BUSI 352- Final Exam
which of the following types of employer plans are exempt from most or all ERISA provisions?
all of the above
the ability of spouses to treat gifts as by each spouse so as to double the use of the gift tax annual exclusion is called which of the following? A. gift splitting B. marital deduction C. unified credit D. joint tenancy
A. gift splitting
Retirees may be sensitive to which of the following uncontrollable factors which may deplete their funds? A. living too long B. an inheritance to leave to their family C. loneliness D. carefree spending
A. living too long
A financial planning professional must do all of the following with the client, except: A. prove to the client why taking more risk is needed B. explain what should be done and why C. discuss the viable alternatives to the client D. explain why present arrangements don't accomplish client's objectives
A. prove to the client why taking more risk is needed
which of the following is true about modifying or revoking a will? A. state laws will sometimes revoke or modify a will based on certain events happening B. defacing a will has no effect on its validity C. an amendment to a will can never result in the will's revocation D. A divorce will always cause the former spouse to not be allowed to take under the will
A. state laws will sometimes revoke or modify a will based on certain events happening
All of the following are the disciplinary actions that the CFP Board may take against a financial advisor who is in violation of the Code of Ethics except: A. Private Censure B. Lawsuit against the advisor in Federal Court C. Public letter of admonition D. Suspension
B. Lawsuit against the advisor in Federal Court
The probate process ensures the following except: A. court scrutiny of the executor's actions B. No contesting of the will by any beneficiaries or potential beneficiaries C. payment of debts, taxes, etc. from the estate D. bequests to beneficiaries according to the terms of the will
B. No contesting of the will by any beneficiaries or potential beneficiaries
Which of the following is NOT an example of financial leverage? A. obtaining a mortgage to purchase a house B. buying 100 shares of stock using cash C. using a "no interest till 2010" offer to buy a TV D. buying 100 shares of a stock on margin
B. buying 100 shares of stock using cash
Which of the following is true regarding a person's standard of living? A. maintaining a person's lifestyle should generally take a minority of a person's resources B. income not allocated to maintain a person's standard of living should be allocated to other financial objectives C. It should be easy to accomplish financial objectives even if almost all a person's income is used to maintain lifestyle D. Every person should spend the same amount of income to maintain lifestyle
B. income not allocated to maintain a person's standard of living should be allocated to other financial objectives
The probate process ensures the following expect: A. court scrutiny of the executor's actions B. no contesting of the will by any beneficiaries of potential beneficiaries C. payment of debts, taxes, etc. from the estate D. bequests to the beneficiaries according to the terms of the will
B. no contesting of the will by any beneficiaries of potential beneficiaries
A person is fully insured for life if he or she has at least _______ quarters of coverage A. 20 B. 30 C. 40 D. 100
C. 40
Which of the following is true regarding inflation? A. advances in technology make everything more affordable B. inflation impacts retirees differently than those who are working C. assumptions about inflation are generally easy to make D. clients do not need to worry about volatility in inflation
B. inflation impacts retirees differently than those who are working
Individuals with only self-employment income can receive credit with social security Social security based on: A. the number of hours worker in a given quarter B. the amount of self-employment income reported in a given quarter C. the amount of tax liability incurred in a given quarter D. all of the above
B. the amount of self-employment income reported in a given quarter
Which of the following is listed on a balance sheet without a specific amount? A. personal effects B. bonus receivable C. contingent liabilities D. remainder interests
C. contingent liabilities
Which of the following statements about chapter 13 bankruptcy are true?A. it is available to debtors who are unemployed B. it allows debtors to discharge all their debts after non-exempt assets are liquidated C. it is the preferred route for debtors with steady income and some non-exempt assets D. none of the above
C. it is the preferred route for debtors with steady income and some non-exempt assets
The Act defines compensation as A. commission only B. fees only C. receipt of any economic benefit D. 12 (b) 1 fees only
C. receipt of any economic benefit
Which of the following pieces of information about a client's employee benefits is needed? A. ERISA documents B. amount the client pays monthly C. summary plan description D. client's description of the benefits E. current value of the benefit if the client retired today
C. summary plan description
the following statements about a person dying without a will are true except: A. it is called dying "Intestate" B. Beneficiaries who are not blood relatives of decedent may be disinherited C. the probate court will divide the estate based on petitions from potential beneficiaries D. the probate court will appoint someone to oversee the estate
C. the probate court will divide the estate based on petitions from potential beneficiaries
Consumers may obtain copies of their credit history from one of the following major reporting agencies EXCEPT: A. experian B. Equifax C. Equitable D. TransUnion
C. Equitable
Which of the following is true regarding financial statements? A. assets and liabilities should be presented in order of liquidity B. business interests can be shown within other investments C. assets should be shown at purchased price D. discounts are not required for receivables
A. assets and liabilities should be presented in order of liquidity
Which of the following should be done if divorce is inevitable A. change beneficiary designations for retirement plans B. maintain joint checking accounts C. do what is needed to make sure one spouse stays in the house D. establish new joint credit cards
A. change beneficiary designations for retirement plans
The Medicare Part that may be contracted out of private insurers is: A. Part A B. Part B C. Part C D. none of the above
C. Part C
Which of the following organizations administers the exam that leads to the CFP certification? A. The American college B. The financial planning association C. The CFP Board of Standards D. The college for financial planning
C. The CFP Board of Standards
A client's formal Financial planning report that summarizes all of the following except: A. strategy - how the client gets where he or she wants B. Turnover - when and how the client will sell certain investments C. Analysis - where the client is now D. Objectives - where the client wants to be
B. Turnover - when and how the client will sell certain investments
When can eligible persons establish an IRA account and claim the appropriate tax deduction? A. at any time B. before the due date of their tax returns without extensions C. before the due date of their tax returns with extensions D. within three months before or after the due date of their tax returns
B. before the due date of their tax returns without extensions
Medicaid is administrated: A. by the Social Security Administration B. by the Department of Health and Human Services C. by individual states D. jointly by the federal government and states
D. jointly by the federal government and states
Andrew established a Roth IRA five years ago. When must he begin taking distributions in order to avoid the required minimum distribution penalty? A. 59 1/2 B. 70 1/2 C. 95 D. never
D. never
Usual financial planning goals include the following except: A. retirement funding B. Current lifestyle C. Career planning D. Estate planning
C. Career Planning
Which of the following is generally NOT one of the basic goals of financial planning? A. children's education B. Parental issues C. Divorce D. estate planning
C. Divorce
The anti-fraud provisions of the Act applies to: A. all investments advisors, even those who are exempt rom registration B. only those who must register with the SEC or the states C. only situations where security transactions take place D. only advisors of pension plans
A. all investments advisors, even those who are exempt rom registration
A nondeductible traditional IRA A. allows prior nondeductible contributions to be distributed tax free B. provides better tax advantages than investing in tax-deffered non-IRA investments C. is created when someone must make an after-tax contribution to a traditional IRA because of being an active participant in an employer plan D. distributes contributions and earnings tax free E. can be established up to the due date of a participant's tax return, including extensions
A. allows prior nondeductible contributions to be distributed tax free
Pam wants to use money from a traditional IRA for a down payment to purchase a first home. How much can she withdraw from her IRA without having to pay the federal early distribution penalty? A. $10,000 B. $12,500 C. $15,000 D. $20,000
A. $10,000
Lenas AGI for 2015 was $60,000. She donated to the Red cross a $75,000 bank CD when it matured during the year. The maximum amount that she can deduct on her 2015 federal income tax return is: A. $30,000 B. $60,000 C. $75,000 D. $22,500
A. $30,000
Certain small employers may be eligible for a business tax credit for startup costs for employee education expenses incurred in connection with the adoption of a retirement plan. What is the maximum amount of the credit? A. $500 B. $1,000 C. $1,500 D. $2,500
A. $500
If Lucy had received the stock by gift as described above, and Lucy had sold the stock 3 months later for $73/share, what is the amount of gain Lucy must report on her income tax return? A. $6,300 B. $300 C. $7,300 D. $7,000
A. $6,300
In the scenario described in the above question, what is Lucy's basis in the inherited stock? A. $70/share B. $10/share C. $63/share D. $73/share
A. $70/share
How many times during a year may a Roth IRA be rolled over to another Roth IRA tax-free? A. 1 B. 2 C. 5 D. no limit
A. 1
Which one of the following IRC sections governs or regulates qualified plans? A. 401 B. 402 C. 501 D. 502
A. 401
An important requirement that is common to the SEC rules for investment advisors and the CFP Board's Code of Ethics is: A. Full disclosure of all material information to clients B. a ban on accepting commissions C. a ban on "soft dollar" D. rules for custody of assets under managment
A. Full disclosure of all material information to clients
Which of the following is true regarding sole proprietorship? A. a sole proprietorship has one owner B. government approval is generally needed for approval to set up a sole proprietorship C. a sole proprietorship is taxed as a separate unit as its owner D. the requirements to set up a business are generally very complex
A. a sole proprietorship has one owner
advantages of defined benefit plans include all of the following, except A. defined benefit plans are easy to design and easy to explain to employees B. employees obtain a tax-deferred retirement savings medium C. retirement benefits at adequate levels can be provided for all employees regardless of age D. benefit levels are guaranteed both by the employer and, for some plans, by the PBGC E. for an older highly compensated employee, a defined benefit plan will allow the max amount of tax-deferred retirement savings
A. defined benefit plans are easy to design and easy to explain to employees
which of the following statements about sole ownership of property is incorrect? A. if the owner shifts income from the property to another person, the owner can reduce his own income taxes B. upon the owner's death, the property will transfer by terms of the will C. if spouse is not bequeathed a share of the property according to the terms of the owner's will, spouse may elect against the will D. owner needs no one's permission to dispose of property
A. if the owner shifts income from the property to another person, the owner can reduce his own income taxes
Which of the following forms of ownership allow property transfer at death without the probate process? A. joint tenancy with right of survivorship B. community property C. sole ownership D. tenancy in common
A. joint tenancy with right of survivorship
Which of the following defined benefits plan distribution options is usually the automatic form of benefit for an unmarried plan participant? A. life annuity B. joint and survivor annuity C. period-certain annuity D. lump sum distribution
A. life annuity
Which of the following nonretirement-related needs may have a significant impact on retirement assets? A. long-term care for a parent B. client's primary housing C. social security income benefits D. private medicare supplement insurance
A. long-term care for a parent
All of the following are true regarding money purchase plans, except A. most money purchase benefit formulas use of factor related to the employee's service that favors owners and key employees B. nondiscrimination regulations provide a safe harbor for money purchase plans C. a plan benefit formula can be integrated with social security D. forfeitures, unvested amounts left behind by employees in their plans, can be used to reduce future employer contributions E. money purchase plan funds are generally invested in a pooled account managed by the employer or a fund manager selected by the employer
A. most money purchase benefit formulas use of factor related to the employee's service that favors owners and key employees
it may be advantageous for a participant to keep retirement assets in a qualified plan rather than roll assets over to an IRA for all of the following reasons except: A. no spousal consent requirement for IRA B. investing in life insurance C. PBGC insurance may be available D. plan loans may be available
A. no spousal consent requirement for IRA
the measure of how much any particular observation of a randomly distributed variable will differ from the average is which of the following? A. standard deviation B. covariance C. diversification D. benchmark
A. standard deviation
which of the following statements about property owned in a community property state is TRUE? A. the will of the decedent (the deceased person) will dictate how his or her half of the property will transfer at death B. the decedent's half of the property will automatically transfer at death to the surviving spouse without going through probate C. The marital deduction is available for estate tax purposes, regardless of who receives the decedent's half of the property D. none of the above
A. the will of the decedent (the deceased person) will dictate how his or her half of the property will transfer at death
Which of the following is true regarding a family's savings and investments? A. there are a large number of ways someone can increase savings and investment in the short run B. a change in attitude is the most important step in increasing savings and investment C. a good way to increase savings and investment is to make them virtually discretionary D. increasing a standard of living is a good way to increase savings and investments
B. a change in attitude is the most important step in increasing savings and investment
If Lucy's grandmother had gifted the stock to Lucy the day before she died (the stock price was $70/share), what would Lucy's basis in the GE stock? A. $70/share B. $10/share C. $63/share D. $73/share
B. $10/share
Sandi wants to convert her traditional IRA to a Roth IRA. The current IRA account value is $100,000. If Sandi follows through, how will the conversion be taxed? A. $100,000 as capital gains B. $100,000 as ordinary income C. $90,000 as capital gains with $10,000 carry-forward D. $10,000 as ordinary income with $90,000 carry-forward
B. $100,000 as ordinary income
Lucy's grandmother purchased 100 shares of GE stock priced at $10/share in 1970. Lucy inherited the stock when her grandmother passed away this year. ON the date of death, the stock was valued at $70/share. Lucy sold the stock 3 months later $73/share. What is the amount of the gain must Lucy report on her tax return (ignoring trading costs)? A. $6,300 B. $300 C. $7,300 D. $7,000
B. $300
Which of the following options are reasons for a plan sponsor to use a prototype plan? (1) reduce drafting costs (2) simplify the determination letter procedure (3) simplify installation (4) gain greater flexibility than otherwise possible A. (1) and (3) only B. (1) (2) and (3) only C. (2) (3) and (4) only D. (1) (2) (3) and (4)
B. (1) (2) and (3) only
Which of the following types of contributions into a savings or thrift plan are allowable? (1) after-tax employee (2) matching employer (3) pre-tax employee (4) deductible employee A. (1) only B. (1) and (2) only C. (1) (2) and (3) only D. (2) (3) and (4) only
B. (1) and (2) only
Which of the following is the correct definition of a jumbo loan? A. a loan to build houses that are larger than average B. a loan whose amount exceeds the guidelines of agencies like Fannie Mae C. a loan whose term is longer than 30 years D. a loan with additional points charged to cover closing costs
B. a loan whose amount exceeds the guidelines of agencies like Fannie Mae
which of the following describes the report filed on form 5500? A. summary plan description B. annual report C. individual accrued benefit statement D. title IV report
B. annual report
Which of the following is simply diversification among different assets classes to take advantage of different correlations among the classes to reduce risk? A. optimal mix B. asset allocation C. standard deviation D. investment horizon
B. asset allocation
The best way to assess whether refinancing a loan is advantageous is to: A. compare the total payments for the two loans over the same period B. compare the present value of the payments at the two discount rates C. compare the points being charged on the two loans D. compare the closing costs of the two loans
B. compare the present value of the payments at the two discount rates
which of the following is (are) true regarding a cash balance plan? A. employee investment risk B. each participant has a hypothetical account that the employer credits at least annually C. plan benefits older workers more than younger workers D. a and c E. b and c
B. each participant has a hypothetical account that the employer credits at least annually
Capital needs at death can have a significant impact in any planning scenario. Which of the following is a reason to include this area when doing retirement planning? A. clients cannot purchase insurance at more advanced ages B. funding these needs is more economical when a client begins at a younger-age C. these concerns are unlikely ever to become a capital-needs-at-death issue D. the purchase of insurance eliminates the need for any further capital-needs-at-death planning
B. funding these needs is more economical when a client begins at a younger-age
disadvantages of defined benefit plans include A. employee bears investment risk B. higher installation and administrative costs as compared with a desired contribution plan C. older employees will receive a lower retirement benefit than a younger employees D. a and b E. a and c
B. higher installation and administrative costs as compared with a desired contribution plan
which of the following statements is true regarding financial behavior? A. financial issues do not affect other parts of a person's life B. only a small number of people have assets that exceed their needs C. divorced individuals are usually looking forward to meeting a new life partner D. young single people typically are very good about saving for retirement
B. only a small number of people have assets that exceed their needs
the duties of fiduciaries include all the following except: A. act with the care, skill, prudence, and diligence under the prevailing circumstances that a "prudent man" would act in a like capacity B. select moderate - to high-risk investments that will max gains the plan C. follow the provisions of the documents governing the plan, unless inconsistent with ERISA provisions D. act for the exclusive purpose of providing benefits to participants and their beneficiaries E. all of the above are duties of fiduciaries
B. select moderate - to high-risk investments that will max gains the plan
advantages of rolling a qualified plan over to an IRA include A. an IRA can invest in life insurance B. there may be more investment flexibility with an IRA C. spousal consent is required for IRA distributions D. the ability to take loans from the iRA
B. there may be more investment flexibility with an IRA
A planning technique used to leave property to children in place of money given to charity is called what? A. private foundation B. wealth replacement trust C. outright gift D. charitable remainder trust (CRT)
B. wealth replacement trust
Keith purchased a home with $20,000 down payment and a $180,000 mortgage. What is his basis in the home? A. $20,000 B. $180,000 C. $200,000 D. $160,000
C. $200,000
Which of the following spousal survivorship benefits are required by pension plans? (1) qualified pre-retirement survivor lump sum (2) qualified pre-retirement survivor annuity (3) qualified joint and survivor annuity (4) qualified joint and survivor lump sum A. (1) only B. (1) and (2) only C. (2) and (3) only D. (2) (3) and (4) only
C. (2) and (3) only
Jim and Mary live in a community property state, and purchased a home for $100,000 in 1991, which was valued at $300,000 immediately prior to Jim's death in 2015. If Mary sells the home for $300,000, what is the taxable gain that she must declare for income tax purpose? A. $150,000 based on the value of Mary's half of the home B. $100,000 based on the step-up in basis of Jim's half of the home C. None, since the entire home receives a step-up in basis of Jim's death D. $200,000 based on the appreciation on the value of the home
