CFP 5111 Exam
At daughter June's 13th birthday party, parents Eddie and Peggy give June a digital camera, and a promise that on her 15th birthday, they will pay her tuition to an after-school photography school. The tuition for the photography school is expected to be $2,000. How much should Eddie and Peggy invest on June's birthday this year at an annual interest rate of 4% compounded annually to fulfill their promise to June? A) $1,849 B) $1,980 C) $1,887 D) $1,778
A) $1,849
Mason is considering the purchase of a rental real estate property for $80,000. Because of his area's slow real estate market, he anticipates he will not see any cash flow from this property until the end of the second year, when he estimates a cash inflow of $5,000. He also anticipates a cash inflow of $5,000 at the end of the third year, with subsequent cash inflows of $7,500 at the end of the fourth year and $10,000 at the end of the fifth year. At the end of the fifth year, Mason believes he can sell the property for $120,000. If his required rate of return is 10%, what is the net present value (NPV) of this property? A) $15,653 B) $6,957 C) $13,731 D) $23,104
A) $15,653
Ollie and June are planning for their daughter's college education. They would like their daughter, who was born today, to attend a public university for four years beginning at age 18. Tuition is currently $15,000 a year and has increased at an annual rate of 6%, while inflation has only increased at 2.5% per year. They can earn an investment rate of return of 9%. How much must Ollie and June save at the end of each year if they would like to make the last payment at the beginning of their daughter's first year of college? Round to the nearest dollar. A) $4,236 B) $3,979 C) $2,945 D) $3,650
A) $4,236
Stuart needs an income stream equivalent to $50,000 in today's dollars at the beginning of each year for the next 12 years to maintain his standard of living. He assumes inflation will average 4.5% over the long term and that he can earn a 9% compound annual after-tax rate of return on investments. Approximately what lump sum does Stuart need to invest today to fund his income need? A) $461,025.81 B) $476,445.85 C) $480,878.04 D) $455,929.00
A) $461,025.81
Bill is interested in pursuing a career selling financial products. In addition to the Series 63 registration required by his state, what other license(s) must he obtain to sell both variable life insurance and mutual funds? State variable insurance license FINRA Series 6 or 7 FINRA Series 66 FINRA Series 65 A) I and II B) II only C) I, III, and IV D) II and IV
A) I and II
Derrick wants to establish an education fund that may be used to pay for his son's primary and secondary school tuition. Which of the following will meet Derrick's needs? Coverdell Education Savings Account (ESA) Section 529 plan (NOTES: Tuition vs Expenses. Regarding elementary and secondary schools, the important distinction between a 529 plan and a Coverdell ESA is how tuition and expenses are handled. A 529 plan, when used for elementary and secondary schools only, is limited to tuition, while a Coverdell ESA can pay for elementary or secondary school expenses as well.) A) I only B) Both I and II C) Neither I nor II D) II only
A) I only
Which of the following are characteristics of the Consumer Credit Reporting Reform Act? Protection against unauthorized credit card use is provided. Applicants who are denied credit must be offered the reason. Access to a credit file is limited to bona fide users of financial information. Credit bureau reports must include accurate, relevant, and recent information. A) I, I, III, and IV B) I, II, and IV C) II, III, and IV D) II and IV
A) I, I, III, and IV
Nicole has consulted a CFP® professional to design and implement tax-efficient estate planning strategies that incorporate charitable donations and preserve wealth for her family. What are the relevant elements in Nicole's financial planning engagement? Identify tax considerations Preserve or increase wealth Pursue philanthropic interests Address estate and legacy matters A) I, II, III, and IV B) II, III, and IV C) I and IV D) II and III
A) I, II, III, and IV
Spencer, a CFP® professional, is meeting with his client, Marcus, for an annual review of Marcus's financial plan. During this meeting, Marcus advises Spencer that, due to uninsured property expenses he has incurred over the last year, Marcus may need to file for bankruptcy under Chapter 7. Spencer advises Marcus that if he files for Chapter 7 bankruptcy, some of his debts may not be dischargeable. Analyze Marcus's statement of cash flows as follows. Statement of Cash Flows Marcus Williams For the Current Year CASH INFLOWS Salary: Marcus $40,000 TOTAL CASH INFLOWS $40,000 CASH OUTFLOWS Living expenses (rent, utilities, food, etc.) $20,000 Alimony $2,000 Child support $5,000 Car payments $5,800 Expenses due to property loss $6,000 Car insurance $3,000 Credit card payments $4,000 Student loan payments $1,200 TOTAL CASH OUTFLOWS $47,000 NET CASH FLOW (DEFICIT) ($7,000) Marcus will not be discharged of which of the following payments if he files for Chapter 7 bankruptcy? Alimony Child support Student loans Credit card payments A) I, II, and III B) II and IV C) III only D) I, II, III, and IV
A) I, II, and III
The CFP Board Fitness Standards apply to which of the following? CFP® candidates Practicing CFP® professionals Professionals eligible for reinstatement (PER) A) I, II, and III B) II only C) I and II D) I and III
A) I, II, and III
Which of the following are examples of nondiscretionary expenses? Taxes Utility bills Club dues Automobile loan payments A) I, II, and IV B) I, II, III, and IV C) I only D) II and IV
