Free SIE flashcards

How does a Treasury bill held to maturity actually deliver a return, given it pays no coupon?

It is sold below par and redeemed at par with no periodic interest, so the whole yield is the accreted discount, the gap between the discounted purchase price and the face value received at maturity.

When rates rise, a fixed-coupon bond's price rises because its fixed payment becomes more valuable.

A fixed payment feels safer, but a below-market coupon is worth less, not more. The price must fall so the older bond's yield can match the higher yields now available.

What is the defining feature that distinguishes a margin account from a cash account?

The core difference is credit. A margin account operates under Regulation T so the firm may lend a portion of the purchase price, while a cash account demands full payment for every purchase.

A traditional IRA takes after-tax contributions with tax-free withdrawals, while a Roth takes deductible contributions with taxable withdrawals.

Wrong: this reverses the two accounts. The traditional IRA has pre-tax contributions and taxable withdrawals; the Roth has after-tax contributions and tax-free qualified withdrawals.

What defines a primary market transaction, and who receives the sale proceeds?

A primary market transaction is defined by the issuer selling newly created securities and collecting the capital raised. The proceeds flow to the issuer rather than to a prior holder. Once those securities change hands again, the trades occur in the secondary market.

An investor buying outstanding shares from another investor on an exchange is a primary market transaction.

This is how most observed trading happens, but buying already-issued shares from another holder is a secondary market trade, not a primary market one. The primary market requires the issuer to sell new securities and keep the proceeds.

Who is an associated person of a FINRA member firm for registration purposes?

A natural person engaged in the investment banking or securities business who is controlled by, controlling, or under common control with the member firm. The definition turns on a control relationship and involvement in the securities business, which is what makes such individuals subject to SRO registration and qualification requirements.

Statutory disqualification means an automatic lifetime bar from the industry with no possibility of review.

This overstates the consequence. A firm may seek to employ or continue employing the person through an eligibility proceeding, so an automatic permanent bar with no review is wrong.