CFP - 5111 Textbook Questions I got wrong

Which of the following is the act that extended the regulation of securities to the secondary market or exchanges? A)The Investment Advisors Act of 1940 B)The Securities Act of 1933 C)The Investment Company Act of 1940 D)The Securities Act of 1934

D)The Securities Act of 1934 Explanation The answer is the Securities Act of 1934. In addition, this act also established the SEC (Securities and Exchange Commission) as the primary regulatory body overseeing the sale and purchase of securities by a potential investor. The 1934 act deals with the people involved in the subsequent sale and purchase of previously registered securities.

Which of the following statements correctly applies the principles found in CFP Board's Code and Standards? Integrity demands honesty and candor, which must not be subordinated to personal gain and advantage. Professionalism means attaining and maintaining an adequate level of relevant knowledge and skill to apply that knowledge. A)I only B)Neither I nor II C)II only D)Both I and II

A)I only Explanation The answer is I only. Statement II correctly defines the Standard of Competence. Standard A.7 of the Code and Standards requires CFP® professionals to adhere to the principle of Professionalism, and treat Clients, prospective Clients, fellow professionals, and others with dignity, courtesy, and respect.

Select the requirements defined in Step 7 (Monitoring Progress and Updating) of Practice Standards for the Financial Planning Process. Address monitoring and updating responsibilities Monitor the client's progress Obtain current qualitative and quantitative information Update goals, recommendations, or implementation decisions A) I, II, III, and IV B) III only C) I, II, and IV D) II, III, and IV

A)I, II, III, and IV The answer is I, II, III, and IV. All of these requirements are included in Step 7 (Monitoring Progress and Updating) of Practice Standards for the Financial Planning Process.

Which of the following requires an individual to be registered as an investment adviser under the Investment Advisers Act of 1940? The individual provides advice about a specific security. The individual is in the business of providing advice about specific securities. The individual receives compensation for providing advice. The individual is a CFP® practitioner. A)I, II, and III B)I, II, III, and IV C)IV only D)III and IV

A)I, II, and III The answer is I, II, and III. A CFP® practitioner does not necessarily have to register by virtue of receiving the designation.

Which of the following statements regarding supply is CORRECT? Generally, the higher the price that can be obtained, the higher the quantity supplied. The supply curve is usually represented as sloping downward from left to right. A) I only B) II only C) Both I and II D) Neither I nor II

A) I only The answer is I only. A higher price level usually results in a higher level of supply, which is represented by an upward-sloping curve from left to right.

Carmen has refinanced her mortgage of $200,000 for 15 years with an annual interest rate of 5%. How much is her monthly principal and interest payment? A) $1,581.59 B) $1,575.02 C) $1,529.24 D) $1,605.70

A) $1,581.59 The answer is $1,581.59. This requires an ordinary annuity calculation. The keystrokes on the HP 10bII/HP 10bII+ are as follows: END mode; 200,000, PV; 5 ÷ 12 = 0.4167, I/YR; 15 × 12 = 180, N; Solve for PMT = -1,581.5873, or $1,581.59.

When calculating the net present value (NPV) of a potential investment, the investor's desired rate can be called I. the required rate. II. the internal rate. III. the opportunity cost. IV. the cost of capital. A)I, III, and IV B)I, II, III, and IV C)I and III D)III and IV

A)I, III, and IV

7. Select the principles that are included in the Code of Ethics. I. Act in the client's best interests. II. Maintain the confidentiality and protect the privacy of client information. III. Exercise due process. IV. Avoid all conflicts of interest. A. II only B. I and II C. II and IV D. I, II, III, and IV

B. I and II

Larry and Brittany each have an individual account and a joint account with Crestview Bank. What is the maximum amount of FDIC insurance they each can have at the bank? A. $125,000 B. $250,000 C. $500,000 D. $1,000,000

C. $500,000

4. The federal funds rate will tend to move upward under which of the following conditions? (Note: This is a previously released CFP® Certification Exam question.) A. The Federal Reserve is buying government securities. B. The Federal Reserve lowers the discount rate. C. A few banks have excess reserve deficiencies, and the rest have ample excess reserves. D. A few banks have excess reserves, and the rest have significant reserve deficiencies

D. A few banks have excess reserves, and the rest have significant reserve deficiencies

1. Identify the scenario(s) where the Fiduciary Duty must be upheld. I. When providing Financial Advice II. When providing Financial Advice that requires Financial Planning III. When providing Financial Advice that does not require Financial Planning IV. At all times A. I only B. IV only C. I and II D. I, II, and III

D. I, II, and III

Which of the following confirms the current state of the economy? A) Unemployment rate B) Orders for durable goods C) Housing starts D) Changes in investor sentiment

A) Unemployment rate The answer is unemployment rate. The unemployment rate is a coincident indicator—it confirms the current state of the economy. The other choices are leading indicators—they indicate which direction the economy is heading.

Tom and Samantha have a modified adjusted gross income of $185,000 in 2019 and file a joint tax return. They want to know what combination of available funds and tax benefits they can use to offset their daughter's higher education expenses. Which of the following choices is CORRECT? A)Coverdell Education Savings Account (CESA) and Section 529 plan. B)American Opportunity Tax Credit and Series EE savings bonds. C)Lifetime Learning Credit, Coverdell Education Savings Account (CESA), and Uniform Transfers to Minors Act (UTMA) account distribution. D)Pell Grant, Coverdell Education Savings Account (CESA), and qualified tuition plan account distribution.

A) Coverdell Education Savings Account (CESA) and Section 529 plan. The answer is Coverdell Education Savings Account (CESA) and Section 529 plan. Because of their modified adjusted gross income, Tom and Samantha do not qualify to take the American Opportunity Tax Credit (the MAGI phaseout for joint filers is $160,000−$180,000) or Lifetime Learning Credit for 2019 (the MAGI phaseout for joint filers is $116,000−$136,000). The Pell Grant is awarded on a financial-need basis, for which the family would not qualify.

10. Choose the CORRECT statement(s) regarding educational assistance programs available under the Internal Revenue Code. I. An employer may provide an unlimited amount of educational assistance to an employee, assuming the education is job related. II. An employer may provide up to $7,250 of non-job-related educational assistance to an employee during any one year as a tax-free employee benefit. A. I only B. II only C. Both I and II D. Neither I nor II

A. I only The answer is I only. Under IRC Section 127, an employer may only provide up to $5,250 of non-job-related educational assistance to an employee during any one year as a tax-free employee benefit.

Identify the value of the protected amount in 2020‒2021 for purposes of calculating student assets in the expected family contribution (EFC) formula. A) $5,000 B) $6,840 C) $5,640 D) $6,600

B) $6,840 The answer is $6,840. The protected amount for student assets is $6,840 (2020‒2021); 50% of student income above the protected amount is included in the calculation of EFC.

For an emergency fund, the Chens should set aside how many months of fixed and variable expenses? A) 12 B) 3 C) 6 D) 9

B) 3 The answer is 3. Because both of the Chens work outside the home, three months of fixed and variable expenses should be set aside for their emergency fund.

Assume you, as a CFP® professional, analyze the Chens' current financial status and decide to make the following recommendations: Fixed insurance products An IRA funded with mutual funds For which of the above must you register with FINRA? A) I only B) II only C) Neither I nor II D) Both I and II

B) II only The answer is II only. You must be registered with FINRA to sell securities. Therefore, you must be registered to sell IRAs funded with mutual funds but not to sell fixed insurance products.

All of the following are employer guidelines associated with implementing an educational assistance program except A) the program must be offered to all employees. B) employers that provide their employees educational assistance benefits may not deduct these costs as a business expense. C) employers must have a written qualified program that applies exclusively to their employees D) the program cannot favor highly compensated employees.

B) employers that provide their employees educational assistance benefits may not deduct these costs as a business expense. The answer is employers that provide their employees educational assistance benefits may not deduct these costs as a business expense. Employers that provide their employees with educational assistance benefits can deduct these costs as a business expense.

Max acquires a $200,000 mortgage with a 30-year repayment term and an annual interest rate of 5%. What is the balance of Max's mortgage after 12 payments? A) $193,333 B) $197,049 C) $190,067 D) $198,229

B) $197,049 The answer is $197,049. The remaining mortgage balance after 12 payments is $197,049. The keystrokes on the HP 10bII/HP 10bII+ calculator are as follows: END mode; 200,000, PV; 5 ÷ 12 = 0.4167, I/YR; 30 × 12 = 360, N; PMT = -1,073.6432. Without clearing the calculator, enter: 1, INPUT, 12, SHIFT, AMORT; = -2,950.73 (total principal paid through 12 months) = -9,932.9884 (total interest paid through 12 months) = 197,049.27 (remaining mortgage balance at the end of 12 months).

Select the option that is NOT available to the Discipline and Ethics Commission (DEC) when reviewing the Hearing Panel's findings and recommendations. A) Reject B) Deny C) Accept D) Modify

B) Deny The answer is deny. During the DEC review and issuance of the final order, the DEC may accept, reject, or modify the Hearing Panel's findings and recommendations.

Identify steps included in CFP Board's Practice Standards for the Financial Planning Process. Monitoring and Updating Identifying and Selecting Goals Establishing and Defining the Client-Planner Relationship Developing the Financial Planning Recommendation(s) A) II and IV B) I, II, and IV C) III and IV D) I, II, III, and IV

B) I, II, and IV The answer is I, II, and IV. Establishing and Defining the Client-Planner Relationship is not included in CFP Board's Practice Standards for the Financial Planning Process.