A) I, II, and IV
(Landon Case Study) Rank the following actions in terms of priority for Harry and Alice's financial plan. Pay off their credit cards Purchase life insurance on Alice Purchase additional life insurance on Harry A) I, III, II B) III, II, I C) II, I, III D) I, II, III
A) I, III, II
Which of the following are characteristics of Chapter 13 bankruptcy provisions? A repayment plan is implemented. The debtor is typically required to relinquish assets. Debt payments may be reduced so that payments are more manageable for the debtor. Generally, Chapter 13 bankruptcy is more favorable for creditors than Chapter 7 bankruptcy. A) I, III, and IV B) I and II C) I, II, and III D) III and IV
A) I, III, and IV
Sharon, a CFP® professional, practices financial planning in New York City. She is meeting with her client, Carla, to present the financial plan she has developed for her. Carla had advised Sharon that one of her goals is to follow a family tradition to take her twin granddaughters on a very expensive transatlantic cruise to Rome, their ancestors' homeland, to celebrate her granddaughters' 18th birthdays. Sharon feels this family tradition is nice but, because of Carla's financial situation, feels this is a poor use of her money. What should Sharon do to best serve her client, Carla? Because Sharon, as Carla's financial planner, does not feel taking the trip is a wise financial decision, she should not include it in Carla's financial plan as a goal. Sharon should understand that expensive trips to the homeland of Carla's ancestors is an important family tradition to Carla. Sharon should consider the trip as one of Carla's goals and explain how such a goal would impact her overall financial plan. Sharon should share her opinion with Carla and persuade her to abandon this as one of her goals. A) II and III B) II, III, and IV C) IV only D) I only
A) II and III
Which of the following statements regarding open-ended and closed-ended questions is CORRECT? I Planners should use as many closed-ended questions as possible when developing client goals and expectations. II Open-ended questions facilitate effective communication between the client and planner because they require the client to answer in her own words. A) II only B) I only C) Both I and II D) Neither I nor II
A) II only
Your new client, Kate, has a daughter, Blanca, who will be attending college in the next few years. For this reason, Kate is interested in learning more about education grants. The following statements have been made by her friends, and Kate has asked you to confirm their accuracy. Which of her following statements regarding education grants is CORRECT? Pell Grants are available to undergraduate and graduate students. Federal Work-Study Programs provide students with part-time jobs while attending college. Pell Grants are disbursed to the educational institution for the benefit of the qualifying student. Federal Supplemental Educational Opportunity Grants (FSEOGs) are federal grants for which priority is given to students who also receive Pell Grants. A) II, III, and IV B) II and IV C) I, III, and IV D) II only
A) II, III, and IV
Which of the following interest rates is controlled by the Federal Reserve Board in the exercise of its monetary policy? Prime rate Federal funds rate Discount rate A) III only B) I and II C) I, II, and III D) II and III
A) III only
Michael, Mason, and Mark are currently college students eligible for federal student aid. Michael is 20 years old and has not registered with the Selective Service System. Mason has been unable to maintain satisfactory academic progress. Mark is experiencing financial difficulties and has defaulted on his federal student loan. Which of these students are likely to lose federal student aid eligibility? A) Michael, Mason, and Mark B) Michael and Mason C) Mason and Mark D) Michael only
A) Michael, Mason, and Mark
When the economy has experienced a decline in real gross domestic product (GDP) for two or more successive quarters, what stage of the economic cycle does this indicate? A) Recession B) Trough C) Peak D) Recovery
A) Recession
Which of the following is the act that provides applicable procedures for issuing an initial public offering (IPO) of securities while specifying which securities are exempt from registration requirements? A) Securities Act of 1933 B) Investment Company Act of 1940 C) Investment Advisers Act of 1940 D) Securities Exchange Act of 1934
A) Securities Act of 1933
To give the stock price a boost, a corporate officer posts favorable, yet slightly inaccurate information about his company's earnings in an internet chat room. After a few days of posting and blogging, the stock starts to rise a couple of points, after which the officer decides to exercise a number of stock options to make a sizable profit. Which of the following acts did this officer violate by his actions? A) Securities Exchange Act of 1934 B) The Investment Advisers Act of 1940 C) The Investment Company Act of 1940 D) Securities Act of 1933
A) Securities Exchange Act of 1934
Windows, Inc., manufactures window shutters and shades. The price of shutters increases, resulting in a higher profit margin. As a result, XYZ Company chooses to reduce the supply of shades and to increase the supply of shutters to take advantage of increased profits. Based on this information, which of the following statements is CORRECT? A) The supply curve for shades would shift to the left. B) The supply curve for shades would remain unchanged. C) The supply curve for shades would shift to the right. D) The supply curve for shutters would shift to the left.
