Working through SIE practice questions is the single highest-yield thing you can do to prepare for this exam — not because practice is a study-tip cliché, but because the SIE is a recognition test. It shows you a paraphrased rule or a disguised definition and asks whether you recognize it under pressure. Reading builds familiarity; only questions build recognition. Below are eight original exam-style questions we wrote across the four SIE content areas, each with the answer and an explanation of why the wrong choices are wrong — which is where the real learning lives.
How to use these SIE practice questions
Attempt each question before reading the answer, commit to a letter, and — this matters — read the explanation even when you got it right. The exam format is 80 questions (75 scored plus 5 unscored pretest) in 1 hour 45 minutes with a passing score of 70, so you have roughly 79 seconds per question. Try to answer each of these in about a minute. The official content outline is on FINRA's SIE page.
Knowledge of capital markets
Question 1. A technology company sells 5 million newly issued shares to the public through an underwriting syndicate. Two weeks later, an investor who bought at the offering sells 500 shares on an exchange. Which statement is TRUE?
- A. Both transactions occurred in the primary market
- B. The first transaction occurred in the primary market; the second in the secondary market
- C. Both transactions occurred in the secondary market
- D. The first transaction occurred in the secondary market; the second in the primary market
Answer: B. New shares sold by the issuer for the issuer's benefit define the primary market; investor-to-investor trading on an exchange is the secondary market. A and C fail because they collapse the two markets into one, and D reverses the definitions — a classic trap for candidates who memorized the labels without anchoring them to who receives the proceeds.
Question 2. The Federal Reserve wants to slow an overheating economy. Which action is it MOST likely to take?
- A. Buy Treasury securities in the open market
- B. Lower the discount rate
- C. Sell Treasury securities in the open market
- D. Lower reserve requirements for member banks
Answer: C. Selling Treasuries drains money from the banking system, tightening credit and cooling the economy. A, B, and D are all easing actions — they inject liquidity or make lending cheaper, which stimulates rather than slows. The exam loves this question shape: three answers pointing one direction and the correct answer pointing the other.
Understanding products and their risks
Question 3. A corporate bond is trading at a premium. Which of the following lists the bond's yields from HIGHEST to LOWEST?
- A. Nominal yield, current yield, yield to maturity
- B. Yield to maturity, current yield, nominal yield
- C. Current yield, nominal yield, yield to maturity
- D. Yield to maturity, nominal yield, current yield
Answer: A. When price rises above par, every yield that accounts for the price falls below the coupon: the nominal (coupon) yield stays fixed and highest, current yield falls next, and yield to maturity is lowest because it also amortizes the premium you lose at maturity. B is the order for a discount bond — the mirror image and the most-chosen wrong answer. C and D scramble the relationship entirely.
Question 4. An investor buys 1 XYZ Oct 50 call at 3. What is the investor's maximum potential loss?
- A. $300
- B. $5,000
- C. $4,700
- D. Unlimited
Answer: A. A long option can never lose more than the premium paid: 3 points on a standard 100-share contract is $300. B confuses the strike value with risk, C is the breakeven math misapplied as a loss figure, and D describes the risk of an uncovered call writer, not a buyer. If you anchor on "buyers risk the premium, uncovered sellers risk the position," this entire question family becomes automatic.
Question 5. Which risk remains even in a portfolio diversified across many stocks in different industries?
- A. Business risk
- B. Market risk
- C. Default risk
- D. Regulatory risk affecting a single industry
Answer: B. Market (systematic) risk is the movement of the whole market and cannot be diversified away — when the market falls, a diversified stock portfolio falls with it. A, C, and D are all nonsystematic risks tied to individual companies or industries, which is precisely what diversification exists to reduce.
Trading, customer accounts, and prohibited activities
Question 6. A customer enters an order to sell 200 shares of ABC at $45 or better. This is a:
- A. Market order
- B. Stop order
- C. Limit order
- D. Stop-limit order
Answer: C. "At a stated price or better" is the definition of a limit order. A market order (A) executes immediately at the best available price with no price condition. A stop order (B) lies dormant until a trigger price trades, then becomes a market order — it protects against adverse moves rather than guaranteeing a price. D layers a limit on a stop trigger, which this order never mentions.
Question 7. A registered representative learns that her firm is about to publish a research upgrade on DEF stock and buys DEF for her own account minutes before the report is released. This is BEST described as:
- A. Front-running
- B. Churning
- C. Marking the close
- D. Freeriding
Answer: A. Trading ahead of material firm information or pending orders to capture the price move is front-running. Churning (B) is excessive trading in a customer's account to generate commissions; marking the close (C) is manipulating a security's closing price with late-session trades; freeriding (D) is buying and selling a security without ever paying for it in a cash account. All four are prohibited — the exam tests whether you can tell the violations apart, not just condemn them.
Overview of the regulatory framework
Question 8. A customer holds $600,000 in securities and $150,000 in cash at a brokerage firm that fails. Under SIPC, the customer is covered for:
- A. $750,000 in total, because the limit is $500,000 with no more than $250,000 in cash
- B. $500,000 of securities and all $150,000 of cash
- C. $350,000 of securities and all $150,000 of cash
- D. Nothing, because SIPC only covers bank deposits
Answer: C. SIPC coverage is $500,000 per separate customer, of which no more than $250,000 may be cash. The $150,000 cash is fully covered, leaving $350,000 of the limit for securities; the remaining $250,000 of securities becomes a general creditor claim. A misreads the limit as a ceiling you can exceed, B ignores that cash counts inside the $500,000, and D confuses SIPC with FDIC — the single most common confusion in this content area.
Beyond these SIE practice questions: Learn, Apply, Master
Eight questions tell you where you stand; they do not build a passing score. The progression that does is the one we build every course around. Learn: first exposure to a topic with the mechanism explained — why premiums push yields down, why buyers risk only the premium. Apply: drill that single topic in isolation until recognition is fast. Master: mixed, timed, full-length practice finals where old topics resurface without warning — because that is what the real exam is. Candidates who skip straight from reading to full exams plateau; candidates who drill topic-by-topic first climb through the plateau. For an honest look at the difficulty you are training against, read how hard the SIE exam is.
If these eight felt comfortable, you are ready to scale up the reps. Our SIE study guide contains the full question bank — chapter quizzes, mini exams, and full-length practice finals built on the Learn/Apply/Master ladder — and you can grab it along with everything else in the shop. Prefer the material taught live? Join the next SIE bootcamp and bring your hardest questions with you.
