SIE (Securities Industry Essentials) Practice Exam

What are 'Blue Chip' stocks associated with?

1. High-risk, high-return investments

2. Stocks under investigation for fraudulent activity

3. Stocks that consistently produce income and modest growth over long periods of time

4. Newly listed companies on the stock exchange

The correct answer is: Stocks that consistently produce income and modest growth over long periods of time

Blue Chip stocks are traditionally defined as the stocks of large, well-established companies with a strong financial track record. These companies are typically industry leaders with a proven history of stable earnings and consistent dividend payments. This is why the correct answer is C. Option A is incorrect because 'Blue Chip' stocks are not known for being high-risk investments. On the contrary, they are seen as more stable and less risky compared to other types of stocks. Option B is also incorrect because 'Blue Chip' stocks are associated with reputable and established companies, and not those under investigation for fraudulent activity. Option D is incorrect because 'Blue Chip' stocks are not necessarily tied to newly listed companies. In fact, they are often well-established companies that have been trading on the stock exchange for many years.