C. None, since the entire home receives a step-up in basis of Jim's death
The following statement about joint tenancy with rights of survivorship (JTWROS) and tenancy in the entirety (TIE) are true EXCEPT: A. TIE is permitted in some states, and only between husband and wife B. one spouse can't dispose of TIE property without the consent of the other C. TIE property is a probate asset, but JTWROS property is not D. Valuation of TIE property may be different from JTWROS property
C. TIE property is a probate asset, but JTWROS property is not
Hector wants his business to continue for generations. Which of the following has infinite life? A. sole proprietorship B. partnership C. corporation D. limited liability company
C. corporation
which of the following asset classes include life insurance cash values and long debt? A. equity assets B. tangibles C. fixed-income assets D. natural resources
C. fixed-income assets
In the scenario above, what is the nature of the gain reported by Lucy? A. Short-term capital gain B. ordinary income C. long-term capital gain D. qualified dividend
C. long-term capital gain
The following statements about joint tenancy with rights of survivorship (JTWROS) are true except: A. ownership interests are deemed to be equal; so is income B. conversion from sole ownership to JTWROS may trigger gift tax C. martial deduction for estate tax is not allowed when one spouse's interest passes exclusively to the other D. JTWROS property does not avoid inclusion in decedent's estate
C. martial deduction for estate tax is not allowed when one spouse's interest passes exclusively to the other
regarding life-cycles, a person who is generally at the peak of his or her career and is in the period of maximum ability to accumulate wealth is in which stage? A. pre-retirement B. career development C. peak accumulation D. retirement
C. peak accumulation
a summary plan description is a A. summary of annual report form 5500 B. summary of any material modification to the plan C. summary of the provisions of the plan is plain language D. written explanation of preretirement survivor annuity
C. summary of the provisions of the plan is plain language
Which of the following is true regarding a person's employment situation? A. overtime should not be considered when determining the compensation package B. company loyalty is different now than it was in the past C. the decision to change jobs would not need to be discussed with a financial planner D. taxes would have no impact on a decision on whether or not to change jobs
C. the decision to change jobs would not need to be discussed with a financial planner
Which of the following is true regarding implementing a family budget? A. absolute accuracy is essential B. unexpected results can be disregarded as anomalies C. the form of the budget should be consistent D. the budget period should be as long as possible
C. the form of the budget should be consistent
The following statements about a person dying without a will are true EXCEPT: A. it is called "intestate" B. beneficiaries who are not blood relatives of decedent may be disinherited C. the probate court will divide the estate based on petitions from potential beneficiaries D. the probate court will appoint someone to oversee the estate
C. the probate court will divide the estate based on petitions from potential beneficiaries
All of the following statements about tenancy in common are true EXCEPT: A. multiple owners, including unrelated parties can share ownership of property B. one owner's fractional interest can be transferred without the permission of the other owners C. transfer at death occurs without the probate process D. the property receives step up in basis at death for the owner's fractional interest
C. transfer at death occurs without the probate process
Which of the following are reasons why an employer might use an ESOP/stock bonus plan? (1) to guarantee specific retirement income amounts for employees (2) to provide tax-advantaged means for employees to acquire company stock (3) to allow the company to borrow money for business needs (4) to broaden company ownership to help prevent a hostile takeover A. (1) only B. (1) and (2) only C. (1) (2) and (3) only D. (2) (3) and (4) only
D. (2) (3) and (4) only
What percentage of each annuity payment normally will be considered taxable income to a plan participant who has no cost basis in the plan? A. 25% B. 50% C. 75% D. 100%
D. 100%
What is the max number of years a service plan may require before a participant is 100% vested in a qualified defined benefit plan? A. 1 B. 3 C. 5 D. 7
D. 7
Angela Snider, age 32, has $19,000 in her qualified retirement plan. The max amount that Angela can borrow against her account is A. zero B. $8,000 C. $9,500 D. $10,000 E. $50,000
D. $10,000
Which of the following is a health care delivery system that contracts with medical care providers to offer services at discounted feeds to its members? A. A health maintenance organization (HMO) B. An Independent practice association (IPA) C. A point of service (POS) program D. A preferred provider organization (PPO)
D. A preferred provider organization (PPO)
Stock bonus plans and ESOPs share many characteristics, but ESOPs have some uniques characteristics. Which of the following characteristics is (are) Unique to an ESOP? A. accounts of employees over 55 must be offered diversification B. employer's ability to borrow to leverage ownership C. tax-free treatment of appreciated company stock distributed to a retiree D. a and b E. b and c
D. a and b
which of the following is (are) true regarding section 401(k) plans? A. employees decide how much of their compensation is to be deferred B. all types of employers can adopt a section 401(k) plan C. section 401(k) plans can allow hardship withdrawals D. a and b E. a and c
D. a and b
Which of the following types of businesses can have an ESOP or stock bonus plan? A. S corporation B. professional corporation C. incorporated business D. a and c E. b and c
D. a and c
A savings/match plan works best in a company that has A. relatively young employees B. employees willing to accept investment risk C. employees who vary widely in their need or desire to save for retirement D. all of the above E. only b and c
D. all of the above
As an actuary, you are helping Roadster Custom Auto Shop determine the annual cost of its defined benefit plan. In making your calculations, you must make reasonable assumptions about: A. employee turnover rate B. Employee salary scale C. future investment and inflation rates D. all of the above E. only b and c
D. all of the above
To reduce costs of installing a qualified retirement plan, a small business owner could purchase a prototype plan from which of the following? A. insurance company B. bank C. mutual fund provider D. all of the above
D. all of the above
Under the "prudent man" rule, a fiduciary must consider A. diversification of plan portfolio B. liquidity and current return of the portfolio relative to the anticipated cash flow requirements of the plan C. the projected return of the portfolio relative to the plan's funding objectives D. all of the above E. only a and b
D. all of the above
if a spouse is to be the beneficiary of an IRA or a qualified plan, it is generally preferable to leave the IRA or qualified plan A. to a bypass trust B. to a QTIP trust C. to the participant's estate D. outright to the spouse
