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SIE – Practice Exam 11

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Question 1 of 10

1. Question

Compared to hedge funds, private equity funds generally:

Carry more risk
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Have shorter lock-up periods
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Invest directly into companies
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Focus more on short-term returns
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Question 2 of 10

2. Question

All the following statements about exchange-traded funds are true except:

They can be traded all day long on stock exchanges at bid and ask prices
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They require higher investments minimums and brokerage commissions than mutual funds
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They are packaged portfolios with a limited number of available shares
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They are similar to closed-end funds with minor technical differences
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Question 3 of 10

3. Question

Investor A is paid a non-qualified dividend. The dividend is taxable:

At a lower capital gains rate
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As ordinary income
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At a higher capital gains rate
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The dividend is not subject to taxation
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Question 4 of 10

4. Question
Exchange-traded notes carry several risks. These risks include:
1. Liquidity risk
2. Credit risk of the Issuer
3. Market risk
4. Default risk
I, II, and III
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II, III, and IV
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I, III, and IV
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I, II, III, and IV
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Question 5 of 10

5. Question
Exchange-traded notes generally:
1. Hold a portfolio of assets or securities
2. Make periodic interest payments
3. Track a benchmark index
4. Have maturity dates of 15 to 30 years
I and II
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I and III
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II and IV
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III and IV
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Question 6 of 10

6. Question

Which of the following best describes purchasing power risk?

The risk that a bond issuer will fail to repay your principal upon maturity
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The risk that a buyer for a bond will not be easily found
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The risk that a bond yield will not keep pace with inflation
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The risk that a bond will be redeemed when interest rates decline
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Question 7 of 10

7. Question

The risk that the principal amount of a debt investment will be paid back prematurely, resulting in fewer interest payments, is known as:

Liquidity risk
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Prepayment risk
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Credit risk
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Reinvestment risk
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Question 8 of 10

8. Question

Investor A purchases a 15-year bond with a 5% annual coupon. 10 years later, interest rates fall to 2.5%, which lowers the overall bond yield. Which risk is best represented in this scenario?

Reinvestment risk
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Business risk
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Market risk
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Prepayment risk
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Question 9 of 10

9. Question

Which of the following scenarios best describes an investor using a sector rotation strategy to mitigate risk during a recession?

Shifting investments from cyclical sectors to defensive sectors
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Selling all equity securities and purchasing corporate bonds
Correct Incorrect Correct answer

Investing only in cyclical sectors
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Purchasing non-debt and non-equity investments, such as artwork
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Question 10 of 10

10. Question

Investor A has a target asset allocation of 70% stocks and 30% bonds. The stock market declines one year which results in bonds now making up 40% of their portfolio. Following a portfolio rebalancing strategy, the investor would:

Sell all stocks to capture the momentum of the bond market
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Purchase more bonds to have an allocation closer to 50% stocks and 50% bonds
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Buy certain stocks and sell certain bonds to restore their original target asset allocation
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Take no action until the stock market improves
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Quiz Summary

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1. Question

Compared to hedge funds, private equity funds generally:

2. Question

All the following statements about exchange-traded funds are true except:

3. Question

Investor A is paid a non-qualified dividend. The dividend is taxable:

4. Question

Exchange-traded notes carry several risks. These risks include:

5. Question

Exchange-traded notes generally:

6. Question

Which of the following best describes purchasing power risk?

7. Question

The risk that the principal amount of a debt investment will be paid back prematurely, resulting in fewer interest payments, is known as:

8. Question

Investor A purchases a 15-year bond with a 5% annual coupon. 10 years later, interest rates fall to 2.5%, which lowers the overall bond yield. Which risk is best represented in this scenario?

9. Question

Which of the following scenarios best describes an investor using a sector rotation strategy to mitigate risk during a recession?

10. Question

Investor A has a target asset allocation of 70% stocks and 30% bonds. The stock market declines one year which results in bonds now making up 40% of their portfolio. Following a portfolio rebalancing strategy, the investor would: