FPQP - Module 1
D
What credit protection legislation established the annual percentage rate (APR) as a way to standardize percentage rates for comparison? A) Consumer Credit Reporting Reform Act (an update of the Fair Credit Reporting Act) B) Equal Credit Opportunity Act C) Fair Credit Billing Act D) Consumer Credit Protection (Truth in Lending) Act
A
What effect does an assumption, regarding the rate of return, have on achieving a goal? A) An assumption of a high rate of return may result in fewer dollars being invested to achieve a particular goal. B) An assumption of a high rate of return will allow greater flexibility in achieving a particular goal. C) An assumption of a low rate of return may result in needing fewer years to achieve a particular goal. D) An assumption of a low rate of return will make it possible to achieve a particular goal.
Medicare is only for those in recovery and getting better. Medicaid is only for those who are impoverished
What is the difference between using Medicare and Medicaid for LTC?
Term- temporary Whole- savings, pass $ down Universal- flexible Variable- the insured controls investments
Types of Life Insurance Term Whole Variable Life Universal Life Variable Universal
Applied above and beyond HO or PAP, given in $1 Million increments
Umbrella Policy
1) Unable to perform own job 2) Unable to perform a qualified job 3) Unable to perform any job
What are the definitions of disability, from the least restrictive to the most?
D
What is the maximum amount of group term life insurance coverage an employer can provide on the life of an employee without income tax consequences to the employee? A) $100,000 B) $25,000 C) $70,000 D) $50,000
B
When examinating retirement plan issues, which are the least likely to be considered? A) Qualifications and income phaseout limitations for deducting contributions to individual retirement accounts (IRAs) B) Debt ratios C) Legal limitations of tax-qualified investing D) General investment constraints
B
When helping clients identify goals, financial planners should practice active listening skills by engaging in all of these except a. summarizing what the planner has heard b. offering suggestions for goals c. restating the clients goals d. paraphrasing what the clients have said
Talking and Driving
Which of the following 2 activities of daily living (ADLs) would NOT be listed in a long-term care (LTC) insurance policy? Dressing, mobility, transferring, talking, toilet, eating, bathing, driving,
All 4
Which of the following are payout options offered by fixed annuities? Life income option Period certain option Fixed amount payments Life option with refund
A
Which of the following elements is NOT considered in the process of determining the cost of a life insurance premium? A) Morbidity charges B) Mortality charges C) Expense charges D) Credited interest
A
Which of the following financial goals is written correctly? a. to accumulate $40,000 in seven years for a down payment on a house b. To set aside 10% of income to replace a car c. To invest $5,000 a year for retirement d. To accumulate funds within the next 10 years for a child's college expenses
D
Which of the following is NOT a requirement of a properly stated goal? A) Purpose B) Amount C) Time frame D) Justification
A
Which of the following is NOT one of the basic, or standard, sections of an insurance policy? A) Riders and endorsements B) Declarations C) Exclusions D) Conditions E) Agreements
E
Which of the following is NOT one of the primary factors in determining the cost of automobile insurance in any given state? A) Age and gender of driver B) Use of vehicle C) Driver's Record D) Type of vehicle E) Gas mileage of vehicle
B
Which of the following is NOT one of the rules of risk management? A) Don't risk more than you can afford to lose B) The law of large numbers C) Don't risk a lot for a little D) Consider the odds
D
Which of the following is a well-written goal? A) To accumulate $10,000 for a new automobile B) To accumulate sufficient money for a down payment on a house in five years C) To make money in the stock market D) To accumulate $500,000, by starting to save today, for retirement in 20 years
B
Which of the following is something a financial planner would want to know when creating a financial plan? I- Insurance needs II- Retirement income objectives III- Acceptable investment strategies IV- Liquid assets available for emergencies a. I, II, and III b. I, II, III, and IV c. I and II d. III and IV
B
Which of the following is the recommended minimum number of months' expenses that a working couple's emergency fund should cover? A) One month B) Six months C) Three months D) Nine months
D
Which of the following lists of the major asset components of net worth is CORRECT? A) Home equity, investments, and jewelry B) Personal property, travel expenses, and retirement benefits C) Retirement benefits, home equity, and jewelry D) Home equity, personal property, and retirement benefits
A
Personal Financial Planning a. is a collaborative process b. is primarily needed by wealthy individuals c. does not need monitoring if done correctly d. involves only insurance, investment, and retirement planning
1B, 2C, 3E, 4A, 5D
1) Consumer Credit Reporting Reform Act (an update of the Fair Credit Reporting Act) 2) Equal Credit Opportunity Act 3) Fair Credit Billing Act 4) Consumer Credit Protection (Truth in Lending) Act 5) Fair Debt Collection Practices Act A) Established APR B) Regulates credit reports C) Prohibits discrimination of lending credit D) Provides guidelines for appropriate debt collection E) How to correct account billing errors on credit
Risk Avoidance, Risk Reduction, Risk Retention, Risk Transfer
4 types of Risk Management Techniques
Character, Capital, Capacity, Collateral, Conditions
5 Qualifications for Credit
B
All other relevant variables being equal, which of the following statements is CORRECT? A) The present value of an ordinary annuity will be greater than the present value of an annuity due. B) The future value of an annuity due will be greater than the future value of an ordinary annuity. C) As the number of compounding periods within a set time (such as five years) increases, the future value of an annuity due decreases. D) The lesser the compound rate, the larger the future value.
1) Emergency Fund 2) Level of Debt 3) Level of Savings 4) Diversification of Assets 5) Planning for Retirement 6) Tax Issues
Analyze 6 things to assess current financial position
C
Asset categories that are appropriate for the client are determined in which one of the following steps in the financial planning process? a. Understanding the clients personal and financial circumstances b. Analyzing the clients current course of action and potential alternate course of action c. Developing the financial planning recommendations d. Implementing the financial planning recommendations
D
Assets listed on a statement of financial position are typically divided into what three categories: A) Cash/cash equivalents, financial assets, and use assets B) Savings and checking accounts, stocks and bonds, and use assets C) Cash/cash equivalents, invested assets, and personal property D) Cash/cash equivalents, invested assets, and use assets
C
Back End Ratio recommendation is ______ % of gross A) 10% B) 28% C) 36% D) 20%
A
Chapter 7 (bankruptcy (liquidation) calls for the immediate liquidation of available assets to pay down any outstanding debt as much as possible and then cancels the remaining debt outstanding. However, it does not cancel which of these? A) Government guaranteed student loans B) Credit card debt C) Medical bills D) Debt secured using a personal note (private debt)
Contributory- if you are at all at fault, then you get nothing Comparative- the faults can be split and damages are split respectively
Contributory vs Comparative Negligence
A- the dwelling B- other structures C- Property inside the structures D- Displacement costs E- Personal Liability to residents of the household F- Medical Payments to 3rd parties
Coverage in Homeowners Policy A B C D E F
A- Liability (about $300-500K recommended) B- Medical Costs C- Uninsured/ Underinsured motorists D- Damage to your own vehicle E- Duties after an incident occurs F- General Provisions
Coverage in a PAP A B C D E F
Immediate: payments start now Deferred: payments start later, tax-deferred growth Fixed: Annuitant it guaranteed a fixed amount Variable: Account value varies based on annuitant's investments
Describe the differences between the following types of annuities: Immediate Annuity Deferred Annuity Fixed Annuity Variable Annuity
C
During which of the following steps in the financial planning process is the current yield from already-invested assets first identified? a. Developing the financial planning recommendations b. Implementing the financial planning recommendations c. Understanding the client's personal and financial circumstances d. Analyzing the client's current course of action and potential alternate course(s) of action
300-850
FICO score can be between
HSA: HDHP, can change during the year, unused $ rolls over, pretax contr FSA: set for the year, Use it or lose it, pretax contr
HSA vs FSA
A
How does an assumption on the future rate of inflation impact the achievement of a specific goal? A) A rate of inflation assumption that is too low may mean that more years will be needed to achieve the goal. B) A rate of inflation assumption that is high may allow greater investment flexibility in achieving the goal. C) A rate of inflation assumption that is too low may mean that fewer years will be needed to achieve the goal. D) A rate of inflation assumption that is high may mean that fewer dollars need to be allocated toward the goal.
At least 80% of the replacement costs of your home
How much homeowners insurance should you have?
