contract of EIC?

A. The replaced product is less than thirty-six months old.

B. The representative provides no comparison of the benefits of the replaced product and the new product.

C. The representative is expected to know enough about the investor's overall financial objectives, liquidity, and net worth to determine the suitability for recommending a variable annuity.

D. The representative may be expected to document that the investor owns liquid assets equal to living expenses for a certain period of time, such as one year.

6. An equity indexed contract holder has chosen a minimum guaranteed rate of 4%, along with a limited upside potential of 80% of the increase in the S&P Index, up to a maximum of 8%. If the S&P Index increases by 7%, what would the contract be credited with?

A. 4%

B. 5.60%

C. 7%

D. 8%

7. An equity indexed contract holder has chosen a minimum guaranteed rate of 4%, along with a limited upside potential of 80% of the increase in the S&P Index, up to a maximum of 8%. If the S&P Index decreases by 7%, by what percentage would the contract be adjusted?

A. -5%

B. -4%

C. 4%

D. 5%

8. Which of the following is correct about how a municipal fund security is like an open-end investment company (mutual fund)?

A. Neither is issued by a governmental unit.

B. Both hold only municipal bonds.

C. Their value varies with the sum of the market values of all securities held.

D. They both can be local government investment pools (LGIPs).

9. Which of the following is correct regarding "direct-sold" or "advisor-sold" 529 plans?

A. No states offer "direct-sold" 529 plans by mail or through a website.

B. No states offer 529 plans through broker-dealers.

C. Direct-sold investors may pay lower fees, and not have professional advice provided.

D. States typically offer "advisor-sold" 529 plans, which provides profession investment advice with no fees.

10. Which of the following is correct regarding Local Government Investment Pools (LGIPs)?

A. They are mutual funds.

B. Multiple state agencies or municipalities may pool their cash reserves into an LGIP.

C. LGIPs are established under federal securities laws.

D. LGIPs do not provide diversification.

SIE Exam: Understanding Products and Their Risks Practice Test 6

Test Information

More Tests

Quick View

FINRA Practice Tests