SeriesPrepKit

SIE: Understanding Products and Their Risks

The biggest SIE section at 44% (33 questions): equity, debt, options, packaged products, 529s, DPPs, REITs, hedge funds and ETPs, plus the risks that come with each..

Updated 2026-09-23 · 1 source · By the SeriesPrepKit team
Exam weight
44%
Scored questions
33
Exam
SIE
Outline
FINRA 2025

Where it sits in the outline

Official outline section: Understanding Products and Their Risks, 44% of the SIE (33 of 75 scored questions), per FINRA - SIE Content Outline (2025).

The biggest SIE section at 44% (33 questions): equity, debt, options, packaged products, 529s, DPPs, REITs, hedge funds and ETPs, plus the risks that come with each.

Key concepts

Equity. Common stock carries voting rights and residual claims; preferred stock has a fixed dividend and priority over common in liquidation. Rights are short-term and let existing holders buy new shares below market; warrants are long-term and usually attached to bonds or preferred.

Debt. When market rates rise, existing bond prices fall. Treasuries carry no credit risk but do carry interest-rate risk. GO munis are backed by taxing power; revenue bonds by the project’s income.

Packaged products. Open-end funds issue and redeem shares at NAV (plus any sales charge on purchase). Closed-end funds trade on exchanges at a premium or discount to NAV. Breakpoints reduce sales charges on larger purchases; a letter of intent gives the breakpoint over 13 months.

Risk types. Systematic (market) risk cannot be diversified away; non-systematic (issuer or sector) risk can. Inflation risk hits fixed payments; reinvestment risk hits callable bonds and falling rates; liquidity risk hits DPPs and non-traded REITs.

Worked example

Bond price and yield

A 4% corporate bond pays $40 a year per $1,000 of par. Market rates rise and the bond now trades at $920. Current yield = 40 / 920 = 4.35%. The bond is at a discount, so yield to maturity is higher still, because the holder also gains $80 as the bond moves to par at maturity.

Common traps

  • ETNs are unsecured debt of the issuer; they carry the issuer’s credit risk, unlike most ETFs.
  • Breakpoints: recommending a purchase just below a breakpoint level to earn a higher sales charge is a violation (breakpoint sales).

Practice questions on this topic

SIE practice questions: Understanding Products and Their Risks

A corporation plans to issue additional common shares. Existing shareholders are given the opportunity to buy new shares in proportion to their current holdings before the shares are offered to the public. This describes:

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Frequently asked questions

How much of the SIE is understanding products and their risks?

Official outline section: Understanding Products and Their Risks, 44% of the SIE (33 of 75 scored questions), per FINRA - SIE Content Outline (2025).

Sources

  1. FINRA - SIE Content Outline (2025) (accessed 2026-09-23)
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