A) The supply curve for shades would shift to the left.
(Landon Case Study) Betty enjoys surfing the internet in her free time. Recently, she went to a seminar on internet safety and identity theft. Here, she learned about individuals who pose as financial institutions and send spam over the internet to entice individuals to reveal their personal information. This information may then be used to steal the individual's identity. This practice is known as A) phishing. B) ripping. C) skimming. D) Pilfering.
A) phishing.
Martin would like to purchase a $250,000 home eight years from today. To meet this goal, approximately how much should Martin invest at the end of each six-month period if he expects to earn a 7% annual rate of return, compounded semiannually, on his investments? A) $11,386 B) $11,921 C) $11,518 D) $12,183
B) $11,921
Today, Bernie and Beth have become the parents of twin boys. Bernie, a financial advisor, knows the importance of advance planning and would like to begin saving for his children's college education. Both Bernie and Beth expect their children to attend private schools and that tuition for such an education will be $25,000 per year per child, in today's dollars. Inflation has been 4% per year, and tuition has been increasing at 6% a year. If the boys are expected to attend four years of college beginning in 18 years, how much should Bernie and Beth save at the end of each year for the next 18 years to fund their goal? Assume Bernie and Beth invest in equities and can earn an after-tax rate of return of 9%. Round to the nearest hundred dollars. A) $9,200 B) $4,600 C) $6,600 D) $13,300
B) $4,600
Julian and Meredith have one child, Rolston. Rolston and his spouse, Debbie, have one daughter, Lydia. Julian and Meredith have provided the following information to you, their financial planner, regarding their checking and savings accounts: Julian and Meredith, checking: $100,000 Julian and Meredith, savings: $30,000 Julian, Meredith, and Rolston, checking: $60,000 Rolston and Lydia, checking: $80,000 Based on the information provided and assuming each owner has an equal right of withdrawal, what is the total FDIC coverage afforded to Julian, assuming the accounts are held at the same financial institution? A) $190,000 B) $85,000 C) $55,000 D) $100,000
B) $85,000
Today, Emily put all of her cash into an account earning an annual interest rate of 9%, compounded monthly. Assuming she makes no withdrawals from or additions to this account, in approximately how many years will Emily double her money? A) 8.25 years B) 7.73 years C) 8.75 years D) 9.00 years
B) 7.73 years
John and Kelly recently moved to the East Coast. John is in the navy and wishes to live off base for his next tour of duty, which is expected to last no more than four years. John and Kelly want to purchase a home; however, they expect to move after his tour of duty. Which of the following mortgages is best for John and Kelly if they want to keep their monthly mortgage payments to a minimum? A) A 15-year fixed-rate mortgage B) A 30-year fixed-rate mortgage C) A reverse mortgage D) An adjustable-rate mortgage (ARM) with an interest rate cap
B) A 30-year fixed-rate mortgage
When must Standard A.1—Fiduciary Duty be upheld? A) At all times when meeting with clients B) At all times when providing financial advice, regardless of whether financial planning is required C) At all times D) At all times when providing financial advice that requires financial planning
B) At all times when providing financial advice, regardless of whether financial planning is required
During the last year, John has made timely payments on three of his credit card accounts, all which have balances near the available credit limits. He did pay off a fourth credit card account, which he had for 15 years, and immediately closed it. Which of the following statements regarding John's credit score is CORRECT? By immediately closing his long-standing account when it was paid off, John likely decreased his credit score. Having three credit card account balances near their available credit limits will in all likelihood adversely affect John's credit score. A) II only B) Both I and II C) I only D) Neither I nor II
B) Both I and II
Which of the following is used in calculating the expected family contribution (EFC) toward the cost of college education? Student assets Parents' retirement plan account balances A) I only B) Both I and II C) II only D) Neither I nor II
B) Both I and II
