FINRA SIE practice exam and sample questions

A useful practice set tests decisions, calculations, and distinctions across the outline, rather than repeating one definition in different words. The questions below are original and cover capital markets, securities products and risks, trading and customer accounts, and regulation. Work each one before revealing the explanation. Record whether the miss came from a knowledge gap, a misread qualifier, a calculation, or rushing. Those categories suggest different fixes.

The official SIE has 80 questions administered: 75 scored questions plus five unscored pretest questions. The 2025 content outline assigns the largest share to products and risks, followed by trading, customer accounts and prohibited activities, then capital markets and regulation. This practice set is not an official simulation, does not reproduce protected FINRA questions, and cannot estimate a scaled exam result. It is a compact diagnostic for the concepts taught here.

Question 1: Primary and secondary markets

A corporation sells newly issued bonds to investors through an underwriting syndicate. The corporation receives the offering proceeds. Which statement best describes the transaction?

1. It is a secondary-market trade because investors can later resell the bonds.
2. It is a primary-market distribution because the issuer is selling new securities.
3. It is a dealer transaction because all bonds trade on an exchange.
4. It is a private placement because an underwriting syndicate is involved.

Correct answer: B. The issuer sells newly issued securities and receives proceeds, which makes the distribution primary. Later investor-to-investor trades are secondary-market transactions. A is wrong because the possibility of later resale does not change the original issuance. C is wrong because an underwriter's role does not make every bond trade an exchange trade, and many bonds trade OTC. D is wrong because underwriting alone does not establish that the offering is exempt or private.

Question 2: Common stock rights

Which statement about common stock is generally correct?

1. Common stockholders are creditors with a contractual right to interest before bondholders.
2. Common stockholders may have voting rights and may receive dividends if declared.
3. Common stockholders have a guaranteed claim to receive their original investment at maturity.
4. Common stockholders receive dividends before preferred stockholders in all cases.

Correct answer: B. Common shares represent an ownership interest. Voting rights are subject to the share class and governing documents, and dividends are not guaranteed; a board must declare them. A describes debt, not equity. C confuses stock with a maturing obligation such as a bond. D reverses the usual priority: preferred stock generally has dividend preference over common stock, subject to the terms and declaration of dividends.

Question 3: Bond price and interest rates

An investor owns a fixed-rate bond. Market interest rates rise, while the issuer's credit quality and the bond's other features remain unchanged. What is the usual effect on the bond's market price?

1. The price tends to fall because the bond's fixed payments are less attractive relative to new rates.
2. The price tends to rise because the issuer pays a higher coupon automatically.
3. The price is unchanged because the coupon rate is fixed.
4. The bond converts into equity when market rates increase.

Correct answer: A. Existing fixed payments become less attractive when comparable new bonds offer higher yields, so the existing bond's price generally declines. B is wrong because a fixed coupon does not reset simply because market rates move. C confuses the stability of the coupon payment with the market value of the bond. D describes no ordinary feature of a fixed-rate bond.

Question 4: Yield calculation

A $1,000 par-value bond pays $50 of annual interest and is quoted at $1,000. What is its current yield?

Work: annual interest divided by current market price equals $50 ÷ $1,000 = 0.05, or 5%. Correct answer: 5%. Current yield compares annual coupon income with the bond's current price. It is not the coupon rate unless price equals par, as it does here. It is not yield to maturity, which accounts for the full stream of cash flows, time to maturity, and gain or loss between purchase price and redemption value.

A common error is to divide the coupon by the bond's face value in every case. If the same bond traded for $950, current yield would be $50 ÷ $950, or about 5.26%, even though its coupon rate remains 5%. Keep annual income, market price, and par value in their correct places.

Question 5: Mutual fund NAV

An open-end mutual fund has assets of $12 million, liabilities of $600,000, and 950,000 shares outstanding. What is its net asset value per share?

Work: NAV = (assets - liabilities) ÷ shares outstanding. ($12,000,000 - $600,000) ÷ 950,000 = $12 per share. Correct answer: $12. Use net assets, not gross assets. Do not subtract liabilities after dividing, and do not divide by the fund's portfolio holdings. The fund's share count is the denominator.

