SIE Practice Questions (2026) — Free Sample Questions with Answers

Answer: B

1. Test 1: 1% of 6,000,000 outstanding shares = 60,000 shares.
2. Test 2: four-week total = 52,000 + 58,000 + 64,000 + 70,000 = 244,000 shares.
3. Average weekly volume = 244,000 ÷ 4 = 61,000 shares.
4. The Rule 144 limit is the greater of the two: 61,000 shares per 90 days.

60,000: This uses only the 1% test; the rule allows the greater of the two tests, and the weekly average is higher.

61,000: Correct. The limit is the greater of 1% of outstanding shares (60,000) or the average weekly volume over the prior four weeks (61,000).

70,000: This uses the single highest week rather than the four-week average.

244,000: This is the total four-week volume, not the weekly average.

Rule 144 volume limit per 90 days = the greater of 1% of outstanding shares or the average weekly volume over the prior four calendar weeks.

Answer: C

The underwriter sells as agent and returns any unsold shares to the issuer: This describes a best efforts underwriting, where the issuer keeps the risk.

The offering is canceled unless every share is sold by the deadline: This describes an all-or-none offering, which is a type of best efforts.

The underwriter buys the whole issue and bears the risk of unsold shares: Correct. In a firm commitment the syndicate buys the issue from the issuer as principal, so it keeps the market risk of any shares it cannot resell.

The underwriter buys only shares that rights holders did not subscribe to: This describes a standby underwriting used in a rights offering.

Firm commitment = underwriter acts as principal and takes the risk; best efforts = underwriter acts as agent and the issuer takes the risk.

Answer: C

sell Treasury securities in the open market: Selling securities drains reserves and tightens credit, which is the opposite of the goal.

raise the discount rate charged to banks: A higher discount rate makes borrowing more expensive, which tightens credit.

buy Treasury securities in the open market: Correct. When the Fed buys securities it pays with new bank reserves, which increases the money supply and puts downward pressure on interest rates.

raise federal income tax rates: Tax policy is fiscal policy, set by Congress and the President, not by the FOMC. Raising taxes would also slow the economy.

Fed buys securities = easier money and lower rates; Fed sells = tighter money and higher rates. Taxes and spending are fiscal policy.

Answer: A

An ETN is unsecured issuer debt, so holders bear credit risk: Correct. An ETN is a senior unsecured note promising a return linked to an index; it holds no portfolio, so its value depends on the issuer's ability to pay.

An ETN holds a basket of the index securities in a trust: Holding the underlying basket describes an ETF, which is an investment company.

An ETN can be redeemed only once a day at NAV by retail investors: Both ETNs and ETFs trade on exchanges during the day at market prices.

An ETN must pay fixed interest coupons like a corporate bond: Most ETNs pay no periodic coupon; their return tracks an index, less fees.

ETF = fund that owns assets; ETN = issuer's unsecured debt, which adds credit risk.

Answer: B

A 529 college savings plan: A 529 savings plan invests contributions in portfolios whose value rises and falls; it does not lock in tuition rates.

A 529 prepaid tuition plan: Correct. A 529 prepaid tuition plan buys future tuition credits at current prices at eligible (usually in-state public) schools.

A UTMA custodial account: A UTMA account holds assets for a minor but has no link to tuition prices and is not an education plan.

A Coverdell education savings account: A Coverdell ESA is an investment account with low contribution limits; it does not guarantee tuition prices.

Prepaid 529 = buy tuition at today's prices; savings 529 = investment account whose value varies.

Answer: B

1. 1. Sales charge in dollars = POP − NAV = $10.00 − $9.20 = $0.80.
2. 2. Sales charge % = sales charge ÷ POP = $0.80 ÷ $10.00.
3. 3. $0.80 ÷ $10.00 = 0.08 = 8.0%.

8.7%: This divides the $0.80 charge by the NAV ($9.20). Sales charge % is based on the POP, not the NAV.

8.0%: Correct. The sales charge is $0.80, and sales charge % is always figured on the POP: $0.80 ÷ $10.00 = 8.0%.

0.8%: This misplaces the decimal: $0.80 is the dollar charge, which is 8%, not 0.8%, of $10.00.

9.2%: This confuses the NAV of $9.20 with the charge; the charge is the $0.80 difference between POP and NAV.

Sales charge % = (POP − NAV) ÷ POP. The denominator is always the offering price.

Answer: A

1. Long call breakeven = strike + premium.
2. Breakeven = 60 + 4 = 64.
3. Above 64 the call is profitable at expiration; below 64 the customer loses part or all of the $400 premium.

64: For a long call, breakeven = strike + premium = 60 + 4 = 64.