Which of the following statements concerning investment advisers is CORRECT? In general, investment advisers with $50 million of assets or more under management are required to register with the Securities and Exchange Commission (SEC). Investment advisers with assets under management of less than $100 million will generally be required to register as investment advisers with the state in which they maintain clients. A) Neither I nor II B) I only C) II only D) Both I and II
B) I only
Which of the following statements concerning the Consumer Credit Protection Act is CORRECT? Credit terms must be disclosed before extending credit. Consumer liability for a lost or stolen credit card is limited. Applicants who are denied credit must be offered the reason. Credit bureau reports must include accurate, relevant, and recent information. A) I and II B) I, II, III, and IV C) II, III, and IV D) I only
B) I, II, III, and IV
Stephanie, a CFP® professional, is working with a graphic artist to design a new brochure advertising her services. On the cover, under her name, she advertises herself as a CFP® consultant. Inside the brochure, under her name, she identifies herself as a CERTIFIED FINANCIAL PLANNER™. According to CFP Board's guidelines regarding how the CFP® marks may be used, which of the following is CORRECT? Advertising herself as a CFP® consultant is prohibited by CFP Board. Following her name, Stephanie could have identified herself as a CFP®. Stephanie has correctly identified herself as a CERTIFIED FINANCIAL PLANNER™. A) II and III B) I, II, and III C) I and III D) I only
B) I, II, and III
Which of the following statements regarding interpersonal communication between financial planners and their clients is CORRECT? I. Mirroring is accomplished by imitating the client's body language or verbal style. II. Effective interpersonal communication involves the application of oral skills only. III. Body language can impact how clients receive and interpret messages more than any other type of communication. IV. Emotional intelligence includes the ability to recognize emotional expressions and select socially appropriate responses. A) I, II, III, and IV B) I, III, and IV C) II and IV D) I and III
B) I, III, and IV
Which of the following statements regarding the decision to buy or lease a home is CORRECT? Generally, more costs are associated with leasing a home, especially if this arrangement is short term. A client who will be residing in the home for a short time period should lease the home. The lower the marginal income tax bracket, the greater the advantage of owning a home. The tax deduction for mortgage interest is a benefit of home ownership. A) I and II B) II, III, and IV C) I and III D) II and IV
B) II, III, and IV
Which of the following expenses qualify for an employer's educational assistance program? Transportation On-campus housing Full-time, graduate school tuition Part-time, undergraduate tuition A) IV only B) III and IV C) I, II, and III D) I, II, and IV
B) III and IV
Emmitt has an auditory learning style. Which of the following statements regarding Emmitt is CORRECT? He prefers to learn by using a hands-on approach. He responds well to graphs, charts, and visual presentations. He retains information by hearing or speaking. He prefers his goals and objectives to be presented as a to-do list in bullet form. A) I and II B) III only C) II, III, and IV D) I, II, and IV
B) III only
Rob and Darla are refinancing their current 7.5% 30-year fixed-rate mortgage for $150,000 into a new 5.75% 30-year fixed rate mortgage for $150,000. How much is their original monthly payment, and how much will their new monthly payment be? A) Original payment: $1,875.82; new payment: $1,248.82 B) Original payment: $1,048.82; new payment: $875.36 C) Original payment: $1,408.82; new payment: $875.36 D) Original payment: $1048.82; new payment: $785.36
B) Original payment: $1,048.82; new payment: $875.36
In his financial planning practice, Ted assumes that clients are rational and will change to the most favorable behavior if given the appropriate counseling. He sees himself as the agent of change and focuses on obtaining and analyzing quantitative data such as cash flow, assets, and debt. Ted's approach to financial counseling is known as A) the cognitive behavioral approach. B) the economic and resource approach. C) the classical economics approach. D) the strategic management approach.
B) the economic and resource approach.