D. outright to the spouse
cash balance plan and a traditional defined benefit plan share which of the following characteristics? A. pension benefit guaranty corporation coverage B. employer bears investment risk C. able to use social security integration D. all of the above E. only a and b
D. all of the above
for a defined contribution plan, annual additions include which of the following? A. employer contributions B. employee salary reductions C. plan forfeitures D. all of the above E. only a and b
D. all of the above
which of the following statements apply to S-corporation? A. they allow income to pass through to shareholders, avoiding double taxation B. the number of shareholders is limited to 100 C. the liability of shareholders is limited - same as for C corporations D. all of the above
D. all of the above
the following statements about joint tenancy with rights of survivorship (JTWROS) are true except: A. husband and wife, father and son, or even unrelated persons can own property in JTWROS form B. when co-owners are not a married couple, the entire value of property will be included in the estate of the first owner to die, unless the survivor can prove contribution to basis C. for married couples, the decedent's half of the property receives a step up in the basis D. at the death of the first owner, the entire property receives a step up in basis
D. at the death of the first owner, the entire property receives a step up in basis
elective deferrals in a 401(k) plan can be distributed upon occurence of all the following, except: A. retirement B. disability C. severance from employment with the employer D. attainment of age 55 1/2 by the participant E. plan termination (if the employer has no other defined contribution plan other than an ESOP)
D. attainment of age 55 1/2 by the participant
A contract entered into between a charity and donor where the charity agrees to pay the donor a specific amount in exchange for an amount transferred to the charity is which of the following? A. charitable lead trust B. private foundation C. donor advised fund D. charitable gift annuity
D. charitable gift annuity
Which plan has benefit levels that are guaranteed by both the employer and the Pension Benefit Guaranty Corporation (PBGC)? A. money purchase plan B. target benefit plan C. cross tested plan D. defined benefit plan E. tax-deferred annuity
D. defined benefit plan
Which of the following employee categories would typically benefit most from a savings or thrift plan? A. low income; nearing retirement B. high income; nearing retirement C. low income; young age D. high income; young age
D. high income; young age
Marcus purchased 100 shares of Yahoo for $200/share a few years ago. He transferred the stocks to his nephew Tony as a gift when the stock was priced at $25/share. If Tony sells the stock for $35/share, what is the gain (or loss) that he must report on his income tax return? A. a loss of $16,500 B. a gain of $1,000 C. a loss of $17,500 D. no gain or loss
D. no gain or loss
Social security integration A. reduces the cost of offering a qualified plan B. allows an employer to make greater contributions or benefits for highly paid employees C. must maintain a certain ratio of contributions to nonhighly compensated individuals versus highly compensated individuals to retain "permitted disparity" D. only a and b E. only a and c
D. only a and b
Which of the following is true regarding the goodwill and going concern value of a business? A. the possibility of repeat sales has no bearing on goodwill B. goodwill and going concern value are separate items C. an absence of experienced management will not affect goodwill D. patents and trademarks are an aspect of goodwill
D. patents and trademarks are an aspect of goodwill
You can improve your Fair Isaac Credit Score (FICO) by all of the following EXCEPT: A. paying bills on time B. keeping balances on credit cards low C. not opening credit accounts indiscriminately D. paying bills before they are posted to your account
D. paying bills before they are posted to your account
Which of the following is a disadvantage of a cash balance plan? A. provides relatively larger benefits for older workers, creating large disparity among younger and older workers B. is difficult to fund with a larger number of middle-income employees C. plan shifts investment risk to employees D. retirement benefits may be inadequate for older workers E. plan complexity makes it difficult to explain to employees
D. retirement benefits may be inadequate for older workers
the following entities protect the business owner from personal liability in actions by creditors of the business EXCEPT: A. corporation B. limited liability company C. limited partnership D. sole proprietorship
D. sole proprietorship
which of the following is true regarding margin trading? A. margin trading is regulated by Regulation M B. the initial margin requirement is generally lower than the maintenance margin requirement C. the Federal Reserve is the only regulating organization that regulates margin trading D. some brokerage firms have their own margin requirements
D. some brokerage firms have their own margin requirements
A disadvantage of a Roth IRA conversion is A. the amount paid in taxes at death B. the basic economics of the conversion C. source for the unified credit applicable exclusion amount at death D. the need for non-IRA funds to pay the taxes in the year of conversion
D. the need for non-IRA funds to pay the taxes in the year of conversion
The financial aspects of a person's lifestyle are determined by all the following EXCEPT: A. how much the person wants to spend to maintain the lifestyle B. the financial priorities the person has C. The Financial resources the person has D. the personality of their financial planner
D. the personality of their financial planner
Which of the following is NOT a requirement for a valid will? A. it must be signed and dated at the end B. The writer must have reached a certain age C. witnesses must sign the will D. the will must be typed
D. the will must be typed
Limited liability companies offer business owners all of the following advantages except: A. they allow flow-through of income, just like partnerships B. they can be formed by as few as one person C. they offer protection for personal assets from the creditors of the business D. they can be set up without filing any paperwork with the state
D. they can be set up without filing any paperwork with the state
if the participant dies at age 60 without a designated beneficiary, minimum distributions must be made A. over the life expectancy for age 60 under the uniform lifetime table B. over the life expectancy for age 60 under the single life table C. over the life expectancy for age 61 under the single life table D> under the five-year rule
D> under the five-year rule
Gene and Norma Alton are both age 65 and will retire later this year. Their financial planner evaluated their financial situation and found that the Altons are going to be approximately $100 per month short of what they need to sustain their desired lifestyle. The Altons should consider A. adjusting their expenses downward before and during retirement and saving more B. placing the bulk of their retirement assets into one or two risky assets with good potential for a high-yield C. continuing to work and contribute to a retirement plan for a few more years D. A and B E. A and C
E. A and C
disadvantages of a 401(k) plan include A. benefits are not an adequate source of retirement income for those entering the plan relatively close to retirement B. employer bears the investment risk C. employer may need to match contributions to avoid having the plan deemed discriminatory D. a and b E. a and c
E. a and c
Under a qualified domestic relations order (QDRO) A. a demand for each cash payment can be made even if the plan has no provisions for the account owner B. a person who receives a distribution because of a QDRO can roll over the distribution to his/her own retirement account and preserve the tax deferral C. a means is provided to circumvent the provision that qualified plan benefits cannot be assigned to another D. a and b E. b and c
E. b and c
Borrowing from an IRA A. is treated as an early withdraw B. requires use of a written loan agreement C. reduces the deductible employee contribution amount D. causes an insufficient withdrawal penalty E. is not allowed
E. is not allowed
Which of the following is (are) true regarding the tax implications of having a money purchase plan? A. employer contributions and plan earnings are tax-deferred for the employee B. employers beginning a new plan are eligible for a $2,500 business tax credit in the first year to help with startup costs C. the employer tax deduction is limited is 25% of total payroll of employees covered under the plan D. only a and b E. only a and c
E. only a and c
Advantages of a money purchase plan from the employer's point of view include which of the following: A. ability to use employee salary reductions or before-tax bonuses to decrease employer contribution to the plan B. tax deduction when contributions made to employee account C. employees bear investment risk D. only a and b E. only b and c
E. only b and c
Acorn Booksellers is a small business interested in adopting a qualified retirement plan. The owner of Acorn wants to be able to choose from more than one financial institution when implementing the plan. Acorn's owners also wants to determine such things as the vesting schedule and the contribution or benefit formula. As a small business, Acorn wants to keep costs down. You recommend that Acorn use
a prototype plan because it would give Acorn choice in funding institution or medium while keeping installation and implementation costs low
Blake Johnston retired from Brumley Enterprises a month after his 56th birthday. Blake began receiving a series of substantially equal periodic payments from his qualified plan based on his life expectancy. When he turned 59, he decided that he wanted to alter his payments so that he would receive a higher monthly payment. If Blake does this
he will not incur any additional taxes
Which of the following is true regarding taxes? A. high tax brackets indicate planning opportunities B. it is not possible to shift income through gifting C. It is not really possible to save on taxes by deferring income D. It is not possible to transfer wealth through generations' tax free
A. high tax brackets indicate planning opportunities
Ways that a Roth IRA differs from a traditional IRA include: A. initial investment and earnings can be withdrawn tax-free B. Roth IRA contributions can be made past 59 1/2 C. Roth IRAs are never subject to minimum distribution rules D. A and B E. A and C
A. initial investment and earnings can be withdrawn tax-free
Cathy Atwater is 60, 5 years away from retirement. The most accurate method for her to use in calculating her income needs during retirement is the A. expense method B. replacement ratio method
A. expense method
The ability of spouses to treat gifts as by each spouse so as to double the use of the gift tax annual exclusion is called which of the following? A. gift splitting B. martial deduction C. unified credit D. joint tenancy
A. gift splitting
Which of the following is NOT an advantage of budgeting? A. it can inhibit creativity B. it reveals unusual utilization of resources C. it makes family members aware of the need to converse resources D. it provides a guideline to measure actual performance
A. it can inhibit creativity
Which of the following is NOT an advantage of personal financial statements? A. it may require appraisals and asset valuations B. it provides a means to summarize a person's financial position C. may force an individual to be realistic about financial goals D. provides an orderly reference point
A. it may require appraisals and asset valuations
All of the following is true regarding the types of financial problems clients will face in their lives? A. taxes add to the cost of an investments and slow progress toward the client's goals B. The inability to quickly turn invested capital into spendable cash is related to inflation C. Clients should not be concerned about leaving to assets to children or young adults D. Psychological comfort has no place in the financial planning process
A. taxes add to the cost of an investment and slow progress toward the client's goals
which of the following statements about the definition of "security" under the investment advisory act is correct? A. the act defines the term "security" in the broadest possible fashion B. the act defines the term narrowly, to include only stocks, bonds and certificates of deposit C. The SEC periodically holds hearings to define the term D. the definition is left to the NASD
A. the act defines the term "security" in the broadest possible fashion
Which of the following is true regarding lifestyle choices? A. there is no right or wrong answer regarding what lifestyle is appropriate B. Fixed required expenses lave a client with no options C. a person's background experience will have no effect on their lifestyle choices D. Discretionary expenses tend to be rather minor expenses
A. there is no right or wrong answer regarding what lifestyle is appropriate
Which of the following is true regarding developing a financial plan? A. this involves budgeting income and expenses B. if a client needs an emergency fund, no recommendations are needed C. Estimating returns should not be needed D. the planner should guard against projections of the client's expected financial position
A. this involves budgeting income and expenses
Tony Johnson, an over-the-road trucker, had several out-of-town trips early in the year, so he got an extension for filing his income tax return. Tony can make the maximum IRA contribution this year. He has until the last date of his income tax filing extension to make a tax-deductible contribution to his IRA. A. true B. false
A. true
Which of the following considerations makes it NOT appropriate to use book value to value a business? A. when the business is new B. when the assets are generally office furniture C. when the business is about to be liquidated D. the business is dependent on one key person
B. when the assets are generally office furniture
Which of the following represents both the age after which an individual may no longer establish a non-rollover traditional IRA and the trigger point for beginning required distributions? A. 65 B. 70 1/2 C. 72 1/2 D. 75
B. 70 1/2
Which member of the financial planning team should be considered the most important? A. CPA B. Client C. Life insurance professional D. Tax attorney
B. Client
