SIE — Markets, Products & Investment Risks flashcards
10 of 70 cards free to study here · 9 topics · the whole deck is built into Willys
Primary and secondary markets, stocks, bonds and yields, munis and Treasuries, funds and annuities, option basics, investment risks and the economic factors the SIE tests.
Learn deck · part of FINRA SIE and Series 7 · written against: FINRA content outlines; T+1 settlement (May 2024); SECURE 2.0 RMD ages. Updated 2026-10-10.
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A company sells newly issued shares to the public in its IPO through an underwriter. Which market is this, and who receives the sale proceeds?The primary market — the issuer receives the proceeds (less the underwriting spread).Capital Markets
Watch out: once those shares later trade between investors, that is the secondary market and the company receives nothing. -
How does an exchange differ structurally from the over-the-counter (OTC) market?An exchange is a centralized marketplace with listing standards where buy and sell orders meet; the OTC market is a decentralized network of dealers who negotiate trades electronically or by phone, often in securities that are not exchange-listed.Capital Markets
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In a corporate liquidation, who is paid last?Common stockholders — they have only a residual claim after secured creditors, unsecured creditors (debenture holders), subordinated creditors and preferred stockholders have been paid.Equity Securities
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Market interest rates rise. What happens to the prices of existing fixed-rate bonds?They fall. Bond prices and yields move inversely: an existing bond's fixed coupon is less attractive than new issues, so its price drops until its yield matches the market.Debt Securities
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What backs a municipal general obligation (GO) bond?The issuer's full faith and credit and taxing power — for local governments mainly property taxes, for states mainly income and sales taxes. GO issues often need voter approval.Municipal Securities
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How are Treasury bills issued and how does the investor earn a return?T-bills mature in one year or less and are sold at a discount (or at par) with no coupon; the investor's return is the difference between the purchase price and face value at maturity.Government and Money Market
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How does an open-end mutual fund differ from a closed-end fund in how investors buy and sell shares?An open-end fund continuously issues new shares and redeems them at NAV; a closed-end fund raises its money in a one-time IPO of a set number of shares, which investors then usually buy and sell on an exchange at market prices that can be above or below NAV.Packaged Products
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What right does the buyer of a call option have, and what obligation does the seller take on?The call buyer has the right to buy 100 shares at the strike price until expiration; the call writer is obligated to sell at the strike if assigned.Options
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What is the difference between systematic and unsystematic risk?Systematic (market) risk affects the whole market and cannot be diversified away; unsystematic risk is specific to a company or industry and can be reduced by diversification.Investment Risks
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Which monetary policy tool does the Federal Reserve use most often, and how does buying Treasuries affect the money supply?Open market operations run by the FOMC.Economic Factors
When the Fed buys securities it adds reserves to the banking system, expanding the money supply and pushing rates down; selling does the reverse.
Watch out: in today's ample-reserves system the Fed steers rates mainly through administered rates such as interest on reserve balances and uses open market operations to keep reserves ample, but open market operations remain the expected SIE answer.
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About these cards
Review status: Second-reader reviewed, with corrections applied.
Checked against:
- Checked against the FINRA Securities Industry Essentials (SIE) Examination Content Outline (© 2025 FINRA; topic list only; no text copied).
- Checked against SEC Investor.gov glossaries and TreasuryDirect product descriptions (U.S. government, public domain) for Treasury, TIPS and fund facts.
- Checked against MSRB EMMA education pages for municipal securities and 529 plan facts (reference only).
- Checked against the U.S. Code (12 U.S.C. 1455, 1719, 1721) and FHFA and Ginnie Mae pages for agency and GSE facts (U.S. government, public domain).
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