What legislation has as one of its primary purposes to provide investors with the full and fair disclosure of material information regarding initial public offerings (IPOs)? A)Securities Exchange Act of 1934 B)Securities Act of 1933 C)The Securities Investor Protection Corporation Act of 1970 D)The Maloney Act of 1938

B)Securities Act of 1933 Explanation The answer is Securities Act of 1933. This disclosure is intended to help investors make more informed investment decisions. Most of this information is found within the prospectus document, which is part of the registration process

Net worth can be calculated to determine whether it is a strength or weakness of clients' current status. What is the Chens' net worth as of the end of the prior year? A) $492,000 B) $177,000 C) $192,000 D) $284,000

C) $192,000 he answer is $192,000. Net worth is defined as the fair market value of all assets minus all liabilities. ASSETS Personal residence$140,000Personal property$30,000Automobiles$18,000Money market mutual fund$15,000S&P 500 Index mutual fund$25,500Section 401(k) plan - Carl$12,000Section 403(b) plan - Sue$22,000Real estate limited partnership$5,200High-yield bond mutual fund$3,500Treasury bill$10,000Utility company stocks$2,800TOTAL ASSETS$284,000 LIABILITIES Mortgage$92,000TOTAL LIABILITIES$92,000NET WORTH$192,000 The Chens had a net worth of $192,000 as of December 31 of the prior year.

1. Barry and Virginia have a six-year-old son, Daniel. They have plans for Daniel to attend a four-year private university at age 18. Currently, tuition at the local private university is $15,000 per year and is expected to increase at 7% per year. Assuming Barry and Virginia can earn an annual compound return of 10% and inflation is 4%, how much does the couple need to start saving at the end of each year (starting this year) to be able to pay for Daniel's college education? (Assume their last payment is made at the beginning of Daniel's first year in college.) A. $5,144.86 B. $5,899.93 C. $6,065.35 D. $8,886.18

C. $6,065.35 Step 1: Determine the future cost of college for the first year. END mode 15,000, +/−, PV 7, I/YR 12, N Solve for FV = 33,782.8738, or $33,782.87 Step 2: Determine the account balance necessary to fund college education. BEG mode (money is needed at the beginning of college) 33,782.8738, +/−, PMT [(1.10 ÷ 1.07) − 1] × 100 = 2.8037, I/YR 4, N Solve for PV = 129,703.2143 or $129,703.21 Step 3: Determine the required savings payments. END mode 129,703.2143, FV 12 N (payments continue until Daniel reaches 18) 10, I/YR Solve for PMT = -6,065.3523, or $6,065.35

Your client, Doug, needs assistance preparing his statement of financial position and cash flow statement. He has an annual salary of $200,000 and pays $1,200 monthly in alimony to his ex-spouse, Diana. Doug owns a condo valued at $300,000, which currently has an outstanding mortgage balance of $130,000. He pays annual property taxes of $4,000, and a monthly condo insurance premium of $250. All of the following statements are correct except A. Doug's salary would be considered a cash inflow on his cash flow statement. B. the alimony Doug pays would be a cash inflow on Diana's cash flow statement. C. taxes paid on his property would be a liability on his statement of financial position. D. the condo insurance payments would be a fixed outflow on Doug's cash flow statement.

C. taxes paid on his property would be a liability on his statement of financial position.

Under the bankruptcy laws, which of the following will NOT be discharged? Credit card debt used to pay college tuition (within the past three years) Taxes from four years ago in which the taxpayer purposely failed to report $10,000 of self-employment income Alimony A) I and II B) I only C) I, II and III D) II and III

D) II and III The answer is II and III. Credit card debt may be discharged. Alimony or back taxes resulting from failure to report income cannot be discharged.

For purposes of calculating the expected family contribution (EFC), which of the following assets is included in the student's calculation? Section 529 plan assets Custodial accounts Home equity Life insurance cash value A) I and III B) I, II, III, and IV C) II, III, and IV D) II only

D) II only The answer is II only. Custodial accounts (e.g., Uniform Gifts to Minors Act [UGMA] or Uniform Transfers to Minors Act [UTMA] accounts) are considered student assets. If the parents are listed as contributors-owners, Section 529 plan assets are considered parental assets. Home equity and life insurance cash value are exempt.

Alice and Mitchell would like their newborn, Paloma, to attend college at Northern State University at age 18 for 4 years. Your planning firm has determined that the total amount needed to fund Paloma's entire college attendance is $175,000. Calculate the amount of the quarterly deposits into a 529 with an expected annual return of 9%. A)$971.66 B)$323.84 C)$863.49 D)$993.52

D) $993.52 The answer is $993.52. 175,000 FV (9 ÷ 4) 2.25 I/YR (18 × 4) 72 N Solve for PMT = ‒993.5239, or $993.52

8. George and Betty wish to establish a Section 529 college savings plan for both of their grandchildren. In 2020, what is the maximum amount that they can contribute without making a taxable gift for federal gift tax purposes? A. $75,000 B. $150,000 C. $265,000 D. $300,000

D. $300,000 The answer is $300,000. Because George and Betty have two grandchildren, they may contribute a maximum of $300,000 (or $150,000 for each account in 2020). However, they may make this contribution only once within a five-year period and must file a federal gift tax return reporting these transfers (even though there is no taxable gift).

3. To be eligible to receive federal student aid, a student must I. be a U.S. citizen. II. be an eligible noncitizen of the United States. III. maintain satisfactory academic progress. IV. not be in default on a federal student loan. A. II only B. I and III C. I, III, and IV D. I, II, III, and IV

D. I, II, III, and IV All of these are correct.

Select the parental assets that are excluded from consideration when calculating the Expected Family Contribution (EFC) for federal financial aid. A. Mutual fund ownership B. Annual contributions to a retirement plan C. Rental real estate property D. The excess of value over the amount owed on a personal residence

D. The excess of value over the amount owed on a personal residence The answer is the excess of value over the amount owed on a personal residence. The equity in a personal residence or home is not included in the calculation of the EFC. The accrued benefit or account balance in a retirement plan is an exempt parental asset.

Which of the following is a provision of the Bankruptcy Act of 2005? Debtors who want to file for Chapter 7 bankruptcy are first required to submit to credit counseling. Individuals who have the ability to pay their debts are required to file under Chapter 7 of the Federal Bankruptcy Code. A) II only B) Both I and II C) Neither I nor II D) I only

D) I only The answer is I only. Individuals who have the ability to pay their debts are required to file under Chapter 13 of the Federal Bankruptcy Code.

Robert Smith asks for your help in preparing his cash flow statement. He tells you that his salary before taxes is $250,000 and that he has no mortgage on his home. Which of the following statements is true about Robert's cash flow statement? A)The taxes on his salary would be an expense. B)The value of the home would be an asset. C)The taxes on his salary would be a liability. D)The value of the home would be an income source since there is no mortgage.

A)The taxes on his salary would be an expense. The answer is the taxes on his salary would be an expense. Cash flow statements show income and debt payments (i.e., inflows and outflows). Assets and liabilities are shown on a statement of financial position or net worth statement. The home's value by itself would be recorded as an asset on a statement of financial position, rather than as an income source on a cash flow statement. Again, income rather than income sources are shown on cash flow statements.

According to the Code and Standards, Standard A.1, Fiduciary Duty, must be upheld A)at all times when providing Financial Advice. B)anytime a financial topic is discussed with a current or prospective client. C)at all times. D)throughout every client interaction.

A)at all times when providing Financial Advice. Explanation The answer is at all times when providing Financial Advice. Per the Code and Standards, "at all times when providing Financial Advice to a Client, a CFP® professional must act as a fiduciary and, therefore, act in the best interests of the Client." (Standard A.1.)

Identify the item that should be included on the statement of financial position. A. Auto loan balance B. Auto loan payment C. Original mortgage amount D. Section 401(k) elective deferrals

A. Auto loan balance

1. Movement through the phases of the business cycle is initiated by shifts in aggregate demand that create fluctuations in gross domestic product (GDP). Which combination of the following statements would be the most significant contributor to the upward shift in aggregate demand shown in the graph? (Note: This is a previously released CFP® Certification Exam question.) I. Increase in demand for capital goods II. Increase in interest rates III. Increase in disposable income IV. Increase in savings A. I and III B. I, II, and III C. I, III, and IV D. II and IV

A. I and III

Which of the following statements regarding FINRA are CORRECT? I. It was established by the U.S. government. II. It regulates financial planners who offer investment advice. III. The applicant who seeks FINRA registration must be associate with a broker or dealer. IV. The FINRA registration process requires individuals to take the SIE exam, which is an introductory exam that assesses a candidate's knowledge of basic securities industry concepts. A. III and IV B. I, II, and III C. I, II, and IV D. II, III, and IV

A. III and IV

Select the subsections included in Standard A.1, Fiduciary Duty. Duty of Care Duty of Confidentiality Duty to Keep Current Duty of Loyalty A) I and IV B) II only C) I, III, and IV D) III and IV

A)I and IV The answer is I and IV. At all times, when providing Financial Advice to a Client, a CFP® professional must act as a fiduciary and, therefore, act in the best interests of the Client. Standard A.1 identifies three subsections: Duty of Care, Duty of Loyalty, and Duty to Follow Client Instructions.

