Why Practice Questions Matter
Practice questions are the most effective way to prepare for the SIE exam. They help you:
- Identify knowledge gaps
- Get comfortable with question formats
- Build test-taking stamina
- Improve time management
The actual SIE exam has 85 questions (75 scored, 10 unscored) with 110 minutes to complete.
Sample SIE Questions by Topic
Capital Markets (16% of exam)
Question 1: Which of the following is a characteristic of the secondary market?
A) Companies raise capital through initial public offerings B) Securities are traded between investors C) Underwriters price new securities D) The SEC approves new stock issuances
Answer: B - The secondary market is where existing securities are traded between investors. The primary market is where new securities are issued.
Question 2: The Federal Reserve conducts open market operations by:
A) Setting bank reserve requirements B) Adjusting the discount rate C) Buying and selling government securities D) Regulating margin requirements
Answer: C - Open market operations involve the Fed buying and selling government securities to influence the money supply and interest rates.
Question 3: Which organization operates the NASDAQ stock exchange?
A) SEC B) FINRA C) MSRB D) Nasdaq, Inc.
Answer: D - Nasdaq, Inc. operates the NASDAQ stock exchange. The SEC regulates securities markets, FINRA regulates broker-dealers, and MSRB regulates municipal securities.
Investment Products (44% of exam)
Question 4: A bond with a 6% coupon and a market price of $900 has a current yield of approximately:
A) 5.4% B) 6.0% C) 6.67% D) 7.0%
Answer: C - Current yield = Annual coupon payment / Market price = $60 / $900 = 6.67%
Question 5: Which of the following is NOT a characteristic of common stock?
A) Voting rights B) Guaranteed dividends C) Residual claim on assets D) Preemptive rights
Answer: B - Common stock dividends are not guaranteed. They are declared by the board of directors and can be reduced or eliminated.
Question 6: A mutual fund with an NAV of $20 and offering price of $21.20 is a:
A) No-load fund B) Closed-end fund C) Load fund D) Money market fund
Answer: C - The difference between the offering price and NAV represents a sales charge (load). Sales charge = ($21.20 - $20) / $21.20 = 5.66%
Question 7: Which of the following has the LEAST interest rate risk?
A) 30-year Treasury bond B) 10-year corporate bond C) 5-year municipal bond D) 90-day Treasury bill
Answer: D - Interest rate risk increases with maturity. The 90-day T-bill has the shortest maturity and therefore the least interest rate risk.
Question 8: An investor purchasing a call option has:
A) The obligation to buy the underlying asset B) The right to buy the underlying asset C) The obligation to sell the underlying asset D) The right to sell the underlying asset
Answer: B - A call option gives the buyer the RIGHT (not obligation) to BUY the underlying asset at the strike price.
Question 9: Which type of bond is backed by a specific asset?
A) Debenture B) Secured bond C) Subordinated bond D) Income bond
Answer: B - Secured bonds (also called mortgage bonds) are backed by specific collateral. Debentures are unsecured.
Question 10: A 529 plan is primarily used for:
A) Retirement savings B) Healthcare expenses C) Education expenses D) Estate planning
Answer: C - 529 plans are tax-advantaged savings plans designed for education expenses. Qualified withdrawals for education are tax-free.
Client Accounts (21% of exam)
Question 11: The minimum age to open an individual brokerage account is:
A) 18 B) 21 C) 25 D) 30
Answer: A - The legal age of majority (18 in most states) is required to open an individual brokerage account.
Question 12: In a JTWROS account, when one owner dies:
A) Their share passes to their estate B) Their share passes to the surviving owner(s) C) The account is frozen pending probate D) A new account must be opened
Answer: B - In Joint Tenants with Rights of Survivorship (JTWROS), the deceased owner's share passes directly to the surviving owner(s), bypassing probate.
Question 13: Regulation T currently sets the initial margin requirement at:
A) 25% B) 50% C) 75% D) 100%
Answer: B - Regulation T, set by the Federal Reserve, requires an initial margin of 50% for purchasing securities on margin.
