SIE Exam Question 23: Answer and Explanation

Question: 23

Which of the following scenarios would be considered an unsuitable recommendation?

• A. Recommending a CD purchase to an elderly risk-averse investor
• B. Recommending a common stock to a 30-year-old with a growth objective
• C. Recommending a speculative stock to a recently retired investor who is risk averse
• D. Recommending a growth stock mutual fund to a 30-year-old investor with a growth objective

Correct Answer: C

Explanation:

Recommending a speculative stock to a recently retired investor who is risk averse would be considered an unsuitable recommendation. Speculative, aggressive, or growth stocks would not be a good fit for older or retired investors that are risk averse. Older investors tend to be more conservative and are looking for stable income. Both common stocks and growth stock mutual funds are perfectly within a younger investor's goal for growth.