Which of the following statements concerning educational tax credits and savings opportunities is CORRECT? A)The original Hope credit was available for the first four years of postsecondary education, but the American opportunity tax credit is only available for the first two years of college. B)The contribution limit for Coverdell Education Savings Accounts (CESAs) is applied per year per donor. C)The lifetime learning credit is equal to 100% of qualified educational expenses up to an annual limit. D)A parent who claims a child as a dependent is entitled to take the American Opportunity tax credit or lifetime learning credit for the educational expenses of the child.

A parent who claims a child as a dependent is entitled to take the American Opportunity tax credit or lifetime learning credit for the educational expenses of the child. The answer is a parent who claims a child as a dependent is entitled to take the American Opportunity tax credit or lifetime learning credit for the educational expenses of the child. The lifetime learning credit is calculated as a percentage of qualified education expenses. Currently, a maximum of 20% of $10,000 qualified expenses ($2,000) is allowed, and is phased out at certain income limits. The original Hope credit was only available for the first two years of college, but the American Opportunity tax credit is available for four years of college. The current contribution limit for a CESA is $2,000 per beneficiary, regardless of how much any particular donor may wish to contribute.

Calculate the lump sum necessary to fund Ethan's college attendance. Current college cost = $12,500 Expected inflation (CPI) = 2.5% Expected rate of education inflation = 5.5% Ethan's current age = 3 Ethan's age at beginning of college = 18 Anticipated years of attendance = 5 Expected 529 account annual performance = 8.75% A) $131,435.60 B) $127,507.64 C) $67,229.09 D) $139,529.78

A) $131,435.60 The answer is $131,435.60. Step 1: Determine the future cost of college for the first year. 12,500 +/- PV 5.5 I/YR 15 N Solve for FV = 27,905.9562, or $27,905.96 Step 2: Determine the account balance necessary to fund college education. BEG mode (money is needed at the beginning of college) 27,905.9562 +/- PMT 3.0806 I/YR [(1.0875 ÷ 1.055) - 1] × 100 = 3.0806 5 N Solve for PV = 131,435.6008, or $131,435.60

Vince's son, Eugene, turned 5 years old today. He has plans for Eugene to attend a 4-year private university at age 18. Currently, tuition is $15,000 per year and is expected to increase at 7% per year. He can earn an annual compound investment return of 10%. Calculate how much Vince needs to start saving at the end of each year (starting this year) to be able to pay for Eugene's college education. (Assume his last payment is made at the beginning of Eugene's first year in college.) A) $5,659.34 B) $8,886.18 C) $10,044.73 D) $5,144.86

A) $5,659.34 The answer is $5,659.34. He would need to deposit $5,659.34 per year to meet the education funding goal, with keystrokes as follows on the HP 10bII/HP 10bII+. Step 1: Determine the future cost of college for the first year. 15,000 +/- PV 7 I/YR 13 N Solve of FV = 36,147.6750, or $36,147.68 Step 2: Determine the account balance necessary to fund college education: BEG mode (money is needed at the beginning of college) 36,147.68 +/- PMT 2.8037 I/YR [(1.10 ÷ 1.07) - 1] × 100 = 2.8037 4 N Solve for PV = 138,782.4586, or $138,782.46 Step 3: Determine the required savings payments. END mode 138,782.46 FV 13 N (payments continue until Eugene reaches 18) 10 I/YR Solve for PMT = $5,659.34

All of the following economic activities represent government fiscal policy except A) cutting the discount rate. B) increasing marginal income tax rates. C) increase purchases of goods and services. D) reducing marginal income tax rates.

A) cutting the discount rate. The answer is cutting the discount rate. Reducing the discount rate is an example of monetary, not fiscal, policy.

Which of the following are tax implications of owning a personal residence? The points paid are tax deductible for the buyer. Mortgage interest is generally tax deductible for the buyer. Capital gains may be nontaxable within specific limits. Homeowners may depreciate their personal residence. A) I, II, and III B) I, II, III, and IV C) II, III, and IV D) II and III

A) I, II, and III The answer is I, II, and III. Although I, II, and III are tax implications of home ownership, exceptions and restrictions apply to these benefits. A taxpayer of any age can exclude $250,000 of gain ($500,000 for joint filers) from the sale of a home owned and used by the taxpayer as a principal residence for at least two of the five years immediately preceding the sale. Generally, an individual cannot claim depreciation on a personal residence.

A financial planner does which of the following when establishing and defining the client-planner relationship? Fully explains how the planner will be compensated Advises the client that the planner will determine how the recommendations will be implemented Discusses expectations regarding the roles of each party Discusses the duration of the relationship

A) I, III, and IV The answer is I, III, and IV. As the client-planner relationship is established and defined, the planner clarifies with the client how decisions will be made during the future phases of the plan. Although the planner will offer advice regarding how recommendations should be implemented, ultimately the client has the final decision.

Sarah wishes to start saving for a lump-sum amount of $100,000 (in today's dollars) that is needed in four years. She assumes an inflation rate of 3% and an investment rate of return of 7.5%. Calculate Sarah's deposit (PMT) in the second year using the serial payment method if she were to deposit the needed savings at the end of each of the four years. A)$24,846.28 B)$23,420.00 C)$25,591.67 D)$24,122.60

A)$24,846.28 The answer is $24,846.28. The required deposit at the end of the second year using the serial payment approach is $24,846.28, with keystrokes as follows on the HP 10bII/HP 10bII+: 100,000 FV {[(1.075 ÷ 1.03) - 1] × 100} = 4.3689, I/YR 4, N Solve for PMT = -23,420.0027, or $23,420.00 (change sign) End of year 1: $23,420.00 × 1.03 = $24,122.60 End of year 2: $24,122.60 × 1.03 = $24,846.28

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)An adjustable-rate mortgage with an interest rate cap B)A reverse mortgage C)A 15-year fixed-rate mortgage D)A 30-year fixed-rate mortgage

A)An adjustable-rate mortgage with an interest rate cap The answer is an adjustable-rate mortgage with an interest rate cap. Given John and Kelly's relatively short time in the residence, an adjustable-rate mortgage (ARM) is their best option. A reverse mortgage is a special type of home loan where the payment stream is reversed (that is, the lender pays the homeowner a stream of income secured by the considerable amount of equity in the home).

Madison, a CFP® professional, offers financial planning services to high net worth clients in her Registered Independent Advisory firm. Which of the services that Madison provides is considered a relevant element of financial planning according to the CFP Board Code and Standards? A) Manage assets and liabilities B) Uphold fiduciary duty when providing Financial Advice C) Maintain confidentiality and privacy D) Avoid or disclose and manage conflicts of interest

A)Manage assets and liabilities The answer is manage assets and liabilities. Relevant elements are the components of the Client's personal and financial circumstances that the Financial Advice may affect. Relevant elements vary from Client to Client depending on goals, needs, and overall circumstances. Managing assets and liabilities is a relevant element.

Which of the following best describes deflation? A) Indicates a decline in the rate of inflation B) Prices are falling in absolute terms, bond prices rise, and purchasing power increases C) Occurs when inflation and unemployment rise and the general growth of the economy is slow as business output falls D) A decline in the general price level and is often caused by an increase in the money supply and consumer demand

B) Prices are falling in absolute terms, bond prices rise, and purchasing power increases The answer is prices are falling in absolute terms, bond prices rise, and purchasing power increases. A deflationary period also can be a time during which real assets perform poorly, thus real estate, collectibles, and gold and other precious metals are likely to fall in value.

Caleb secures a $350,000 mortgage with a 30-year repayment term and an annual interest rate of 6%. How much total interest will Caleb have paid on the mortgage at the end of 25 years? A) $375,960.34 B) $388,070.37 C) $241,457.67 D) $108,542.33

B) $388,070.37 The answer is $388,070.37. The keystrokes on the HP 10bII/HP 10bII+ as follows: END mode; 350,000, PV; 30 × 12 = 360, N; 6 ÷ 12 = 0.50, I/YR; Solve for PMT = -2,098.4268; 1, INPUT, 300, SHIFT, AMORT (pressing the = key toggles you through amortization totals for months 1 through 300); = -241,457.6682 (total principal paid through 300 months) = -388,070.3718 (total interest paid through 300 months) = 108,542.3318 (remaining principal balance through 300 months).

Use the partially completed cash flow statement below and the information that follows it to answer the next question. Eileen and John Sharpe Cash FlowStatement For the Year Ending December 31, 20XX INFLOWSSalaries1$ 76,000Rental income213,800TOTAL INFLOWS$OUTFLOWSSavings and Investments$Fixed OutflowsMortgage note payment$ 12,552Insurance32,848Property taxes1,560FICA5,814Total Fixed Outflows$Variable OutflowsTaxes4$ 16,812Food6,300Transporation2,080Clothing/personal care3,600Child care6,500Entertainment/vacations2,400Medical/dental700Utilities/household expenses5,500Rental expenses2,045Total Variable Outflows$TOTAL OUTFLOWS$ 1 Eileen ($40,000); John($36,000)2 From rental home; $1,150 each month is received3 Auto $1,208; homeowners $634; life $1,0064 Federal income tax ($12,212) and state income tax ($4,600) In addition to the inflows and outflows listed in the financial statement, Eileen and John also had the following: Annual dividend income of $3,500 from mutual funds, $2,500 of which was reinvested in the respective funds Annual interest income of $1,200 Monthly investment of $1,300 in various common stocks over the past year Annual miscellaneous expenses of $7,689 What was the total variable outflows figure for the Sharpes' cash flow statement for the year ending December 31, 20XX? A)$45,937 B)$53,626 C)$31,748 D)$22,774

B) $53,626 The answer is $53,626. The annual miscellaneous expense is added to the total variable outflows provided in the cash flow statement itself ($45,937 + $7,689 = $53,626).