An open-end fund issues and redeems its own shares at a price based on NAV, with any applicable sales charge handled under the fund's terms. This differs from an exchange-traded fund, whose shares trade in the secondary market at market prices that can differ from NAV. The question gives a direct NAV calculation, so no premium or discount is added.

Question 6: Options payoff

An investor buys one call option with a $40 strike for a premium of $3 per share. At expiration, the stock is $46. Ignoring transaction costs, what is the buyer's net profit per share?

Work: intrinsic value is max($46 - $40, 0) = $6. Subtract the $3 premium paid: net profit is $3 per share. Correct answer: $3. The gross exercise value is $6, but premium is a real cost. The break-even price is strike plus premium, or $43. A choice of $6 omits premium; a choice of a $3 loss mistakes the buyer's paid premium for a loss even though the call finishes in the money.

Options are leveraged contracts with asymmetric risks for the buyer and seller. A call buyer has the right, but not obligation, to buy at the strike. A put buyer has the right to sell at the strike. The option buyer can lose the premium paid; an uncovered option writer can face much larger risk. On a question, identify the position first, then calculate intrinsic value and account for premium.

Question 7: Limit order

A customer enters an order to buy 100 shares with a limit of $27. The stock's market price remains above $27 all day. Which result is possible?

1. The order must execute at the closing price.
2. The order may remain unexecuted because the limit price was not available.
3. The broker may execute above $27 because a limit guarantees a fill.
4. The order automatically becomes a short sale.

Correct answer: B. A buy limit sets a maximum price. If the market never offers the stock at $27 or less, the order may not execute. A is wrong because a limit order does not guarantee execution at the close. C reverses the limit's price protection. D has no connection to the order instruction; a short sale concerns selling a security the customer does not own or has borrowed.

Question 8: Customer account and margin

A customer buys securities using funds borrowed from the broker-dealer, with securities in the account serving as collateral. Which account feature is being used?

1. A cash account, because the customer owns securities.
2. A margin account, because the broker extends credit secured by account assets.
3. A custodial account, because collateral is involved.
4. A discretionary account, because the firm supplies funds.

Correct answer: B. Borrowing from the broker to purchase securities is a margin transaction. The customer must meet applicable initial and maintenance requirements, and leverage can magnify gains and losses. A cash account generally requires full payment. A custodial account describes an account held by an adult for a minor, not a loan feature. A discretionary account concerns authority to make investment decisions, not credit.

Question 9: Prohibited conduct

A registered representative places trades in a customer's account solely to generate commissions, without regard to the customer's objectives or financial situation. Which practice is most directly described?

1. Churning
2. Dollar-cost averaging
3. Arbitration
4. Rebalancing

Correct answer: A. Churning is excessive trading in a customer's account primarily to generate commissions, with the representative exercising control or discretion over the trading pattern. B is a planned periodic investment strategy. C is a dispute-resolution process. D is adjusting portfolio weights toward a target. Not every active account is churned; the combination of excessive turnover, control, and commission motive is central.

A related concept is front-running: trading ahead of a customer block order with knowledge that the order may move the market, to benefit from the expected price effect. Insider trading concerns trading while in possession of material nonpublic information in violation of applicable duties or law. These terms describe different misconduct. When the question emphasizes excessive customer-account turnover and commissions, choose churning; when it emphasizes an impending customer order, distinguish front-running.

Question 10: New issue communications

A representative tells a prospective investor that a new security cannot lose value because the issuer is well known. Which principle is the best response?

Answer: The statement is misleading. Reputation does not eliminate market, credit, liquidity, or other investment risks, and no securities investment should be represented as risk-free without a valid basis. A representative must communicate fairly and avoid material misstatements or omissions. A known issuer can default, a market price can fall, and an investor may be unable to sell at a desired time.

Question 11: Regulatory roles

Which regulator is the primary federal agency responsible for administering and enforcing federal securities laws and overseeing securities markets?

1. Securities and Exchange Commission (SEC)
2. Federal Deposit Insurance Corporation (FDIC)
3. Department of Labor (DOL)
4. Office of the Comptroller of the Currency (OCC)

Correct answer: A. The SEC administers federal securities laws and oversees important parts of securities markets and market participants. The FDIC insures eligible bank deposits and supervises certain institutions. The DOL administers federal labor and employee-benefit laws. The OCC charters and supervises national banks. FINRA is a self-regulatory organization for broker-dealers, operating under SEC oversight; it is not a federal cabinet agency.

Question 12: Customer protection and SIPC

A brokerage firm fails while holding customer securities. Which statement about Securities Investor Protection Corporation (SIPC) protection is most accurate?

Answer: SIPC may help return missing customer cash and securities in a member-firm liquidation, subject to statutory limits and eligibility. It does not insure investment value, guarantee a profit, or protect against a market decline. The distinction is custody failure versus investment loss. If a security falls in price while properly held in an account, SIPC does not reimburse the decline merely because the customer lost money.

Question 13: Settlement timing

A customer sells listed shares on Thursday. There is no market holiday on Friday. Under the standard U.S. T+1 settlement cycle, when does the trade generally settle?

Answer: Friday. T+1 means one business day after trade date. It does not mean one calendar day in all cases: a trade late in the week or before a market holiday must be counted using business days. Settlement is also distinct from execution, which occurred on Thursday when the trade was made.

Question 14: Municipal securities

Which statement best distinguishes a general obligation municipal bond from a revenue bond?

Answer: A general obligation bond is backed by the issuer's taxing power and full faith and credit, subject to legal and issuer-specific limits. A revenue bond is payable from designated revenues, such as tolls or utility charges. The security source matters when evaluating repayment risk. Neither label means that repayment is guaranteed; both remain subject to the issuer's ability and legal obligation to pay.

Question 15: Suitability and customer profile

A customer nearing retirement has a short investment horizon and says the money is needed for a home purchase in one year. A representative recommends an illiquid, speculative investment without discussing the risks. What information is most important to evaluate the recommendation?

Answer: The customer's time horizon, liquidity needs, financial circumstances, investment objectives, and risk tolerance are central. A short horizon and a planned near-term expenditure make liquidity and loss capacity especially relevant. The product's complexity, risk, and holding period must be understood and fairly explained. One fact alone does not mechanically decide every recommendation, but ignoring the stated need for funds is a serious warning.

Question 16: Calculation discipline

A customer buys 40 shares at $15.50 and later sells them at $17.00. Ignoring fees and taxes, what is the total gain?

Work: gain per share = $17.00 - $15.50 = $1.50. Total gain = $1.50 × 40 = $60. Correct answer: $60. The initial cost is $620 and proceeds are $680, which confirms the same result. A frequent distractor is $1.50, which is only the per-share gain, or $60 expressed incorrectly as a loss by subtracting in the wrong order.

How to review this practice set

Do not review only the answer letters. For each miss, write the rule in one sentence and a short reason the selected distractor was wrong. If you missed the bond question, decide whether the error was the inverse price-yield relationship or confusion between coupon and market yield. If you missed the limit-order question, restate the tradeoff: price boundary is known, execution is not. If you missed the suitability scenario, list which customer facts change the product's fit and why.

For calculations, keep a small formula sheet with the variables labeled. Current yield is annual interest divided by current market price. NAV is fund net assets divided by shares outstanding. Option profit accounts for both intrinsic value and premium. Share profit multiplies the per-share change by quantity. Write the units beside the result: dollars per share, dollars total, percent, or number of shares. Unit labels catch many avoidable mistakes.

A practice percentage on this short set should not be converted into an SIE pass prediction. The exam contains a larger, differently sampled set, includes unscored pretest questions, and reports a result using FINRA's equated scale. Instead, use the set as a map of what to revisit. A strong readiness check combines performance across all four areas, ability to explain correct and incorrect choices, and a later fresh mixed set completed under time pressure.

When the same concept is missed twice, return to the underlying explanation before doing another question. Change the surface facts in your own example: move the bond price from par, change a call into a put, or compare a market order with a limit. If you can predict how the result changes and explain why, you have learned a rule rather than memorized a particular answer.

Sources and next steps

FINRA's 2025 content outline supplies the current tested domains and weights. Its exam overview explains the SIE's scored and unscored question count, format, and passing result. The companion market-structure and product pages teach the concepts tested in several of these questions.