Question 14: Which of the following is NOT a fiduciary account?
A) UGMA account B) Trust account C) Individual account D) ERISA account
Answer: C - An individual account is owned by one person without a fiduciary relationship. UGMA, trust, and ERISA accounts all involve fiduciary duties.
Question 15: Anti-money laundering (AML) regulations require firms to:
A) Report all cash transactions over $5,000 B) Verify customer identity C) Obtain customer Social Security numbers D) Both B and C
Answer: D - AML programs require Customer Identification Programs (CIP) including identity verification and obtaining identifying information like SSN.
Regulations and Ethics (19% of exam)
Question 16: FINRA Rule 2111 requires that recommendations be:
A) Approved by a supervisor B) Suitable for the customer C) Documented in writing D) Made only for qualified investors
Answer: B - The suitability rule (Rule 2111) requires that recommendations be suitable based on the customer's investment profile.
Question 17: Which of the following activities would be considered "churning"?
A) Recommending diversified investments B) Excessive trading to generate commissions C) Providing unsolicited recommendations D) Selling securities at a loss
Answer: B - Churning is excessive trading in a customer's account primarily to generate commissions, which is prohibited.
Question 18: A registered representative discovers a customer is 72 years old. Under RMD rules, the customer must:
A) Begin taking distributions from traditional IRAs B) Convert to a Roth IRA C) Stop making contributions D) Rollover to a 401(k)
Answer: A - Required Minimum Distributions (RMDs) must begin by April 1 following the year the account holder turns 73 (as of 2023, updated from 72).
Question 19: Which agency is the self-regulatory organization (SRO) for broker-dealers?
A) SEC B) FINRA C) MSRB D) Federal Reserve
Answer: B - FINRA (Financial Industry Regulatory Authority) is the SRO that regulates broker-dealers and their registered representatives.
Question 20: Under the Securities Act of 1933, which of the following is exempt from registration?
A) Common stock IPO B) Municipal bonds C) Corporate bonds D) ADRs
Answer: B - Municipal bonds are exempt securities under the Securities Act of 1933 and do not require SEC registration.
More Practice Questions
Equity Securities
Question 21: Preferred stock typically offers:
A) Voting rights and fixed dividends B) No voting rights and fixed dividends C) Voting rights and variable dividends D) No voting rights and no dividends
Answer: B - Preferred stock typically has no voting rights but receives fixed dividend payments before common stockholders.
Question 22: A stock trading at $50 with earnings per share of $5 has a P/E ratio of:
A) 5 B) 10 C) 50 D) 250
Answer: B - P/E Ratio = Price / EPS = $50 / $5 = 10
Debt Securities
Question 23: As interest rates rise, bond prices generally:
A) Rise B) Fall C) Stay the same D) Become more volatile
Answer: B - Bond prices have an inverse relationship with interest rates. When rates rise, existing bond prices fall.
Question 24: Zero-coupon bonds:
A) Pay interest monthly B) Are sold at a premium C) Are sold at a discount D) Have no maturity date
Answer: C - Zero-coupon bonds pay no periodic interest and are sold at a deep discount to face value.
Mutual Funds
Question 25: Net Asset Value (NAV) is calculated by:
A) Total assets ÷ shares outstanding B) (Total assets - liabilities) ÷ shares outstanding C) Market price × shares outstanding D) Total liabilities ÷ shares outstanding
Answer: B - NAV = (Total Assets - Total Liabilities) / Shares Outstanding
Tips for Practice
- Time yourself - Average 1.3 minutes per question
- Review wrong answers - Understand why each incorrect answer is wrong
- Track your scores - Aim for 80%+ on practice exams
- Focus on weak areas - Spend extra time on missed topics
- Simulate exam conditions - Take full-length practice tests
Ready to Practice More?
These sample questions represent just a fraction of what you'll encounter on the SIE exam. For comprehensive preparation, explore our free SIE exam prep resources with hundreds of practice questions across all topics.