A client is presented with two equal investment opportunities. The first is stated in terms of potential gains, and the second is stated in terms of potential losses. Without having any additional information, the client selects the first investment. The client's decision reflects A) loss aversion theory. B) the framing effect. C) herding. D) anchoring.
B) the framing effect.
Which of the following individuals are required to register as an investment adviser under the Investment Advisers Act of 1940? Margaret provides advice regarding securities. Candace receives compensation for providing advice. Monty is in the business of providing advice about securities. Kate is a CFP® practitioner who issues reports regarding securities. A) I and III B) II, III, and IV C) II and III D) I, II, III, and IV
B)II,III,IV
(Landon Case Study) Transactions can increase or decrease a client's net worth. This can result in a change in the strength or weakness of a client's financial status. Assume Harry and Alice sold their antiques for $20,000 and used the proceeds to purchase a used car valued at $22,500. What is their net worth after these transactions? A) $314,335 B) $312,835 C) $310,335 D) $311,835
C) $310,335
Today, Charles purchased an oil painting for $50,000. He expects the painting's value to increase at a rate of 12%, compounded annually for the next five years. How much will the painting be worth at the end of the fifth year if his expectations are correct? A) $66,911 B) $89,542 C) $88,117 D) $89,783
C) $88,117
Calculate the following inflation-adjusted return based on an 11% rate of return and a 4% inflation rate. A) 2.75% B) 7.00% C) 6.73% D) 0.36%
C) 6.73%
(Landon Case Study) Harry and Alice are most likely in what life cycle phase? A) Gifting phase B) Conservation phase C) Asset accumulation phase D) Preservation phase
C) Asset accumulation phase
In Country A, inflation and unemployment are high, and the general growth of the economy has slowed as business output has fallen. In Country B, there has been an increase in the general level of prices; in other words, the cost of buying a home, durable goods, and consumption goods has increased. Based on this information, which of the following statements is CORRECT? Country A is experiencing stagflation. Country B is experiencing inflation. A) Neither I nor II B) I only C) Both I and II D) II only
C) Both I and II
Which of the following statements is CORRECT regarding the American Opportunity Tax Credit and the Lifetime Learning Credit? The American Opportunity Tax Credit and the Lifetime Learning Credit may not both be claimed in the same year for the same student. The student loan interest deduction may be used in combination with any of the other educational tax benefits, such as the qualified higher education tuition deduction, the American Opportunity Tax Credit or the Lifetime Learning Credit. A) I only B) Neither I nor II C) Both I and II D) II only
C) Both I and II
Which of the following statements regarding inflation and disinflation is CORRECT? Disinflation is a decline in the rate of inflation. Inflation represents an increase in the general level of prices. A) Neither I nor II B) II only C) Both I and II D) I only
C) Both I and II
Which of the following cash outflows is the best example of a variable outflow? A) Automobile loan payments B) Insurance premiums C) Clothing expenses D) Mortgage payments
C) Clothing expenses
Which of the following statements regarding credit unions is CORRECT? Credit union loans are insured by the National Credit Union Share Insurance Fund (NCUSIF). They accept deposits and make automobile loans only. Earnings from investments are allocated to the members in the form of stock options. Members may elect the board of directors that is responsible for setting credit union guidelines and providing leadership. A) I, II, and III B) IV only C) I and IV D) III and IV
C) I and IV
As a member of a team of financial advisors, a financial planner's responsibilities for a client typically include which of the following? Helping the client identify financial goals Drafting a power of attorney for the client Analyzing the client's current financial status Monitoring whether the client is complying with a plan after implementation A) I and III B) III and IV C) I, III, and IV D) I, II, III, and IV
C) I, III, and IV