The "brochure rule" requires that the investment adviser do which of the following? A. provide the client with an audited financial statement of the adviser's net worth B. Deliver a written disclosure document (such as part II of form ADV) to each client C. Provide a part I of form ADV to each client D. provide clients with copies of the adviser's marketing brochure
B. Deliver a written disclosure document (such as part II of form ADV) to each client
According to the authors, the three C's of credit include the following EXCEPT: A. character B. competence C. Collateral D. capacity
B. competence
The CFP Board's Financial Planning Practice Standards are designed to accomplish all of the following except: A. advance professionalism in financial planning B. facilitate the weeding out of incompetent financial advisors C. enhance the value of the financial planning process D. Establish certain norms of practice for CFP practitioners
B. facilitate the weeding out of incompetent financial advisors
Tom Closten is the owner of a closely held business. Tom's financial planner told Tom that developing a retirement plan for him will be much simpler than developing a retirement plan for non-business owners who do not have the bulk of their assets tied up in one place. The statement of Tom's financial planner is A. true B. false
B. false
Which of the following is NOT exempt from the definition of an investment advisor? A. publisher of the local newspaper, the Daily Beagle B. insurance agent who advises clients about no load mutual funds C. Those who advise clients solely about U.S. treasury obligations D. local attorney who occasionally advises clients about setting up investment accounts for their jury awards
B. insurance agent who advises clients about no load mutual funds
which of the following is not an acceptable method for overcoming a retirement shortfall? A. cut back on expenses before retirement B. invest a large portion of a retirement portfolio in a high-risk investment to obtain a higher return C. increase pre-retirement savings D. retire later E. tap into home equity
B. invest a large portion of a retirement portfolio in a high-risk investment to obtain a higher return
William Best is completing a retirement plan for a client. Which of the following sources of his client's income would William ignore when estimating client's income sources? A. current and future asset income B. pension income from a former employer C. rent from a duplex owned by the client D. income tax refunds E. Social Security income
B. pension income from a former employer
Which of the following is true regarding discretionary expenses? A. vacations are generally not a major discretionary expense B. season tickets to professional teams can be a major expense C. These expenses should be decided on before discussing fixed expenses D. resources have no effect on discretionary spending
B. season tickets to professional teams can be a major expense
which of the following is true regarding same-sex married couples? A. these couples' legal rights are straightforward B. they are allowed to file joint federal tax returns C. a surviving partner generally has no intestacy rights D. the estate tax marital deduction is generally unavailable
B. they are allowed to file joint federal tax returns
Which of the following are considered fundamental steps in the retirement planning process? (1) assessing client retirement financial needs (2) determining how much of the need will be met (3) establishing a plan for any cash flow shortfall (4) selling investments based on projected income needs A. (1) only B. (1) and (2) only C. (1) (2) and (3) only D. (2) (3) and (4) only
C. (1) (2) and (3) only
Peter is 55 years old, and he decided to establish and contribute to a Roth IRA for the first time this year. What is the minimum number of years must wait before being able to withdraw any accumulated earnings from the Roth IRA tax free? A. 1 B. 3 C. 5 D. 10
C. 5
Which of the following statements is true regarding financial objectives? A. Good financial objectives are stated in aspirational terms B. All financial objectives have short time horizon C. After they have been identified, they should be prioritized D. Once identified, they do not need to be revisted
C. After they have been identified, they should be prioritized
Financial Advisor John Smith manages investment accounts for clients for mostly in his home state of Ohio. He should register with the Ohio division of securities if: A. he has any clients outside of Ohio B. The assets under his management exceed 30 million C. Assets under his management are less than 25 million D. He is not a CFP certificant
C. Assets under his management are less than 25 million
Which of the following is true regarding risk? A. attitudes towards risk are easy to measure B. Defining the nature of risk is objective for each person C. Attitudes about risk are likely to change over a person's lifetime D. Risk attitudes are due to factors that are relatively easy to deal with
C. Attitudes about risk are likely to change over a person's lifetime
which of the following is true regarding financial issues facing young parents? A. young parents usually put off financing a college fund for the children B. these individuals usually have more than enough time to save for retirement C. Housing is usually a major financial issue facing these couples D. life insurance is not needed at this stage of life
C. Housing is usually a major financial issue facing these couples
A good financial planning report must include an analysis of all the following except: A. where you are now B. where you want to be C. Why you failed previously D. How to reach your goals
C. Why you failed previously
Which of the following is true regarding financial security? A. financial security is based on absolute wealth or income B. taxes are not a consideration when determining financial security C. a pension plan left by a decedent to a grandchild may retain less than a quarter of its value D. Wealth and income are diverted because of inflation and slippage
C. a pension plan left by a decedent to a grandchild may retain less than a quarter of its value
Which of the following is an example of discretionary expenses? A. utilities B. household supplies and maintenance C. education fund D. food and groceries
C. education fund
Which of the following is NOT part of the definition of an Investment Advisor as defined by the Investment Advisers Act of 1940 (the Act)? A. provides advice regarding securities B. is in the business of providing advice C. holds a CFP or series 7 license D. receives compensation for advice
C. holds a CFP or series 7 license
which of the following is true about retirement planning? A. social security benefits start at age 55 B. retirement planning should start about five years before retirement C. retirement planning is really about cash-flow planning D. the average savings rate in the U.S. is 15%
C. retirement planning is really about cash-flow planning
A traditional IRA A. allows a couple to set aside money for retirement even if one spouse is not employed B. has higher contribution limits than an employer-sponsored IRA C. is often used as a supplemented to employer-sponsored retirement plans D. A and C E. B and C
D. A and C
The principle of objectivity in the Code of Ethics and Professional Responsibility of the CFP Board of Standards requires that a CFP practitioner A. must disclose in writing any conflicts of interest that might compromise the adviser's objectivity or independence prior to establishing a relationship with the client B. Had the burden of proving, by clear and strong evidence that any business transactions with or for the client are arms-length transactions C. Must act with prudent professional judgement and in the best interest of the client D. All of the above
D. All of the above
Which of the following are PROHIBITED uses of the CFP marks? A. www. CFPadvisors.com B. CFP Advisors, INC. C. All Star CFPs, Inc. D. All of the Above
D. All of the above
Which of the following uses of the CFP marks are PROHIBITED by the CFP board? A. Jane Smith is a CFP graduate B. Jane Smith is a CFP C. Jane Smith has a CFP D. All of the above
D. All of the above
For individuals who have attained age 50 before the close of the tax year, what is the maximum dollar amount that may be contributed to a traditional IRA in 2018? A. $3,000 B. $4,000 C. $5,500 D. $6,500
D. $6,500
the most important documents that a terminally ill person should have are the following EXCEPT: A. healthcare power of attorney B. Living will C. power of attorney/durable power of attorney D. Charitable remainder trust
D. Charitable remainder trust
The six steps in the financial management process outlined by the authors include the following except: A. establish goals B. collect data C. measure performance D. establish living wills
D. Establish living wills
Gary Hinton, age 54, is planning to retire this year. He has $600,000 accumulated in a traditional IRA A. Gary must wait until he is 59 1/2 to take IRA distributions without penalty B. Gary would take an IRA distribution of $100,000 without penalty before age 59 1/2 if he uses the money to make a qualified purchase of a condo in a retiree community C. Gary must pay a 10% penalty for any withdrawals that he makes from his IRA before age 59 1/2 unless the distribution is to purchase health insurance or medical care D. Gary can make penalty-free withdrawals in an amount equal to an annual life annuity payment until age 59 1/2; at that time, he can withdraw the remaining balance in his IRA without penalty
D. Gary can make penalty-free withdrawals in an amount equal to an annual life annuity payment until age 59 1/2; at that time, he can withdraw the remaining balance in his IRA without penalty
Which of the following is true regarding the relationship a planner has with the client? A. the financial planner solely defines the scope of the relationship B. The engagement of the planner is never limited C. the duration of any relationship will always be open-ended D. It is possible that the scope of the relationship will change over time
D. It is possible that the scope of the relationship will change over time
Which of the following is true regarding the contends of the financial plan? A. The length of the presentation of the plan should always be the same, regardless of the contents of the plan B. once the plan is in place it should not be changed C. Checklists are usually a bad idea in the plan D. The plan should have a discussion of how to achieve goals
D. The plan should have a discussion of how to achieve goals
Under the CFP Board's Code of Ethics and Professional Responsibility, a financial planner who has reason to suspect illegal conduct in his or her organization must: A. disclose the information to his or her supervisor B. alert regulatory authorities if the organization does not take suitable to remedy the situation C. not use the process to harass another planner D. all of the above
D. all of the above
Which of the following would not be included in a retirement "fact finder" A. balance in profit sharing plan B. expected social security income C. amounts invested in mutual funds D. amounts of last year's tax refund E. client goals and objectives in retirement
D. amounts of last year's tax refund
What is true regarding a client, or potential client's, finances? A. a client's life expectancy is not relevant regarding the determination of a client's financial goals B. The planner should consider the likelihood of the client reaching recommended financial objectives C. How a planner acts towards the client has no effect on the public's attitude toward planners D. assumptions should not be made about a client when reviewing the client's finances
D. assumptions should not be made about a client when reviewing the client's finances and B. The planner should consider the likelihood of the client reaching recommended financial objectives
The following statements about "529 plans" for funding college educational expenses are true EXCEPT: A. withdrawals from 529 plans for qualified educational expenses are tax-free B. parents can retain some control over the funds, including the ability to change beneficiaries C. contributions are not eligible for federal income tax deduction D. donor can exercise day to day control over investment management
D. donor can exercise day to day control over investment management
Which of the following is true regarding emergency funds for a family? A. short-term reserves should be placed in publicly-traded stocks and bonds B. the more a family invests in stocks and bonds, the more liquid cash reserves are needed C. the amount that a family would need is fixed, regardless of circumstances D. families should have three to six months of income for emergencies
D. families should have three to six months of income for emergencies
The following features of an UTMA account set up in a child's name by a parent to pay for the child's college education are true EXCEPT: A. the parent loses control of the account when the child reaches the age of majority (18 or 21, depending upon the state) B. the child may qualify for less financial aid in college C. investment income is generally taxable to the parent until the child is 24 years old D. if child chooses not to go to college, the parent can revoke the account
D. if child chooses not to go to college, the parent can revoke the account
All of the following factors need to be considered in assessing the adequacy of funds needed to fund a client's income needs during retirement EXCEPT: A. inflation B. investment returns C. spending levels D. living trust funds
D. living trust funds
which of the following is NOT a requirement for a valid will? A. it must be signed and dated at the end B. the writer must have reached a certain age C. witnesses must sign the will D. the will must be typed
D. the will must be typed
Which of the following is true regarding financial issues facing widows or widowers? A. they are usually very logical when it comes to managing finances B. many have a great deal of experience in managing money C. while sad at the loss of a spouse, young widows quickly look forward to possibly meeting a new life partner D. they face many issues that face retirees and divorces
D. they face many issues that face retirees and divorces
Looking beyond pure capital accumulation needs, which of the following is a primary capital needs planning objective? A. determining pension plan income benefits B. identifying retirement cash flow C. accounting for income from future savings D. translating capital into living expense needs
D. translating capital into living expense needs
Ron's bankruptcy filing under Chapter 7 was approved by the bankruptcy court. Which of the following obligations will he be allowed to discharge? A. alimony owed to his ex-wife B. loans used to pay for his college education C. unpaid federal taxes from over 3 years D. unpaid condo feeds
D. unpaid condo feeds