Which activity that takes place during the financial planning process is generally the most demanding? A)Communicating the recommendations B)Analyzing and evaluating the client's current financial status C)Gathering information necessary to fulfill the engagement D)Prospecting for new clients

B) Analyzing and evaluating the client's current financial status The answer is analyzing and evaluating the client's current financial status. The analysis and evaluation of the client's financial status is considered the most challenging financial planning activity because it often requires an in-depth knowledge of insurance and employee benefits, investments, taxes, retirement planning, and estate planning.

Brenda and her loan company, SureCash Enterprises, have been Owen's clients since he began his financial planning practice several years ago. Owen, a CFP® professional, would like to purchase new computer equipment. Because she admires Owen, Brenda has offered to loan him money, either personally or through SureCash. As a rule, under the Standards of Conduct, Owen should not borrow money from his clients. Identify the circumstances that are exceptions to the rule that would allow Owen to borrow money from a client. Brenda personally lends Owen money, and she is his mother. Brenda personally lends Owen money, and their client-planner relationship has existed for more than 10 years. Brenda is a friend and personally makes Owen a loan with a competitive interest rate that is secured by collateral. SureCash makes a loan to Owen. SureCash is a financial institution in the business of lending money, and the borrowing is unrelated to any professional services performed by Owen. A) III only B) I and IV C) II and III D) I, II, and IV

B) I and IV The answer is I and IV. If Brenda is a member of Owen's immediate family, he is allowed to borrow from her. If SureCash is in the business of lending money and the borrowing is unrelated to the financial planning services provided to SureCash, a loan to Owen is permitted. Regarding a loan from a client, the terms of the loan and the duration of the client-planner relationship are irrelevant. Standard A.15, Refrain From Borrowing or Lending Money and Commingling Financial Assets, defines these guidelines and exceptions.

Which of the following actions will lower a client's credit score? I. Maintaining a balance on a credit card that is much lower than the credit limit II. Closing long-held credit card accounts once they are paid off III. Opening new accounts infrequently IV. Filing bankruptcy after a long period of unemployment A)III and IV B)II and IV C)II, III, and IV D)I and III

B) II and IV The answer is II and IV. Option I is an action that will improve a credit score because a large amount of available credit indicates prudent use of debt. Option II is an action that can lower a credit score. Closing accounts that have a long history, especially a good one, will lower a credit score. Option III is an action that will also help a credit score. Opening several new accounts in a short period will hurt a credit score. Option IV is an action that will most definitely lower a credit score.

Some rule-of-thumb ratios are helpful in understanding how a client's debt will be assessed by lenders, which can determine interest rates. Which of the following is NOT correct regarding ratio descriptions and the related benchmark? A) Consumer debt is all nonmortgage debt. It should be no more than 20% of monthly net income. B) Monthly housing costs include principal, interest, taxes, fees, and insurance, and should be no more than 28% of the prospective borrower's net income. C) The minimum required payments should be used in the calculation. D) Total monthly payment on all debts should be no more than 36% of gross monthly income.

B) Monthly housing costs include principal, interest, taxes, fees, and insurance, and should be no more than 28% of the prospective borrower's net income. The answer is monthly housing costs include principal, interest, taxes, fees, and insurance, and should be no more than 28% of the prospective borrower's net income. Keeping all debt payments under 36% is important in order to qualify for reasonable rates on credit. Helping clients understand what will make future debt more costly can give them motivation to stay within the guidelines. Monthly housing costs should be no more than 28% of the prospective borrower's gross, not net, income.

Maria Baxter plans to purchase a condo in five years. She wants to accumulate $40,000 for a down payment. If her investments have an average annual rate of return of 7%, how much should she deposit at the beginning of each of the next five years to reach her goal of $40,000? A)$9,756 B)$6,501 C)$6,956 D)$9,117

B)$6,501 The answer is $6,501. Keystrokes: Set to BEGIN Mode & 1 compounding period per year 40,000, FV 7, I/YR 5, SHIFT, N PMT = 6,500.59

Which of the following statements regarding state banks is CORRECT? The Federal Deposit Insurance Corporation (FDIC) supervises state banks that are not members of the Federal Reserve System. State-chartered banks are subject to regulation by state banking commissions or departments. A)I only B)Both I and II C)Neither I nor II D)II only

B)Both I and II The answer is both I and II. Both of these statements are correct. If a state bank is not a member of the Federal Reserve System, it will be under FDIC supervisions.

Which of the following statements best describes a downward sloping demand curve? A)Consumer demand has dropped drastically. B)Consumers demand more at lower prices. C)Consumer demand has not changed significantly. D)Consumer demand has increased significantly.

B)Consumers demand more at lower prices. The answer is consumers demand more at lower prices. Consumers demanding more at lower prices describes a downward sloping demand curve.

Which of the following best describes the process of discounting? A)Computes the value of a series of payments made over time, presuming deposits are made at the end of the year B)Determines the value of funds that are to be received in the future in terms of their present value C)Determines the value of funds that are to be received now in terms of their future value D)Computes the value of a series of payments made over time, presuming deposits are made at the beginning of the year

B)Determines the value of funds that are to be received in the future in terms of their present value The answer is determines the value of funds that are to be received in the future in terms of their present value. Discounting is the term associated with working back from a future value to that of a present value.

Identify the group responsible for reviewing petitions for consideration for a presumptive bar determination. A)Hearing Panel B)Disciplinary and Ethics Commission C)CFP Board Counsel D)Appeals Committee

B)Disciplinary and Ethics Commission Explanation The answer is Disciplinary and Ethics Commission. The Disciplinary and Ethics Commission is responsible for reviewing petitions for consideration submitted for individuals receiving a presumptive bar.

Select the CORRECT statement(s) regarding the employer's Educational Assistance Program. Graduate courses are included in qualifying expenses. The Educational Assistance benefits do not have to be for work-related courses. Only full-time students qualify for the Employer-provided Educational Assistance Program. Educational Assistance Program can be used with an education tax credit for the same expenses. A)I and III B)I and II C)II, III, and IV D)III only

B)I and II The answer is I and II. The Educational Assistance benefits do not have to be for work-related courses. The employer or employee cannot claim an education credit (American Opportunity Tax or Lifetime Learning Credit) for the same expenses. The Educational Assistance is available to full-time and part-time students enrolled in either undergraduate- or graduate-level courses.

Which of the following are NOT included in the definition of an investment adviser? Banks or bank holding companies Persons whose advice is limited to securities issued and guaranteed by the U.S. government Publishers of bona fide newspapers or financial publications of general and regular circulation Lawyers whose performance of advisory services is solely incidental to the practice of their profession A)II, III, and IV B)I, II, III, and IV C)I and III D)I, II, and IV

B)I, II, III, and IV Explanation The answer is I, II, III, and IV. Other persons who are excluded from the definition of investment adviser are accountants, engineers, or teachers whose performance of advisory services is solely incidental to the practice of their professions; brokers or dealers whose performance of advisory services is solely incidental to their conduct as brokers or dealers and who receive no special compensation for advice; and other persons designated by Securities and Exchange Commission (SEC).

In order to proceed with a petition for reinstatement, a Respondent must have completed all of the following except A) paid the reinstatement fee and any outstanding costs owed to CFP Board. B) completed a CFP Board verified Ethics continuing education (CE) course. C) provided a written certification that the Respondent has read, understands, and will comply with the Code and Standards. D) completed the suspension.

B)completed a CFP Board verified Ethics continuing education (CE) course. The answer is completed a CFP Board verified Ethics continuing education (CE) course. The Respondent's Petition must not proceed unless the Respondent has completed the suspension; provided a properly completed CFP Board Ethics Disclosure Questionnaire; provided a written certification that the Respondent has read, understands, and will comply with the Code and Standards; paid the reinstatement fee and any outstanding costs owed to CFP Board; and otherwise satisfied CFP Board's certification requirements.

Erin has the following assets. How much of her money is currently FDIC insured? Assets Ownership Balance Traditional IRA (Oakdale Bank is custodian) Erin $265,000 Savings account (Oakdale Bank) Erin $175,000 Certificates of deposit (Oakdale Bank) Erin $125,000 Money market mutual fund (Oakdale Bank Advisors) Erin $80,000 Savings account (Oakdale Bank) Joint w/ father $40,000 Checking account (Oakdale Bank) Joint w/ sister $25,000 A. $282,500 B. $532,500 C. $565,000 D. $557,500

B. $532,500 ***never include money market mutual funds / money markets!!! Added Traditional IRA, Savings account, CDs and subtracted half the value of the joint savings account and the joint checking account $265k + $175k + $125k - $20k - $12.5k = $532,500

A client has a net worth of $900,000 at the beginning of the calendar year. Calculate the client's net worth at the end of this same calendar year after the following transactions: Repayment of a $25,000 loan using funds from a savings account Purchase of a $40,000 automobile with a $10,000 down payment and the remaining amount financed through a credit union A $12,000 increase in the client's mutual funds account balances A $15,000 decrease in the client's bond portfolio A. $867,000 B. $897,000 C. $922,000 D. $925,000

B. $897,000

9. Amanda is a half-time sophomore at ABC University. Tuition payable for 2020 was $3,000. Amanda is claimed as a dependent on her parents' 2020 income tax return and her parents have reported an AGI of $150,000 for that year. Neither Amanda nor her parents are claiming any other education benefit for 2020. Which of the following statements regarding the possible applicability of the American Opportunity Tax Credit is CORRECT? A. Amanda's parents will be able to claim $2,000 of the American Opportunity Tax Credit on their 2020 income tax return. B. Amanda's parents will be able to claim $2,250 of the American Opportunity Tax Credit on their 2020 income tax return. C. Amanda will be able to claim $3,000 of the American Opportunity Tax Credit on her 2020 income tax return. D. Neither Amanda nor her parents are able to take advantage of the American Opportunity Tax Credit for income tax purposes.

B. Amanda's parents will be able to claim $2,250 of the American Opportunity Tax Credit on their 2020 income tax return. The answer is Amanda's parents will be able to claim $2,250 of the American Opportunity Tax Credit on their 2020 income tax return. This amount is determined as follows: (100% × $2,000) + (25% × $1,000). Because Amanda's parents claim Amanda as a dependent, they are permitted to take the credit. Also, because they are currently below the applicable beginning phaseout of $160,000 (2020), there is no reduction in the amount of credit.

Which of the following occurs when the price of a product decreases and consumers buy more of that product? A) A change in inelastic demand has taken place. B) An increase in supply has occurred. C) A change in quantity demanded has taken place. D) The product is a complementary product.

C) A change in quantity demanded has taken place. The answer is a change in quantity demanded has taken place. The demand curve shows that the quantity demanded for a product varies inversely with its price.

The type of bankruptcy in which a person is freed from most debts in exchange for giving creditors assets that legally may be seized is called A) Chapter 9 bankruptcy. B) Chapter 13 bankruptcy. C) Chapter 7 bankruptcy. D) Chapter 11 bankruptcy.

C) Chapter 7 bankruptcy. The answer is Chapter 7 bankruptcy. Chapter 13 bankruptcy is one in which a plan is created for the debtor to repay outstanding debts within a specified time period. Frequently, the amount owed is reduced so that payments will be manageable.

Deflation is characterized by rising unemployment. caused by a reduction in the money supply. the opposite of inflation. a decline in the rate of inflation. A) II and III B) I and IV C) I, II, and III D) I, II, III and IV

C) I, II, and III The answer is I, II, and III. Disinflation, not deflation, is characterized by a decline in the rate of inflation.

Justine completes the Free Application for Federal Student Aid (FAFSA) to see if she qualifies for financial aid. The value of which of the following assets will be included in the expected family contribution (EFC) calculation? Automobiles owned by Justine's parents Her father's Section 401(k) plan balance The equity in her parents' personal residence Justine's UTMA (Uniform Transfers to Minors Account) account A) II and IV B) I, II, III, and IV C) IV only D) III and IV

C) IV only The answer is IV only. All assets owned by a student's parents are included in the EFC calculation, with the notable exceptions of home equity, cars used for regular transportation, accrued benefit or account balances in any retirement plans (e.g., Section 401(k) plans), and the cash value of life insurance policies. The value of student-owned assets, in this case the UTMA account, is also included in the EFC calculation at 20%.

George and Barbara have three dependent children in college. Cameron is a senior, Lauren is a junior, and Cheryl is a freshman, and each has qualifying education expenses in excess of $10,000 annually. When George and Barbara file their income tax returns for 2020, they want to use the American Opportunity Tax Credit and/or Lifetime Learning Credit to their greatest benefit. They are eligible for both credits. Which of the following statements describing their options is CORRECT? A) They can use only one of the credits and should use whichever credit will provide the greatest benefit. B) They can use the American Opportunity Tax Credit individually for Cameron, Lauren, and Cheryl and an additional Lifetime Learning Credit for the same expenses as a family tax credit. C) They can use the American Opportunity Tax Credit for the qualified education expenses of Cameron, Lauren, and Cheryl. D) They can use the American Opportunity Tax Credit for the qualified education expenses of Cheryl only and the Lifetime Learning Credit for Cameron and Lauren.

C) They can use the American Opportunity Tax Credit for the qualified education expenses of Cameron, Lauren, and Cheryl. The answer is they can use the American Opportunity Tax Credit for the qualified education expenses of Cameron, Lauren, and Cheryl. The American Opportunity Tax Credit may be used for qualifying education expenses for the first four years of college for each student. The Lifetime Learning Credit is allowed once per year per family but cannot be claimed for the same student for which an American Opportunity Tax Credit is claimed. The Lifetime Learning Credit would most likely not be claimed because the American Opportunity Tax Credit provides a larger tax credit for the family.

Rodney wants to start saving for a lump-sum amount of $200,000 (in today's dollars) that is needed in five years. He assumes an inflation rate of 3% and a before-tax rate of return of 7% on any investments that are set aside to meet this goal. How much must Rodney deposit at the end of each of the five years using the level payment approach? A) $41,526.91 B) $37,679.68 C) $40,317.39 D) $28,476.37

C) $40,317.39 The answer is $40,317.39. The required annual savings deposit is $40,317.39 with keystrokes on the HP 10bII/HP 10bII+ as follows: Step 1: 200,000, +/−, PV 3, I/YR 5, N Solve for FV = 231,854.8149 Step 2: C ALL 231,854.8149, FV 7, I/YR 5, N Solve for PMT = -40,317.3948, or $40,317.39

Pat wants to start his own business in five years. He needs to accumulate $500,000 (in today's dollars) in five years to sufficiently finance his business. He assumes inflation will average 2% and that he can earn a 6% (compounded annually) after-tax return on investments. What serial payment should Pat invest at the end of the first year to attain his goal? A) $102,081.51 B) $92,458.37 C) $94,307.53 D) $104,123.14

C) $94,307.53 The answer is 94,307.53. 500,000, FV, 5, N {[(1.06 ÷ 1.02) - 1] × 100} = 3.9216, I/YR Solve for PMT = ‒92,458.3658 × 1.02 = ‒94,307.5331, or $94,307.53 (change sign)

All of the following statements comprise the Fiduciary Duty, Duty of Loyalty, except A) Place the interests of the Client above the interests of the CFP® professional and the CFP® Professional's Firm B) Act without regard to the financial or other interests of the CFP® professional, the CFP® Professional's Firm, or any individual or entity other than the Client C) Act with the care, skill, prudence, and diligence that a prudent professional would exercise D) Avoid Conflicts of Interest, or fully disclose Material Conflicts of Interest to the Client, obtain the Client's informed consent, and properly manage the conflict

C) Act with the care, skill, prudence, and diligence that a prudent professional would exercise The answer is act with the care, skill, prudence, and diligence that a prudent professional would exercise. "Act with the care, skill, prudence, and diligence that a prudent professional would exercise" is a statement that is found in the Fiduciary Duty, Duty of Care, NOT the Duty of Loyalty.

To properly use the CFP® marks on documents or marketing materials, certain guidelines must be followed. Identify the items that are required when the words "CERTIFIED FINANCIAL PLANNER™" are used. Always use capital letters or small cap font Always use the ™ symbol Always associate with CFP Board Always use with one of CFP Board's approved nouns ("certificant," "professional," "practitioner," "certification," "mark" or "exam") unless directly following the name of the individual certified by CFP Board

C) I, II, and IV The answer is I, II, and IV. If the words "CERTIFIED FINANCIAL PLANNER" are used, they must be presented in capital letters or small cap font followed by a ™ because the words are subject to trademark law. Statement III is incorrect; the words must always associate with the individual(s) certified by CFP Board. "CERTIFIED FINANCIAL PLANNER" must always be used with one of CFP Board's approved nouns ("certificant," "professional," "practitioner," "certification," "mark" or "exam") unless directly following the name of the individual certified by CFP Board.

Assume you have a new financial planning client. Arrange the following tasks you would perform during the financial planning process with this client, in their logical order, from first to last. Review the client's financial plan and evaluate changes in the legal, tax, or economic environment. Discuss the terms of the engagement and compensation with the client. Prepare appropriate alternative recommendations to meet the client's financial goals. Collect the client's financial records.

C) II, IV, III, I The answer is II, IV, III, I. Discussing relevant issues is part of establishing and defining the client-planner relationship, which is conducted first in the financial planning process. The next step is gathering the information necessary to fulfill the engagement, which includes collecting the client's financial records. Developing and communicating the recommendations follows, and evaluating changes is part of monitoring the recommendations, which is done afterward on an ongoing basis.

Which of the following are common features between the Coverdell Education Savings Account (CESA) and the Section 529 plan? A)Both have an income phaseout. B)The CESA can only be used for K-12 education expenses. C)Neither provides any federal income tax deductibility to the contributors. D)Both have an age restriction for use of funds.

C) Neither provides any federal income tax deductibility to the contributors. The answer is neither provides any federal income tax deductibility to the contributors. Only the CESA has an income phaseout and age restriction at age 30. Both can be used to pay for qualified elementary and secondary school expenses as well as college expenses, but neither plan is deductible for federal income tax purposes.

17. Identify the transgressions that are presumed to be unacceptable according to the CFP Board's Fitness Standards. I. Felony conviction for tax fraud or other tax-related crimes II. Felony conviction for nonviolent crimes (including perjury) within the last five years III. Revocation of a financial professional license that is administrative in nature IV. Two or more personal or business bankruptcies A. I and II B. I and III C. II and IV D. I, II, and IV

C. II and IV

Charles 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, Charles believes he can sell the property for at least $120,000. If his required rate of return is 10%, what is the net present value (NPV) of this property? A)$6,957 B)$23,104 C)$13,731 D)$15,653

C)$13,731 The answer is $13,731. Be sure to input 0 as the cash flow for year 1 and to then add the final cash inflow to the sales price. The keystrokes on the HP 10bII/HP 10bII+ are as follows: 80,000, +/−, CFj; 0, CFj; 5,000, CFj; 2, SHIFT, Nj,; 7,500, CFj; 130,000, CFj; 10 I/YR; SHIFT, NPV = 13,731.1738, or $13,731.

Bernie and Betty purchased their home eight years ago for $239,500. They made a 20% down payment, and financed the balance using a 30-year mortgage with a 5.15% interest rate. Taxes and insurance increase the payment by $300 per month. What is their outstanding principal balance? A)$129,524 B)$164,365 C)$165,071 D)$206,338

C)$165,071 The answer is $165,071. Set the calculator for 12 payments per year or 12 P/YR. Next be sure the calculator is in End Mode. A 20% down payment of $47,900 means that Bernie and Betty financed the balance of $191,600, and this is used as the PV in the calculation. Because we must first calculate the regular monthly payment, N = 360 (or 30 years x 12 months per year). The interest or I/YR = 5.15 and all that needs to be done is to calculate the payment or PMT = $1,046.19. In calculating eight years of payments, we are examining the results of 96 payment periods or 8 x 12 = 96; To accomplish this we must press the following keys: 1 [INPUT]; 96 [SHIFT], [AMORT] look under the FV key for AMORT. Once this has all been done the following should be on your screen 1 - 96. Then push the [=] key and the principal paid thus far in eight years will show up; Press the [=] key again and interest paid to date shows up; Press [=] key one more time and the remaining principal balance will be displayed.

According to the CFP Board Code and Standards, which of the following is considered a relevant element of financial planning? A) Clear and understandable Client communications B) Collaborate to prioritize goals C) Achieve financial security D) Use of Form ADV, Part 2

C)Achieve financial security The answer is achieve financial security. Relevant elements are the components of the Client's personal and financial circumstances that the Financial Advice may affect. Relevant elements vary from Client to Client depending on goals, needs, and overall circumstances. A client's plan to achieve financial security is a relevant element.

Which of the following actions can the Federal Reserve do to increase the money supply? Decrease the reserve requirements for banks Increase expenditures of the federal government, thereby circulating additional funds in the economy Engage in open-market transactions A)I and II B)I, II, and III C)I and III D)I only

C)I and III The answer is I and III. All of these actions have the potential to increase the money supply. However, the Federal Reserve does not control the expenditures of the federal government. Increasing expenditures of the federal government is a fiscal rather than a monetary policy action.

Which of the following statements regarding the National Credit Union Share Insurance Fund (NCUSIF) are CORRECT? The NCUSIF is an agency of the federal government. The NCUSIF is backed by the full faith and credit of the state governments. Up to $500,000 of a member's account balances are insured by the NCUSIF. The fund is administered by the National Credit Union Administration (NCUA). A)I, II, and III B)I, III, and IV C)I and IV D)II and IV

C)I and IV The answer is I and IV. The NCUSIF is an agency of the federal government and is administered by the National Credit Union Administration (NCUA). It is backed by the full faith and credit of the U.S, not state, governments. The NCUSIF insures member accounts of all federal and most state-chartered credit unions up to $250,000.

Identify the day counting rules that apply when the Procedural Rules state a time in calendar days. Exclude the day of the event that triggers the period Include the day of the event that triggers the period Count every day, excluding intervening Saturdays, Sundays, and federal legal holidays Include the last day of the period, but if the last day is a Saturday, Sunday, or federal legal holiday, the period continues to run until the end of the next day that is not a Saturday, Sunday, or federal legal holiday A) II and III B) II and IV C) I and IV D) II, III, and IV

C)I and IV The answer is I and IV. When the Procedural Rules state a time in calendar days exclude the day of the event that triggers the period count every day, including intervening Saturdays, Sundays, and federal legal holidays; and include the last day of the period, but, if the last day is a Saturday, Sunday, or federal legal holiday, the period continues to run until the end of the next day that is not a Saturday, Sunday, or federal legal holiday.

Which of the following statements regarding the Securities and Exchange Commission (SEC) is CORRECT? It has primary authority regarding the registration of investment advisers. Any planner or broker/dealer who wishes to sell securities must register with the SEC. A)II only B)Both I and II C)I only D)Neither I nor II

C)I only The answer is I only. The SEC has primary authority regarding the registration of investment advisers. Any planner or broker/dealer, or the representative of a broker/dealer that wishes to sell securities, must register with Financial Industry Regulatory Authority (FINRA), not the SEC.

Which of the following is legislation enacted to provide credit protection to the consumer? Fair Credit Billing Act Equal Credit Opportunity Act Consumer Credit Reporting Act Fair Debt Collection Practices Act A)I, II, and IV B)I, II, and III C)I, II, III, and IV D)III and IV

C)I, II, III, and IV The answer is I, II, III, and IV. The purpose of these acts is to give consumers credit protection. The Consumer Credit Protection Act, also known as the Truth in Lending Act, also provides this security.

Which of these statements regarding securities and insurance regulation legislation are CORRECT? I. The Securities Act of 1933 requires the registration of new issues of securities or issues in the primary market. II. The Securities Investor Protection Act of 1970 is designed to protect individual investors from losses as a result of brokerage house bankruptcies. III. The Investment Company Act of 1940 assures investor safety of investment value in companies engaged primarily in investing, reinvesting, and trading in securities. IV. The Investment Advisers Act of 1940 requires that persons or firms advising others regarding securities must register with the Securities and Exchange Commission. A. I and III B. II and IV C. I, II, and IV D. I, II, III, and IV

C. I, II, and IV

Which of the following statements regarding savings and loan associations (S&Ls) is CORRECT? S&Ls are also known as trust companies. One function of S&Ls is to provide home loans. Federally chartered S&Ls are regulated by the Federal Deposit Insurance Corporation (FDIC). Both checking and savings accounts are offered by S&Ls. A)II and III B)III and IV C)II only D)I and II Explanation

C)II only The answer is II only. An S&L is not a trust company, which specializes in managing estates and serving as trustee for various types of trusts. The main purposes of an S&L are to accept savings and provide home loans. S&Ls are not permitted to provide demand deposits, such as checking accounts. However, they can offer interest-bearing NOW accounts, which are similar to demand deposit accounts. As a result of the Dodd-Frank Act, federal and many state-chartered S&Ls once regulated by the Office of Thrift Supervision are now regulated by the Office of the Comptroller of the Currency.

Which one of the following individuals is required to register as an investment adviser? A)Winston, a CFP® certificant, who publishes Egers' Edge, a monthly investment newsletter about investments issued by the federal government, or those guaranteed by the federal government B)Jenny, who is a CPA, and periodically gives recommendations about investments whenever a client brings in a prospectus for her to review C)Michelle, an attorney whose estate planning practice generally includes advice regarding investment types, allocation, and ownership D)Darrel, a registered representative with F.W. Bondsworth, a broker-dealer. Darrel earns no special compensation.

C)Michelle, an attorney whose estate planning practice generally includes advice regarding investment types, allocation, and ownership The answer is Michelle, an attorney whose estate planning practice generally includes advice regarding investment types, allocation, and ownership. When an attorney regularly gives investment advice, it is not likely that she will qualify under the exception that would exist if the advice were incidental to her practice of law.

Which of the following has the greatest impact on a client's total FICO score? A)Amounts owed B)New credit C)Payment history D)Length of credit history

C)Payment history The answer is payment history. Payment history accounts for 35% of the credit score and is most heavily weighted because lenders want to know first and foremost whether an individual paid past credit accounts on time. Amounts owed account for approximately 30% of a credit score. Length of credit history accounts for 15%, and new credit accounts for 10% of a credit score.

Carmen and Ricardo Robles are 12 years into their first mortgage, with $62,000 remaining on the principal and a mortgage line of credit with a limit of $40,000. The 30-year first mortgage has a monthly principal and interest payment of $518.26 at an annualized interest rate of 7.38%; the line of credit, good for another 13 years, is 6%. Current mortgage rates are 5.25% for 15-year and 5.9% for 30-year mortgages. Home equity lines are at prime plus 1%. Prime is currently at 4.5%. They had been applying additional payments of $500 to their mortgage in the last few years. They want to free up the line of credit before their oldest daughter starts college in three months just in case they have additional expenses, but they have a $32,000 balance from purchasing a car and repairs. Their house has a market value of $280,000. They have had no problem paying more than the minimum toward the credit balance, but they are not sure how much headway they can make over the next three months. Which one of the following options, all of which are available, will best meet their needs while holding down their total payments? A)Replace the line of credit balance with a lower interest, 30-year second mortgage. B)Make no changes, but concentrate on reducing the balance of the line of credit as much as possible. C)Replace both the first mortgage and line of credit with a $94,000, 15-year, first mortgage at low current rates, and establish a new line of credit with no current balance. D)Refinance the line of credit balance with a lower interest, 15-year second mortgage, while maintaining the line of credit.