CFP Board provides guidelines regarding how the CFP® marks may be used in documents or marketing materials. Identify the items that are required when the words CERTIFIED FINANCIAL PLANNER are used. Always use the ™ symbol. Always associate with CFP Board. Always use capital letters or small-cap font. Always use with one of CFP Board's approved nouns (certificant, professional, practitioner, certification, mark, exam) unless directly following the name of the individual certified by CFP Board. A) I and III B) II and IV C) I, III, and IV D) II and III
C) I, III, and IV
You have advised Brooke that she needs to increase her savings. What might you recommend as good savings strategies? Limit her cell phone texting and calling Use an overdraft feature on debit cards Increase her deductible on her car insurance policy Limit her credit card purchases to those she can pay off in full in one year A) I, II, III, and IV B) III and IV C) I, III, and IV D) I and III
C) I, III, and IV
Jillian is meeting with Maggie, a married client. During a discussion of Maggie's retirement planning, Maggie asks, "Should I contribute more to my 401(k) plan?" Jillian answers, "What type of lifestyle do you anticipate during retirement?" Maggie frowns, hangs her head, and responds, "I just want to have the extravagant lifestyle my husband, Tristen, wants us to have." Jillian does not find Maggie convincing. What type of communication is taking place between Jillian and Maggie? Jillian is practicing verbal mirroring. Jillian's answer to Maggie is a leading response. Jillian is likely not convinced that Maggie wants to have the extravagant lifestyle Tristen wants due to Maggie's body language A) I and II B) I and III C) II and III D) I, II, and III
C) II and III
You have gathered the following information from Sam's financial statements: Monthly gross income: $10,000 Monthly net income: $7,400 Total assets: $195,000 Total debt: $30,000 Monthly housing payment (PITI): $1,500 Monthly consumer debt payments: $1,600 Based on this information, which of the following statements is CORRECT? Sam's total debt ratio exceeds the generally recommended maximum. Sam's consumer debt ratio exceeds the generally recommended maximum. A) Neither I nor II B) Both I and II C) II only D) I only
C) II only
Maury, age 30, has come to you for advice regarding college planning for his two-year-old son, Brandon. He has presented you with the following information: Current annual salary: $96,700 Traditional IRA: $12,563 (no contribution/fully invested in a U.S. government bond fund) Section 401(k): $23,087 (6% contribution/2% match) Monthly rent payment: $1,235 Credit card debt: $2,205 (14.9% fixed) Car: lease, fully paid by employer Checking account balance: $1,937 Long-term disability insurance: 60% of salary to age 65, 90-day elimination period (group) Life insurance: 2× salary (group), $500,000, 20-year term (individual) After completing a budget with Maury, you have determined that he has $250 per month in surplus cash flow. He tells you excitedly that the full amount may be used to fund a college plan for Brandon. Through a risk profile questionnaire, you determine he has a moderate to aggressive risk tolerance. Based on the information provided, what should Maury do first? A) Establish an emergency fund B) Establish a college education plan for Brandon C) Pay off his credit card balance D) Purchase additional life insurance
C) Pay off his credit card balance
Which of the following should be considered a liquid asset for emergency fund purposes? A) Stock mutual funds B) Life insurance cash values C) Savings accounts D) Personal residences
C) Savings accounts
A financial institution that allocates earnings from loan interest and investments to its members in the form of dividends is+ A) an investment bank. B) a credit union. C) a bank. D) a trust company.
C) a bank.
In 2013, the average cost of a new home in Anytown was $200,000. Two years later, to the dismay of many prospective homeowners, the average cost rose to $250,000. Then in 2018, the average cost of a new home fell to $225,000, and the reaction to the decreased cost was positive, even though the new average cost was higher than the 2013 average cost of a new home. This behavior is known as A) herding. B) mental accounting. C) anchoring. D) confirmation bias
C) anchoring.
All of the following would be included on a client's statement of financial position except A) the client's credit card balances. B) the value of the client's home. C) the client's salary. D) the client's checking account balance
C) the client's salary.
Daniel secures a $350,000 30-year mortgage with an annual interest rate of 6%. How much total interest will Daniel have paid on the mortgage at the end of 25 years? A) $375,960 B) $388,070 C) $241,458 D) $108,542
D) $108,542
Margo has debts listed as follows. She would like to reduce her debt by paying off the debt with the lowest balance first, then paying off the next-lowest balance, and so on. She currently has $50 in excess monthly cash flow to start this process. Using the snowball technique, what would she be able to pay on Credit Card D once the smaller loans have been paid off? Debt Balance Minimum Payment Credit Card A $225 $25 Credit Card B $575 $35 Credit Card C $1,000 $50 Credit Card D $3,200 $120 Auto loan $12,000 $300 A) $110 B) $230 C) $160 D) $280
D) $280
Claude would like to travel around the world in six years and will need $200,000 for his adventure. He assumes inflation will average 4% and that he can earn a 9% compound annual after-tax rate of return on his investments. What serial payment should Claude invest at the end of the first year to attain his goal? A) $30,727.95 B) $29,318.41 C) $28,190.78 D) $29,546.11
D) $29,546.11
Danielle works full time for an accounting firm and is enrolled in night classes on a part-time basis in pursuit of her MBA. Her employer offers reimbursements for qualified expenses through an educational assistance program. This year, Danielle has incurred the following educational expenses: Books: $600 Tuition: $3,000 Enrollment fees: $300 Computer lab fee: $100 Clothing for school: $150 Based on these expenses, what is the amount of reimbursement for which Danielle can receive under the educational assistance program? A) $4,150 B) $3,300 C) $3,900 D) $4,000
D) $4,000
Your clients, Garrett and Laura, have become parents today with their first-born child, Misty. They would like to start saving for Misty's college education, and would like Misty to attend college at Central University for four years starting at age 18. You've determined that the total amount needed to fund Misty's college education is $175,000. If the expected annual return for deposits into a 529 plan is 9%, what is the amount of the quarterly deposits that must be made into a 529 plan? A) $863.49 B) $323.84 C) $971.66 D) $993.52
D) $993.52
Mary purchased a zero-coupon bond nine years ago for $600. The bond, with a face value of $1,000, matured today. What is the average annual compound rate of return (calculated semiannually) that Mary realized on her investment? A) 5.76% B) 2.88% C) 2.92% D) 5.84%
D) 5.84%
Ross and Jackie recently retired and are planning an Asian vacation to celebrate their 45th wedding anniversary. When they return, they would like to meet with you, their financial planner, to discuss charitable contributions they would like to make. Ross and Jackie are currently in which life cycle phase? A) Conservation phase B) Protection phase C) Asset accumulation phase D) Distribution phase
D) Distribution phase
Evelyn has heard from her friends that an investment in ABC stock was a wise idea because the company sells popular designer eyewear. Though you, as her financial planner, advise her that investing in this stock is a poor decision, Evelyn makes the investment anyway. Martin, another client of yours, considers his investment skills to be much greater than they actually are. He takes credit for any investment decisions that have positive returns, but blames the economy when his portfolio does poorly. In recent months, Considering Evelyn's and Martin's behavior, which of the following statements is CORRECT? A) Evelyn's behavior is representative of anchoring; Martin's behavior is an example of mental accounting. B) Evelyn's behavior is representative of mental accounting; Martin's behavior is an example of confirmation bias. C) Evelyn's behavior is representative of overconfidence; Martin's behavior is an example of overconfidence. D) Evelyn's behavior is representative of confirmation bias; Martin's behavior is an example of overconfidence.
D) Evelyn's behavior is representative of confirmation bias; Martin's behavior is an example of overconfidence.
(Landon Case Study) Alice recently read a blog where the author advises his readers that the Federal Reserve is likely to raise the discount rate. What will likely result? The cost of borrowing will increase. Member banks will be discouraged from borrowing funds. There will be an increase in the money supply. A) II only B) I, II, and III C) I only D) I and II
D) I and II
Alonzo, a CFP® professional, has a financial planning practice in his hometown. His client, Jeff, approached Alonzo asking him for advice about a life insurance policy on his own life. Alonzo has no expertise in individual life insurance and refers Jeff to Marta, a local insurance agent and Alonzo's daughter. Unlike her father, Marta is not a CFP® professional. Alonzo does not tell Jeff that Marta is his daughter. The following week, Marta meets with Jeff in Alonzo's office to discuss insurance options. Jeff completes an application for life insurance and explains that he does not have the $5,000 annual premium available at this time. Alonzo agrees to loan Jeff $5,000, which Jeff repays three months later. Which of the following statements regarding Alonzo's adherence to CFP Board's Code of Ethics and Standards of Conduct is CORRECT? Alonzo followed Standard A.3—Competence by referring Jeff to Marta for insurance consultation. Alonzo should have disclosed to Jeff that Marta is his daughter to avoid any potential conflicts of interest. Alonzo did not violate the Standards of Conduct when he loaned Jeff money because Jeff repaid the full balance within 180 days. Marta owes Jeff the duty of care of a fiduciary as defined by CFP Board. A) I, III, and IV B) I, II, and III C) II only D) I and II
D) I and II