B
How much would a person need to invest at the end of each year in order to accumulate $100,000 in 15 years, assuming the investment could earn an annualized rate of 9%? A) $3,682 B) $3,406 C) $3,124 D) $3,945
D
Planners generally recommend what maximum percentage of gross income be spent on rent? A) 30%-50% B) 15%-25% C) 25%-50% D) 20%-30%
Income-Based: Just replace the lost potential income of the person Needs-Based: provide for the needs of the family for the rest of their lives
Income Based vs. Needs Based Method of LI calculation
B
Kiara has accumulated $10,000 in a savings account over the last few years and has earmarked that money as a down payment on a luxury boat. Her central air conditioner breaks and requires $5,000 in repairs. Kiara is reluctant to spend the money in her savings account to make the repairs because she wants to use that money for the boat down payment. Instead, she puts the $5,000 repair charge on her credit card at an annual interest rate of 23%. This is an example of which of these behaviors? a. Confirmation bias b. Mental accounting c. Self- control bias d. Conservation bias
C
Liability risk is A) one form of speculative risk. B) avoidable with good behavior. C) one form of pure risk. D) only a concern for wealthy individuals.
C
Limited resources is the main reason for A) analyzing goals. B) identifying goals. C) prioritizing goals. D) quantifying goals.
B
Marcus is meeting with his clients, Ren and Amari, to define their goals. Ren tells Marcus one of his goals is purchasing a hunting camp in two years, and Amari rolls her eyes. What is the best action for Marcus to take next? A) Ask Ren and Amari if they have any other goals. B) Ask Amari if the camp is a mutually agreed-upon goal. C) Recommend how Ren and Amari can pay for the camp. D) Get more details regarding the purchase of the camp.
Moral Hazard- someone is dishonest Morale Hazard- someone is more reckless because they have insurance, "Insurance will cover it"
Moral Hazard vs. Morale Hazard
B
Potential problems that might interfere with clients achieving their objectives are identified in which of the following steps in the financial planning process? a. Implementing the financial planning recommendations b. Analyzing the client's current course of action and potential alternate course(s) of action c. Understanding the client's personal and financial circumstances d. Developing the financial planning recommendations
A
Regina wants to accumulate $20,000 in three years to start her own business. She wants to be conservative and only count on earning a 1.5% return. What amount would Regina have to set aside monthly in order to reach her goal? A) $543.50 B) $533.50 C) $522.45 D) $560.32
D
Roberta has $5,000 invested in a mutual fund and plans on adding $500 at the end of every quarter for the next five years. If she makes all of her quarterly contributions and earns a 7.5% return, what will her investment in the fund be worth in five years? A) $18,665 B) $18,275 C) $19,002 D) $19,248
A
Savings Ratio recommendation is ______ % of gross A) 10% B) 28% C) 36% D) 20%
A
Someone who determines whether an insurance company will cover given risks is A) an underwriter. B) a broker. C) an insurer. D) an agent.
A
The FPQP® Code of Ethics requires compliance with all of these components except A) observance of state statutes. B) self-disclosure of prior allegations or violations. C) adherence to the terms and conditions. D) adherence to the Standards of Professional Conduct.
B
The consumer ratio, also known as the nonmortgage debt-to-income ratio, is considered appropriate when that ratio is A) 35% or lower. B) 20% or lower. C) 30% or lower. D) 25% or lower.
B
The present value of $1,000 ordinary annuity payments that are made once a year for nine years and discounted at an annual rate of 6% is A) $7,210. B) $6,802. C) $6,236. D) $7,555.
C
To still be considered adequate, the highest a front-end debt-to-income ratio should be is A) 20%. B) 36%. C) 28%. D) 15%.
A
To which of the following does the Fair Credit Billing Act pertain? A) Credit cards B) Debit cards C) Mortgage loans D) Auto loans
D
Which of the following statements is CORRECT? A) Coverage for personal property on a homeowners policy is typically the same amount as coverage for the dwelling. B) The concept of indemnity is based on the idea that when one suffers a loss, he should profit from it above being made whole again. C) Insurance contracts are bilateral contracts. D) To avoid a coinsurance penalty under a homeowners policy, insureds must have coverage for at least 80% of their home's replacement cost.
A
Which of the following statements is CORRECT? A) Nonparticipating policies are sold by stock companies only. B) Mutual companies offer participating and nonparticipating policies. C) Stock companies are owned by the policyholders. D) Mutual companies are publicly traded on a stock exchange.
B
Which of the following statements regarding the elimination period of a disability insurance policy is CORRECT? A) The elimination period determines how long coverage lasts. B) All else being equal, the longer the elimination period, the lower the premium. C) The elimination period has no impact on premiums. D) All else being equal, the shorter the elimination period, lower the premium.