60: At the strike, the call has no intrinsic value and the $4 premium is lost.

68: This adds the premium twice; it is counted only once.

56: Subtracting the premium gives the breakeven for a put, not a call.

Calls: breakeven = strike + premium. Puts: breakeven = strike − premium (same for buyer and writer).

Answer: A

1. Annual interest = 5% × $1,000 par = $50.
2. Price of 96 = 96% of $1,000 = $960.
3. Current yield = $50 ÷ $960 = 0.0521 = 5.21%.

5.21%: Current yield = annual interest ÷ market price = $50 ÷ $960 = 5.21%.

4.80%: This multiplies the coupon by the price (5% × 96%) instead of dividing interest by price.

5.00%: This is the nominal (coupon) yield, which is based on par, not on the market price.

5.53%: This approximates a yield to maturity, which also counts the discount accreting to par; current yield ignores it.

Current yield = annual coupon interest ÷ current market price. A discount bond’s current yield is above its coupon rate.

Answer: D

Debenture holders, secured bondholders, preferred, common: Debentures are unsecured, so they rank behind secured bonds backed by specific collateral.

Secured bondholders, preferred, debenture holders, common: All creditors, including unsecured debenture holders, are paid before any equity holder, preferred included.

Preferred, secured bondholders, debenture holders, common: Preferred stock is equity; it never ranks ahead of creditors.

Secured bondholders, debenture holders, preferred, common: Secured creditors come first, then general (unsecured) creditors such as debenture holders, then preferred and finally common stockholders.

Creditors before owners: secured debt, unsecured debt (including subordinated), preferred stock, then common stock with the residual claim.

Answer: C

Roth IRA owners must begin RMDs at age 73: Wrong: RMDs at 73 apply to traditional IRAs; the original owner of a Roth IRA never takes RMDs.

Catch-up contributions begin at age 59½: Wrong: catch-up contributions start at 50; 59½ is the age for penalty-free withdrawals.

A 55-year-old may contribute up to $8,600 in total: Correct. The 2026 IRA limit is $7,500 plus a $1,100 catch-up for anyone 50 or older, for $8,600 across all of the person's IRAs.

The $7,500 limit applies to each IRA separately: Wrong: the limit is a combined total for all of a person's traditional and Roth IRAs.

2026 IRAs: $7,500 total per person, plus $1,100 at 50+; traditional IRAs require RMDs at 73, Roth IRAs do not for the original owner.

Answer: C

It passes automatically to his surviving brother: Wrong: automatic transfer to the survivor is the right of survivorship in a JTWROS account, not TIC.

It is split equally between his estate and his brother: Wrong: TIC owners hold stated fractional interests; the full 60% goes to the estate.

It passes to his estate: Correct. In a tenants in common account, a deceased owner's fractional interest goes to his estate and is distributed under his will or state law.

It is held by the firm until the account is closed: Wrong: the firm freezes the account pending documents, but ownership of the 60% passes to the estate.

JTWROS: equal undivided interests that pass to the survivor. TIC: fractional interests that pass to the deceased owner's estate.

Answer: D

Backing away, since he trades before his customer: Backing away is a market maker refusing to honor its firm quote.

Marking the close, since the trade lifts the price: Marking the close means trading near the end of the session to set the closing price; this trade is about an incoming block order.

Permitted, since the information is not about the issuer: Knowledge of a pending block order is material and nonpublic market information; using it to trade ahead is prohibited.

Front running, which FINRA Rule 5270 prohibits: Correct. Trading ahead of an imminent block order the firm knows about, to profit from its expected price impact, is front running.

Front running = trading ahead of a known imminent block transaction (FINRA Rule 5270). Customer orders come first.

Answer: A

Wednesday, June 10: Correct. A trade on Wednesday settles Thursday (T+1), so the buyer is the holder of record on June 11.

Tuesday, June 9: This applies the old T+2 rule. Since May 28, 2024, regular-way trades settle T+1.

Friday, June 12: A purchase after the record date settles too late for the buyer to be the holder of record.

Thursday, June 11: This is the ex-dividend date. Under T+1 the ex-date equals the record date, and a buyer on the ex-date does not get the dividend.

With T+1 settlement the ex-dividend date is the same day as the record date, so the buyer must purchase by the business day before the record date.

Answer: C

$100: This was the limit before March 30, 2026, when FINRA raised it to $300.

$250: This is the de minimis amount for political contributions under MSRB Rule G-37, not the gift limit.

$300: Correct. Since March 30, 2026, Rule 3220 limits business-related gifts to $300 per person per year.

$500: This is above the Rule 3220 limit.

FINRA Rule 3220: $300 per person per year for gifts related to the recipient's employer's business. Firms must keep records of gifts.