You are using internal rate of return (IRR) to evaluate several alternative investments for your client, Jerry. If Jerry's required rate of return is 8%, which of the following investments should he consider adding to his portfolio? Investment 1 (IRR = 12%) Investment 2 (IRR = 9%) Investment 3 (IRR = 5%) A) I only B) II and III C) II only D) I and II
D) I and II
(Landon Case Study) As the Landons' financial planner, you must adhere to the Standard of Integrity in the Code and Standards. Which of the following best describes the Standard of Integrity? It demands honesty and candor, which may not be subordinated to personal gain. It requires a CFP® professional to treat clients, prospective clients, fellow professionals, and others with dignity, courtesy, and respect. A) Neither I nor II B) II only C) Both I and II D) I only
D) I only
Which of the following education funding plans provide(s) tax advantages, regardless of the contributor's modified adjusted gross income (MAGI)? Section 529 plan Series EE or Series I savings bonds Coverdell Education Savings Account (ESA) A) II and III B) I, II, and III C) III only D) I only
D) I only
Under the Consumer Credit Protection Act (Truth in Lending Act), which of the following must be disclosed when consumer loans are made? Prepayment penalties Annual percentage rate (APR) Right of rescission clause When payments are to begin A) I, II, and III B) III and IV C) I and II D) I, II, III, and IV
D) I, II, III, and IV
Which of the following statements regarding a financial planner's analysis of a client's cash flow statement is CORRECT? The financial planner may encourage the client to reduce the variable expenses reported on the cash flow statement. The analysis of the client's cash flow statement can help the planner determine whether the client is living within his financial means. The analysis of the client's cash flow statement helps determine the client's net worth, or total cash surplus, by tracking cash inflows and outflows over a period of time. A) II only B) I and III C) I and II D) I, II, and III
D) I, II, and III
Zoe, a CFP® professional, has recently entered into a financial planning engagement with Mannie. As his financial planner, which of the following are Zoe's roles? Analyzing Mannie's current financial status Assisting Mannie in implementing the financial plan Helping Mannie identify financial goals and objectives Providing the financial statements needed to complete the financial plan A) I and III B) I, III, and IV C) II and IV D) I, II, and III
D) I, II, and III
If CFP Board Counsel finds no probable cause following an investigation, it must do which of the following? Dismiss the investigation Provide a settlement offer Reserve the right to reopen the investigation in the future Indicate that the matter requires no further action at this time A) II and III B) I only C) I, II, and IV D) I, III, and IV
D) I, III, and IV
Which of the following statements regarding cash flow statements is CORRECT? The cash flow statement also helps to determine a client's savings level. A cash flow statement represents a snapshot of a client's status as of a given date. The three components of the cash flow statement are cash inflows, cash outflows, and net cash flow. "For the period January 1, 20XX to December 31, 20XX" is an appropriate way to indicate the period covered by the cash flow statement. A) III and IV B) I and II C) I, II, III, and IV D) I, III, and IV
D) I, III, and IV
(Landon Case Study) Which of the following items would affect Harry and Alice's net worth? Payment of $1,200 of their current credit card balance using funds from their savings account Purchasing a used automobile with a 10% down payment from their checking account with the remaining 90% bank financed Value of the Section 401(k) plan drops to $55,000 A) I, II, and III B) III only C) I and II D) II and III
D) II and III
Barry is meeting with his client, Mandy, to gather the information he needs to develop a financial plan. During the conversation, Barry imitates Mandy's gestures and physical positions and uses a similar tone of voice. Which communication skill(s) is Barry using to help develop a relationship of honesty and trust with Mandy? Anchoring Cognitive dissonance Verbal mirroring Physical mirroring A) I only B) I, III, and IV C) II, III, and IV D) III and IV
D) III and IV
A client's assessment of the magnitude of the risks being traded off is known as A) emotional intelligence. B) risk tolerance. C) risk capacity. D) risk perception.
D) risk perception.
Emma, a CFP® professional, has a thriving financial planning practice in a small town. As part of clients' financial planning engagements with Emma, these clients have provided her with a considerable amount of confidential information. Under which of the following circumstances can Emma reveal confidential client information? To defend herself against charges of wrongdoing To give an example in a meeting with another client To demonstrate to prospective clients the types of services Emma provides To provide information to an estate planning attorney who is working on a similar case
To defend herself against charges of wrongdoing
The preamble of CFP Board's Code of Ethics and Standards of Conduct describes the value of upholding aspirational standards and incorporating them into everyday financial planning practice. Identify the purpose(s) of the Code and Standards contained in the preamble. To hold all CFP® professionals to high standards of competency and ethics To benefit and protect the public To investigate, review, consider recommendations, and issue final decisions on allegations of violations and/or noncompliance To advance financial planning as a distinct and valuable profession
To hold all CFP® professionals to high standards of competency and ethics To benefit and protect the public To advance financial planning as a distinct and valuable profession
