TEAS Reading: Key Ideas and Details (Quiz 4) Welcome to your SIE Practice Quizzes. Note: We designed four (4) sets of practice quizzes for each Domain. each quiz set has 25 questions. Domain 3 (Set 2): Understanding Trading, Customer Accounts, and Prohibited Activities. (25 questions) Please click NEXTÂ to start your Free SIE Practice Quizzes right away. Best of Luck! 1. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE Selling shares not yet borrowed or located to be borrowed is A) known as closing a short sale with a purchase. B) known as a short sale and is prohibited. C) known as a naked short sale and is prohibited. D) known as closing a position with a sale and is prohibited. None 2. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE Shares must be borrowed in order to A) buy to open a position. B) sell short to open a position. C) buy to close a position. D) sell short to close a position. None 3. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE Which of the following is true regarding short sales? A) Selling short involves purchasing the shares first. B) Selling short involves selling shares not yet owned. C) Selling shares not yet owned is prohibited. D) Selling short means selling less shares than were purchased. None 4. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE What is the spread on a stock quote? A) The range of prices the stock has shown over the course of one trading day B) The profit margin for an individual trade C) The broker-dealer's commission charges for the transaction D) The difference between the bid price and the ask price or offer None 5. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE Ownership of a security indicates that one is A) short the position and bearish. B) short the position and bullish. C) long the position and bullish. D) long the position and bearish. None 6. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE An opening transaction can be A) a short sale only. B) either a buy or a sell. C) a buy only. D) a sell only. None 7. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE The spread a dealer makes is best described as A) the total commission. B) the ask plus the bid. C) none of these. D) the ask minus the bid. None 8. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE An investor with no existing positions in MMS stock sells 100 shares. This is A) a long bearish position. B) a short bearish position. C) a short bullish position. D) a long bullish position. None 9. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE An investor who has a short position in 500 shares of JKH common stock would eliminate that position by A) entering an opening purchase order for 500 shares of JKH. B) entering a closing purchase order for 500 shares of JKH. C) entering a closing purchase order for 500 shares of ABC. D) entering a closing sale order for 500 shares of JJK. None 10. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE All of the following are bullish positions except A) long warrants. B) long stock. C) long calls. D) short stock. None 11. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE Meeting the location requirements and the borrowing of securities when a customer wants to sell short is done by A) the customer or entity that the shares will be borrowed from. B) the broker-dealer on behalf of the short-selling customer. C) the purchaser of the securities being sold short. D) the customer who wants to sell short. None 12. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE Subject to market liquidity, which of the following orders is most likely to be executed immediately? A) All-or-none (AON) order B) Fill-or-kill order C) Market order D) Limit order None 13. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE Which of the following transactions has the most risk? A) Selling short B) Short against the box C) Buying to open D) Selling to close None 14. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE A closing transaction can be A) either a buy or a sell. B) a sell only. C) a short sale. D) a buy only. None 15. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE Shares to sell short have been located in order to be borrowed. Once sold short, these shares will be known as A) covered. B) uncovered. C) naked. D) closed. None 16. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE Selling long is equivalent to which of the following? A) Selling to close B) Selling short C) Selling to open D) Selling to open then buying to close None 17. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE A customer who is short against the box may close the position by all the following except A) depositing the fair market value of the shorted stock into his account. B) combining purchases of stock with stock already owned by the customer. C) covering the short with the stock in his account. D) purchasing twice the stock in the open market. None 18. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE Potential risks of owning common stock include all of the following except A) unlimited liability. B) business risk. C) market risk. D) low priority in liquidation. None 19. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE When investors open a position by going long the security, they can close the position by A) opening a new position in the security. B) buying the security. C) selling the security short. D) selling the security. None 20. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE An investor notices that a bond originally bought at 95 some years ago is now trading at a price of 88. The investor sells the bond, then buys it back the next day for 88.5 with the intention of declaring a loss from the original purchase and sale on this year's tax return. This would be known as A) supporting, and taking the loss is allowed. B) a wash sale, and taking the loss is prohibited. C) pegging and is taking the loss allowed. D) matched orders, and taking the loss is prohibited. None 21. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE A customer who is bullish on ABC would most likely A) sell ABC long. B) buy ABC long. C) sell ABC short. D) buy ABC short. None 22. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE Which of the following transactions has the least risk? A) Selling to open B) Buying to open C) Short against the box D) Selling short None 23. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE A customer wishes to sell short 1,000 shares of ABC. Prior to executing the order, the registered representative must A) receive permission from the customer to borrow shares. B) receive principal permission to execute the trade. C) locate shares that can be lent to effect the sale. D) have the customer pledge personal collateral to cover the sale. None 24. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE Which of the following would not be considered ordinary income for tax purposes? A) Gains gotten from the sale of securities B) Salary and commissions C) Rents from income properties D) Dividends on common stock None 25. SIE, Understanding Trading, Customer Accounts and Prohibited Activities,SIE Short sellers have A) unlimited profit and loss potential. B) unlimited profit potential and limited loss potential. C) limited profit and loss potential. D) limited profit potential and an unlimited loss potential. None 1 out of 25 Time is Up! Time's up
