SIE (Securities Industry Essentials) Practice Exam

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If an investor pays an issuer a set amount of money in a lump sum with a guaranteed set sum at a later date, which type of investment are they exercising?

  1. Bond Purchase

  2. Stock Investment

  3. Fully Paid FAC

  4. Mutual Funds

The correct answer is: Fully Paid FAC

Fully Paid FAC usually stands for "Fully Paid-Fixed Annuity Contract". This investment involves an investor paying a lump sum of money to an issuer with the guarantee of receiving a fixed sum at a later date. This differs from the other options because a bond purchase involves purchasing a debt security from an issuer, a stock investment involves buying ownership shares in a company, and mutual funds involve pooling money with other investors to invest in a portfolio of securities. Therefore, the correct type of investment in this scenario is a Fully Paid FAC.

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