C)Replace both the first mortgage and line of credit with a $94,000, 15-year, first mortgage at low current rates, and establish a new line of credit with no current balance. The answer is replace both the first mortgage and line of credit with a $94,000, 15-year, first mortgage at low current rates, and establish a new line of credit with no current balance. Because current rates are significantly lower than their current mortgage and they have so much equity in their house, they would benefit from refinancing to the 15-year for both the mortgage and the line of credit. This will reduce their mortgage length by three years but with the lower rate their mortgage and home equity line will be $752. You know they have been putting over $1,000 per month toward their mortgage and you don't know what they were paying on their line of credit. In any case, the payment will be within their comfort zone and the interest they pay for the life of the loan will be much less in addition to providing them a freed up line of credit. The drawback will be the closing costs, which is not an issue if they plan on staying in the residence long enough to recapture these costs.

Which one of the following factors would be the strongest indication that interest rates might rise? A)Decreasing rates of inflation B)Weak credit demand by the private sector of the United States economy C)Selling of dollar-denominated assets by foreign investors D)Decreasing United States government deficits

C)Selling of dollar-denominated assets by foreign investors The answer is selling of dollar-denominated assets by foreign investors. When an asset is being sold by investors, the compensation paid to entice an investor to hold that asset must be raised. Raising the interest rate paid on fixed income investments is one method to increase the compensation paid to hold U.S. dollars. Decreasing the deficit might actually lower rates since the holding of U.S. debt becomes less risky. Also, government spending would decrease, thereby decreasing the demand for money and decreasing rates. Decreasing inflation also would cause rates to decrease because the Fed generally decreases interest rates when inflation falls. Weak credit would cause banks to decrease interest rates to attract new demand.

Which of the following is governed by the Securities Exchange Act of 1934? A)All of these B)Registration of investment companies with the SEC (Securities and Exchange Commission) C)The purchase and sale of securities in the secondary market D)New issues of securities in the primary market

C)The purchase and sale of securities in the secondary market Explanation The answer is the purchase and sale of securities in the secondary market. New issues come under the Securities Act of 1933. Investment company registration comes under the Investment Company Act of 1940.

12. Jessica has been working in the financial services profession for 11 years and has been a CFP® professional for over 5 years. During this time, she has developed into a highly sought-after investment professional who is well versed in retirement and estate planning. Although she has limited knowledge of insurance products, she nonetheless recommends specific insurance products to help her clients reach their goals without consulting an insurance professional. Identify the Standard of Conduct that Jessica is violating. A. Diligence B. Professionalism C. Competence D. Sound and Objective Professional Judgement

C. Competence

Which of the following are components of the statement of cash flows? I. Taxes II. Variable outflows III. Net cash flow IV. Cash and cash equivalents A. I and III B. III and IV C. I, II, and III D. I, III, and IV

C. I, II, and III

Grandpa Eugene and Grandma Amelia wish to help fund their grandchild James's college education. They have a sizable estate and wish to place the money into an account that has growth potential along with tax benefits. Assuming they choose a Section 529 plan, what is the maximum they could place into the account for James and meet the following goals: 1) removal of the contribution amount from their estates, and 2) no gift tax implications in 2020? A) $30,000 B) $0 C) $15,000 D) $150,000

D) $150,000 The answer is $150,000. In 2020, a contributor is permitted to make one $75,000 contribution (the gift tax annual exclusion of $15,000 × 5) and spread that contribution over five years. In addition, if the contributor splits that gift with his spouse, a one-time contribution (every five years) of $150,000 may be made to any beneficiary, including the account owner, if so desired. These contributions are also correspondingly removed from the contributor's gross estate. Even though the contributor retains control of the 529 account balance at his death, the balance in the plan is not included in his estate for estate tax purposes (thereby constituting a significant estate planning technique alternative).

The Chens wish to retire in 20 years and estimate they will need a first-year annual income of $60,000. They do not want to fall behind as a result of inflation, which they estimate will average 4% per year during the term of retirement. If the Chens can earn an after-tax return of 8% on their money and will be in retirement for 25 years, what is the approximate amount they will need at the beginning of the year in which they retire? (Round to the nearest thousand.) A) $858,000 B) $953,000 C) $640,000 D) $989,000

D) $989,000 The answer is $989,000. This is a present value of an annuity due problem using an inflation-adjusted rate of return. The keystrokes on the HP 10bII/HP 10bII+ are as follows: BEG mode, 60,000 +/− PMT; 25 N; [(1.08 ÷ 1.04) − 1] × 100 = I/YR; PV = 989,399.0658, or $989,000.

After meeting with their new financial planner, the Richard family has decided to invest $1,400 each month into a 529 for their 4-year-old daughter Kiera. The Richards expect Kiera to attend, Florham College. The current tuition is $55,000 per year, education inflation is expected to be 5.75%, and the anticipated rate of return on their 529 is 7.5%. Kiera will attend school beginning at 18 years old for 4 years. Using these facts, calculate to determine whether the current investment plan ($1,400 monthly deposits) will meet the education savings goal. A) Exceed the goal by $17,542.02 B) Fall short of the goal by $42,252.30 C) Exceed the goal by $1,554.49 D) Fall short of the goal $55,575.31

D) Fall short of the goal $55,575.31 The answer is fall short of the goal by $55,575.31. Step 1: Determine the future cost of college for the first year. 55,000 +/- PV 5.75 I/YR 14 N Solve for FV = 120,306.1847, or $120, 306.18 Step 2: Determine the account balance necessary to fund college education. BEG mode (money is needed at the beginning of college) 120,306.1847 +/- PMT 1.6548 I/YR [(1.075 ÷ 1.0575) - 1] × 100 = 1.6548 4 N Solve for PV = 469,600.9116, or $469,600.91 Step 3: Calculate Future Value of Current Payments [Set Calculator to 12 P_Yr] 1,400 +/- PMT 7.5 I/YR 14, SHIFT, N Solve for FV = 414,025.6013, or $414,025.60 Step 4: Subtract Future education need from future value of current payments. $414,025.60 - $469,600.91 = -$55,575.31

Purposes of the Federal Reserve include establishing the prime rate. influencing and monitoring the flow of capital. establishing federal income tax rates. maintaining steady economic growth with moderate inflation. A) II, III, and IV B) II only C) I, III, and IV D) II and IV

D) II and IV The answer is II and IV. Commercial banks establish the prime rate. The executive branch or Congress initiates any changes regarding federal income tax rates with legislation. Controlling the flow of capital to maintain steady economic growth with moderate inflation is the primary purpose of the Fed.

Which of the following is NOT characteristic of the Consumer Credit Reporting Act? A) Access to a credit file is limited to bona fide users of financial information. B) Credit bureau reports must include accurate, relevant, and recent information. C) Applicants who are denied credit must be offered the reason. D) Protection against unauthorized credit card use is provided.

D) Protection against unauthorized credit card use is provided. The answer is protection against unauthorized credit card use is provided. Statement 1 is incorrect; protection for unauthorized credit card use is provided by the Consumer Credit Protection Act.

Which of the following statements concerning education tax credits and savings opportunities is CORRECT? A) The contribution limit for Coverdell Education Savings Accounts (CESAs) is applied per year per donor. B) The American Opportunity Tax Credit is only available for the first two years of postsecondary education. C) The Lifetime Learning Credit is equal to 100% of qualified education expenses up to a certain limit. D) The American Opportunity Tax Credit reduces a family's tax dollar-for-dollar in an amount equal to 100% of the first $2,000 of qualified education expense and 25% of the next $2,000.

D) The American Opportunity Tax Credit reduces a family's tax dollar-for-dollar in an amount equal to 100% of the first $2,000 of qualified education expense and 25% of the next $2,000. The answer is the American Opportunity Tax Credit reduces a family's tax dollar-for-dollar in an amount equal to 100% of the first $2,000 of qualified education expense and 25% of the next $2,000. A parent who claims a child as a dependent is entitled to take the American Opportunity Tax Credit for the education expenses of the child. The Lifetime Learning Credit is equal to 20% of qualified education expenses up to a certain limit. The American Opportunity Tax Credit is available for the first four years of postsecondary education. The contribution limit for CESAs is applied per year per student (not donor).

Les secures a $200,000 mortgage with a 30-year repayment term and an annual interest rate of 5.5%. How much principal will Les have paid on his original mortgage balance after the first 12 months? A) $10,932.76 B) $13,626.94 C) $2,825.99 D) $2,694.18

D) $2,694.18 The answer is $2,694.18. The keystrokes on the HP 10bII/HP 10bII+ are as follows: END mode; 200,000, PV; 30 × 12 = 360, N; 5.5 ÷ 12 = 0.4583, I/YR; solve for PMT = -1,135.5780; 1, INPUT, 12, SHIFT, AMORT (pressing the = key toggles you through amortization totals for months 1 through 12) = -2,694.1789 (total principal paid through 12 months) = -10,932.7571 (total interest paid through 12 months) = 197,305.8211 (remaining principal balance through 12 months).

John wants to start his own business in six years and will need $200,000. 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 John invest at the end of the first year to attain his goal? A) $28,190.78 B) $29,546.11 C) $29,318.41 D) $30,727.95

D) $30,727.95 The answer is $30,727.95. END mode 200,000, FV [(1.09 ÷ 1.04) − 1] × 100 = 4.8077, I/YR 6, N; Solve for PMT = -29,546.1090 × 1.04 = -30,727.9533, or $30,727.95 (change sign)

Gilbert purchased several gold coins for $30,000. Today, he sold the coins for $55,045.91. Gilbert estimated the average annual rate of return, compounded monthly, on the coins was 9%. Approximately how many years did Gilbert own the coins (rounded to the nearest 0.00)? A) 84.52 B) 7.04 C) 81.23 D) 6.77

D) 6.77 The answer is 6.77. 9 ÷ 12 = 0.75, I/YR 30,000, +/‒, PV 55,045.91, FV Solve for N = 81.2325 ÷ 12 = 6.7694 years (6.77, rounded)

Which of the following statements regarding serial payments and fixed annuity payments is CORRECT? A) The last serial payment will be less than the respective fixed annuity payment. B) Serial payments are similar to fixed annuities in that they both pay out a fixed amount each year. C) The last serial payment will have less purchasing power than the first serial payment. D) A serial payment is a payment that increases at some constant rate on a regular basis.

