SIE Exam Practice Test

SIE Funds, Options & Investment Risk Practice Questions

Funds, Options & Investment Risk makes up 11 of every 50 questions on a Tigertest SIE practice test. Here are 10 of the 44 questions on it, each with the answer and the reason.

Updated 2026-11-10 by the Tigertest team. Based on FINRA's Securities Industry Essentials content outline. Original questions; 50 per test, weighted like the real 75-question exam, 70% to pass.

1. 1. Shares of an open-end mutual fund are redeemed at:

   • A.The price of the last trade
   • B.The next computed NAV
   • C.The public offering price
   • D.The day's closing market bid

   Answer: B. Open-end funds redeem shares at the next net asset value computed after the order is received, less any redemption charge. This is forward pricing.

2. 2. How are shares of a closed-end fund bought after the IPO?

   • A.Only from the fund's sponsor
   • B.By redemption request
   • C.Directly from the fund at NAV
   • D.On an exchange

   Answer: D. Closed-end funds issue a fixed number of shares and then trade on an exchange. Their price can be above or below NAV.

3. 3. A mutual fund's public offering price equals:

   • A.NAV plus any sales charge
   • B.The last exchange trade
   • C.NAV minus any sales charge
   • D.NAV with no adjustment

   Answer: A. The POP is the net asset value plus the maximum front-end sales charge. For a no-load fund the POP equals NAV.

4. 4. Which share class usually has a front-end sales charge?

   • A.Class C
   • B.No-load class
   • C.Class A
   • D.Class B

   Answer: C. Class A shares charge a sales load at purchase and qualify for breakpoints. Class B has a back-end charge and Class C a level charge.

5. 5. Breakpoints on a mutual fund give investors:

   • A.Free exchanges between fund families
   • B.A refund of 12b-1 fees
   • C.Lower sales charges as amounts rise
   • D.Higher returns on larger purchases

   Answer: C. Breakpoints reduce the sales charge percentage as the dollar amount invested rises. Recommending a purchase just below a breakpoint is breakpoint selling, a violation.

6. 6. A letter of intent lets a mutual fund investor receive a breakpoint if purchases are completed within:

   • A.13 months
   • B.12 months
   • C.24 months
   • D.6 months

   Answer: A. A letter of intent gives the reduced sales charge now if the investor reaches the stated amount within 13 months. It may be backdated up to 90 days.

7. 7. What is a 12b-1 fee used for?

   • A.Taxes owed by the fund
   • B.Portfolio manager salaries
   • C.Brokerage commissions on fund trades
   • D.Marketing and distribution costs

   Answer: D. A 12b-1 fee is taken from fund assets each year to pay for distribution and marketing. Management fees pay the investment adviser.

8. 8. Which feature describes a unit investment trust?

   • A.A board that changes holdings daily
   • B.A fixed, unmanaged portfolio
   • C.Shares traded only on exchanges
   • D.An actively managed portfolio

   Answer: B. A UIT buys a fixed set of securities and holds them; there is no investment adviser trading the portfolio. Units are redeemable.

9. 9. An exchange-traded fund differs from a mutual fund because it:

   • A.Cannot be sold short
   • B.Trades all day on an exchange
   • C.Is priced only once a day at NAV
   • D.Must be bought from the sponsor

   Answer: B. ETF shares trade on an exchange at market prices during the day and can be bought on margin or sold short. Mutual funds are priced once a day.

10. 10. Leveraged and inverse ETFs are generally designed for:

    • A.Guaranteed income
    • B.Tax-free growth
    • C.Long-term retirement savings
    • D.Short holding periods

    Answer: D. These funds reset their exposure daily, so over longer periods returns can differ sharply from the stated multiple. FINRA has warned they are usually unsuitable to buy and hold.