SIE Exam: Investment Products
by FlashQuest
30 SIE Exam flashcards on investment products: stocks, bonds, funds, options, annuities and their risks. Cards define common and preferred stock, par value, call and put options, municipal, corporate, zero-coupon and convertible bonds, Treasury terms, current yield and yield to maturity. Fund cards cover mutual funds, ETFs, open-end and closed-end funds, money market funds, NAV and the 12b-1 fee, along with REITs and variable annuities. Risk cards cover interest rate, credit, systematic, unsystematic, inflation and liquidity risk. A companion deck covers capital markets. Checked against FINRA, SEC rule text, the U.S. Code and other official sources; each card names its sources. Written with AI help. Study aid only, not legal or investment advice.
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Made by FlashQuest. Last updated October 2026. Drafted with AI help.
- What does common stock represent?
- Ownership, usually with a vote
- Common stock is equity ownership in a corporation. Holders typically vote to elect the board of directors and have a residual claim on assets and income, but dividends are not guaranteed. Source: Cornell LII, FINRA.
- What is a bond's par value?
- The face amount repaid at maturity
- Par value is a bond's face value: the amount the issuer repays at maturity and the base for the coupon. Many bonds use $1,000 par, but not all. Source: FINRA.
- What is a mutual fund?
- A pooled, professionally run fund
- A mutual fund pools money from many investors to buy a portfolio of securities chosen by a professional manager. Investors buy and redeem shares at the net asset value computed once a day. Source: FINRA.
- What does a call option give its holder?
- The right to buy at the strike
- A call option gives the holder the right, not the obligation, to buy the underlying asset at the strike price. The seller (writer) takes on the obligation to sell if assigned. Source: FINRA.
- What does a put option give its holder?
- The right to sell at the strike
- A put option gives the holder the right, not the obligation, to sell the underlying stock at the strike price. The writer takes on the obligation to buy if assigned. Source: FINRA.
- How does preferred stock differ from common stock?
- Its dividends come before common
- Preferred stock has priority over common stock for dividends and, typically, in a liquidation. The dividend is usually stated as a fixed amount or rate, but it is not a guaranteed debt payment. Source: Cornell LII.
- What is a municipal bond?
- Debt of a state or local government
- Municipal bonds are issued by states, cities and other local governments, generally backed by taxes or by revenue from a project. Interest is often exempt from federal income tax. Source: FINRA.
- What is an ETF?
- A pooled fund that trades like stock
- An exchange-traded fund holds a basket of assets, often stocks or bonds. Unlike a mutual fund, its shares trade on an exchange throughout the day at changing market prices. Source: FINRA.
- What is interest rate risk?
- Bond prices fall when rates rise
- When market interest rates rise, existing bond prices tend to fall, and when rates fall, prices tend to rise. Longer-duration bonds are more sensitive. Source: FINRA.
- What is credit (default) risk?
- The issuer may not pay as promised
- Credit risk is the risk that a bond issuer fails to make interest or principal payments on time. Higher-risk, lower-rated bonds pay higher yields to compensate. Source: FINRA.
- What is a mutual fund's 12b-1 fee?
- Yearly fee for marketing and service
- A 12b-1 fee is paid out of fund assets each year for distribution (marketing) and shareholder service. FINRA rules cap the asset-based sales charge at 0.75% and the service fee at 0.25% of average annual net assets. Source: FINRA.
- What is a REIT?
- A company owning income property
- A real estate investment trust invests in income-producing real estate or real estate loans. Shareholders receive dividends, and a REIT must meet tax-law tests to avoid corporate tax on what it pays out. Source: Cornell LII, U.S. Code / eCFR.
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What is dollar-cost averaging?
Investing set amounts on a schedule
With dollar-cost averaging, you invest equal amounts at regular intervals regardless of market conditions, such as each paycheck into a 401(k). It does not guarantee a profit or protect against loss. Source: FINRA.
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What term does a U.S. Treasury bond have?
20 or 30 years
TreasuryDirect sells Treasury bonds with a term of either 20 or 30 years. They pay a fixed rate every six months. Treasury bills are short-term and notes run 2 to 10 years. Source: TreasuryDirect.
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What is yield to maturity (YTM)?
The return if held to maturity
Yield to maturity is the annual return a bond earns if you buy at today's price and hold it until it matures, with every payment made as promised. It includes coupons and any gain or loss versus par. Source: FINRA.
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What is a corporate bond?
Debt a company issues to raise money
A corporate bond is a debt security issued by a corporation to raise money for things like capital spending, operations and acquisitions. Bondholders are lenders, not owners. Source: FINRA.
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What is a zero-coupon bond?
Sold at a discount; no interest paid
A zero-coupon bond pays no periodic interest. You buy it at a discount from face value and receive the full face amount at maturity. Source: FINRA.
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What is a convertible bond?
A bond that can turn into stock
A convertible bond lets the holder convert it into shares of the same issuer's common stock at a preset price or ratio. Source: FINRA.
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How do you find a bond's current yield?
Annual interest ÷ current price
Current yield is the bond's annual coupon interest divided by its current market price. If the price rises, the current yield falls. Source: FINRA.
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What does a money market fund invest in?
Short-term, highly liquid debt
Money market funds invest in short-term, highly liquid debt such as Treasury bills and commercial paper. They are not bank deposits and are not FDIC-insured. Source: FINRA.
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What is an open-end fund?
A fund that sells and redeems shares
An open-end fund (a mutual fund) continuously issues new shares and redeems shares from investors at the next computed net asset value. The Investment Company Act defines it by its redeemable securities. Source: U.S. Code / eCFR.
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What is a closed-end fund?
Fixed shares, traded on an exchange
Most closed-end funds sell a fixed number of shares in an IPO, which then trade on an exchange. The market price can be above or below the net asset value. Source: FINRA.
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How is a mutual fund's NAV per share found?
(Assets − liabilities) ÷ shares
Net asset value per share is the fund's total assets minus its liabilities, divided by the shares outstanding. Mutual funds compute it once a day after the markets close. Source: FINRA.
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What is systematic risk?
Market risk you can't diversify away
Systematic (market) risk affects the whole economy or market, so spreading money across more stocks does not remove it. Asset allocation can help manage it, but it cannot be eliminated. Source: FINRA.
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What is unsystematic risk?
Company risk diversification can cut
Unsystematic risk is specific to a company or industry, such as a failed product. Holding many different investments reduces it. Source: FINRA.
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What is inflation (purchasing power) risk?
Returns may not keep up with prices
Inflation risk is the chance that an investment, such as a fixed-rate bond or a CD, earns less than the rise in the cost of living, so its real value falls. Source: FINRA.
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What is liquidity risk?
You can't sell fast at a fair price
Liquidity risk is the chance you cannot sell quickly without accepting a lower price, or cannot sell at all. Thinly traded securities often have wide bid-ask spreads. Source: FINRA.
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What is a variable annuity?
Insurance contract tied to markets
A variable annuity is an insurance contract whose value moves with the investment options (subaccounts) chosen. It is regulated by state insurance regulators and, as a security, by the SEC and FINRA. Source: FINRA.
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What happens in a forward stock split?
More shares, lower price per share
In a forward split, such as 2-for-1, each share becomes more shares and the price per share drops proportionally. The total value of an investor's position does not change because of the split. Source: FINRA.
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What is a dividend?
Profits paid out to shareholders
When profitable, a company can distribute some earnings to shareholders as a dividend, in cash or reinvested in more shares. Dividends are declared by the board and are not guaranteed. Source: FINRA.
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