A
Which of the seven steps of the financial planning process follows the development of the financial planning recommendations? a. Presenting the financial planning recommendations b. Monitoring progress and updating c. Analyzing the client's current course of action and potential alternate course(s) of action d. Implementing the financial planning recommendations
C
Which of these Financial Paraplanner Qualified Professional℠ Standards of Professional Conduct is matched with its CORRECT definition? A) Integrity—respond to reasonable client inquiries in a timely manner B) Confidentiality—keep client information confidential, disclosing only to family members and other interested parties C) Diligence—respond to reasonable client inquiries in a timely manner D) Competence—comply with all laws and regulations as required and applicable, refraining from actions that bring dishonor to you or your profession
C
Which of these designations or certifications is best suited for an assistant working with a financial planner? A) Chartered Financial Analyst (CFA) B) Master Planner Advanced Studies (MPAS) C) Financial Paraplanner Qualified Professional℠(FPQP)® D) Certified Investment Management Analyst® (CIMA)
C
Which of these helps clients shift their perspectives by considering circumstances, feelings, and thoughts from another perspective? A) Giving advice B) Explaining C) Reframing D) Summarizing
C
Which of these is NOT a correct statement about the requirements of being a Financial Paraplanner Qualified ProfessionalSM designee? A) A Financial Paraplanner Qualified ProfessionalSM designee must maintain objectivity and impartiality, with respect to services rendered and advice given. B) A Financial Paraplanner Qualified ProfessionalSM must provide professional services with integrity, honor, fairness, and dignity, as well as maintain client trust and confidence. C) A Financial Paraplanner Qualified ProfessionalSM designee must engage in 30 hours of continuing education every two years to maintain active status. D) A Financial Paraplanner Qualified ProfessionalSM designee must self-disclose prior allegations or violations.
A
Which of these is a characteristic of the Affordable Care Act (ACA) of 2010? A) There are lifetime limits on group health plan coverage. B) The ACA created government health insurance. C) Only unmarried children may remain on their parents' health insurance plan until age 26. D) There are market exchanges for comparison and choice of plans.
D
Which of these is especially important when discussing estate planning with a client? A) Investment policy statement B) Amount of money in an emergency fund C) Discretionary income D) Titling of assets and property
A
Which of these often occurs when developing financial planning recommendations? A) Consideration of the economic environment and financial resources B) Identification of clients' strengths and weaknesses C) Helping clients understand the differences between needs and wants D) Completion of a financial planning questionnaire to gather information.
B
Which of these statements about life insurance is CORRECT? A) Generally, life insurance policies never pay claims for deaths resulting from suicide. B) Policyholders can generally borrow up to 90% of the cash value of a policy. C) Variable life insurance is temporary life insurance with an investment feature. D) The grace period for most policies is 45 days.
A
Which of these statements about the impact of a FICO score on obtaining credit is CORRECT? A) Generally, the lower one's FICO score, the higher the interest rate for borrowing will be. B) Generally, the higher one's FICO score, the higher the interest rate for borrowing will be. C) FICO scores have little bearing on whether individuals can obtain credit but have a substantial impact on the interest rate that will be charged if they do. D) FICO scores impact whether individuals can obtain credit but have little impact on the interest rate that will be charged.
A
Which of these statements regarding financial planning is CORRECT? A) Data gathering for a financial planning engagement includes both quantitative and qualitative data. B) When clients' circumstances change, the planner should return to the fourth step in the financial planning process, developing the financial planning recommendations. C) The role of the financial planner during the implementation of the financial planning recommendations is to select from the strategies identified. D) Most financial planners are paid by fees only.
B
Which of these statements regarding property insurance coverage is CORRECT? A) A homeowners policy would include covering any liability incurred from conducting a business out of the home. B) Homeowners and personal auto policies cover personal property and liability, not business property and liability. C) A personal auto policy (PAP) usually does not cover car rentals by the insured/owner. D) Under a personal auto policy (PAP), covered family members include all children of the insured/owner, regardless of whether they live with the insured/owner.
D
Which of these would NOT be considered quantitative data? a. Brokerage firm statements b. Life insurance policies c. Assets and liabilities d. Health status
C
Which one of the following is a correctly written financial goal? a. to set aside 10% of income for the purpose of replacing the automobile currently owned b. to accumulate funds within the next 10 years for college expenses for a son c. to accumulate $40,000 in five years for a house down payment d. to invest $5,000 per year for retirement
A
Which one of these is NOT a requirement to become a Financial Paraplanner Qualified Professional designee? A) Bachelor's degree B) Abide by Financial Paraplanner Qualified Professional Standards of Professional Conduct C) Sign and attest to abiding by the Financial Paraplanner Qualified Professional Code of Ethics D) Self-disclose any prior allegations or violations