D) A serial payment is a payment that increases at some constant rate on a regular basis. The answer is a serial payment is a payment that increases at some constant rate on a regular basis. Serial payments differ from fixed annuity payments (both ordinary and annuity due payments) in that serial payments are not a fixed amount per year. Thus, the initial serial payment is less than its respective annuity due or ordinary annuity payment. The last serial payment will obviously be greater than the last respective fixed annuity payment but will have the same purchasing power as the first serial payment.

What is the appropriate date to identify the statement of financial position of a calendar-year client for the year 2020? A) For the period from January 1 to December 31, 2020 B) At January 1, 2021 C) For the period beginning January 1, 2020 D) At December 31, 2020

D) At December 31, 2020 The answer is at December 31, 2020. The statement of financial position (balance sheet) is presented as of a specific date in time (i.e., a snapshot). The answer choice "For the period beginning January 1, 2020," could be correct, but the question specified the date was for a calendar-year client.

Select the group to which CFP Board's Fitness Standards apply. A) CFP® professionals B) CFP® certificants C) CFP® practitioners D) CFP® candidates

D) CFP® candidates The answer is CFP® candidates. The Fitness Standards apply to CFP® candidates and Professionals Eligible for Reinstatement (PER). PER includes both individuals who are not currently certified but have been certified by CFP Board in the past and individuals are eligible to reinstate their certification without being required to pass the current CFP® Certification Examination.

Select the Code of Ethics principle that a CFP® professional is following by acting with skill, prudence, and diligence that a prudent professional would exercise in light of the client's goals, risk tolerance, objectives, and financial and personal circumstances. A) Avoid or disclose and manage conflicts of interest. B) Act in a manner that reflects positively on the financial planning profession and CFP® certification. C) Act with honesty, integrity, competence, and diligence. D) Exercise due care.

D) Exercise due care. The answer is exercise due care. A CFP® professional exercises due care by acting with skill, prudence, and diligence that a prudent professional would use in light of the client's goals, risk tolerance, objectives, and financial and personal circumstances.

Which of the following are roles of the financial planner? Analyzing the client's current financial status Recommending strategies that will meet the planner's business goals Assisting the client in implementing the financial plan Providing documentation the financial planner needs to complete the financial plan

D) I and III The answer is I and III. The financial planner is responsible for making recommendations based on the client's goals and objectives. The client has the duty to provide documentation the financial planner needs to complete the financial plan.

Which of the following statements regarding credit unions are CORRECT? Credit unions make loans and accept deposits. Credit union deposits are insured by the FDIC. Earnings from investments are allocated to members in the form of credit union stock. A board of directors, elected by members, is responsible for providing leadership and setting credit union guidelines. A)II, III, and IV B)II and IV C)I, III, and IV D)I and IV

D) I and IV The answer is I and IV. Deposits are insured by the National Credit Union Share Insurance Fund (NCUSIF) up to $250,000 per qualifying account. Earnings from investments are allocated to members in the form of dividends.

Allyson would like to pay off her debt, reducing the debt with the highest interest rate first. Compared to the snowball approach of debt reduction, which of the following statements are CORRECT? Compared to the snowball approach, it is relatively more difficult to pay off the first debt with a high balance quickly. This approach increases the total amount of interest paid during the debt reduction process. A) Neither I nor II B) Both I and II C) II only D) I only

D) I only The answer is I only. With Allyson's approach, it often takes longer to pay off the first debt when the highest interest rate has a considerable balance. Less interest paid during the debt reduction process is an advantage of paying off debt in order of interest rate.

Which one of the following programs properly matches an accurate description of one of its features? A)Perkins loans are only available for undergraduate tuition. B)PLUS loans are based on the applicant's need. C)Parent Loans for Undergraduate Students loans (PLUS loans) are available for the student to utilize for either undergraduate or graduate tuition. D)Stafford loans are available for undergraduate and graduate tuition.

D) Stafford loans are available for undergraduate and graduate tuition. The answer is Stafford loans are available for undergraduate and graduate tuition. Perkins loans are available for undergraduate and graduate tuition. PLUS loans are for parents of undergrads. Graduate students can also avail themselves of the Stafford loan program. PLUS loans are not based on need.

Mike won $20 million in the state lottery. His winnings will be paid annually over 30 years in equal payments made at the end of each year. What is the present value of this sum, assuming a discount rate of a 5%? A)$4,627,549 B)$10,392,100 C)$10,760,716 D)$10,248,301

D)$10,248,301 The answer is $10,248,301. This is a present value of an ordinary annuity calculation. The keystrokes on the HP 10bII/HP 10bII+ are as follows: END mode; 5, I/YR; 30, N; 20,000,000 ÷ 30 = 666,666.6667, PMT; Solve for PV = −10,248,300.6846, or $10,248,301.

Doug has the following amounts on deposit at the same bank. Account Ownership Balance Savings account Doug $200,000 Traditional IRA Doug $300,000 Certificate of Deposit Joint with spouse $400,000 How much Federal Deposit Insurance Corporation (FDIC) insurance coverage does Doug have for his accounts at the bank? A)$900,000 B)$700,000 C)$450,000 D)$650,000

D)$650,000 Explanation The answer is $650,000. Each category of ownership (e.g., individual, joint, or retirement account) in the same institution is subject to a separate limit of $250,000. Doug has $200,000 of coverage on his individual savings account, $250,000 of coverage on the traditional IRA, and $200,000 of coverage on the joint account, for a total of $650,000.

Noah grew up in the period following the Depression and is very conservative with his finances. He has individual accounts at three separate federally chartered banks with balances of $265,000, $300,000, and $200,000. What is the total amount insured by the Federal Deposit Insurance Corporation (FDIC)? A)$500,000 B)$250,000 C)$765,000 D)$700,000

D)$700,000 The answer is $700,000. Each individual account in a federally chartered bank is insured against loss up to $250,000. Therefore, his two accounts with balances in excess of $250,000 will only be insured up to $250,000 each for a total of $500,000. The third account will be insured for the entire $200,000. The total insured amount is $700,000 ($250,000 + $250,000 + $200,000).

Which of the following situations is not an example of where your knowledge of consumer protection laws could benefit clients? A)A client's son has been having difficulty getting a job. He goes for interviews, but after a background check, he is not being hired. B)A client tells you about her credit being denied, and she doesn't know why. C)A client tells you they have lost their wallet and are concerned that it may have been stolen. D)A client made a major purchase using credit from a door-to-door salesman last week and is now regretting it five days later.

D)A client made a major purchase using credit from a door-to-door salesman last week and is now regretting it five days later. The answer is a client made a major purchase using credit from a door-to-door salesman last week and is now regretting it five days later. You may know the provisions of the Consumer Credit Protection Act, which state that the client had three days to exercise the right of rescission, but that won't be helpful here since the timeline has passed. Knowing the rules about lost or stolen credit cards can help you guide this client to appropriate action of notifying the credit and debit card companies. One can limit potential risks through this process. Knowing that the client can ask for this information to be corrected and all creditors who have run requests to be notified is helpful. Knowing that employers are asking for credit checks as part of a typical background check could be helpful. The son can contact the credit reporting agencies, review and ask for corrections, and have correct reports sent to any employers to whom he has applied in the last two years.

Which of the following statements regarding registration requirements to become an investment adviser is CORRECT? An investment adviser is any person who, for compensation, engages in the business of advising others as to the valuation of securities, either directly or through publications or writing. An investment adviser is any person who, for compensation, advises others in purchasing or selling securities. An investment adviser, who is registered with the Securities and Exchange Commission (SEC), must be competent. An individual who wants to be an investment adviser must be sponsored by a broker/dealer before registration. A)II, III, and IV B)III only C)I, II, III, and IV D)I and II

D)I and II Explanation The answer is I and II. The three-step test used to determine if registration is required is as follows: Does the adviser provide analysis or advice concerning securities? Is the adviser in the business of providing investment advisory services? Does the adviser receive any compensation for providing investment advisory services? Remember A-B-C, Advice-Business-Compensation. However, being registered as an investment adviser does not imply competence. Registered representatives, rather than investment advisers, must be sponsored by a broker/dealer before registration.

Who of the following must register as an investment adviser with the Securities and Exchange Commission (SEC)? Jessica, an attorney, who advertises that she also gives investment advice Katherine, a Certified Public Accountant, who primarily provides investment advice and security analysis Grant, a CFP® professional, who receives compensation for publishing reports upon request by investors Jim, an attorney, who solely advises his clients regarding venture capital opportunities A)II and IV B)I and III C)IV only D)I, II, and III

D)I, II, and III Explanation The answer is I, II, and III. Jessica, Katherine, and Grant must register as investment advisers. Because Jessica advertises that she gives investment advice, this service is not incidental to her law practice. Grant's reports are specific to those who request them; therefore, he must register. Because Katherine is principally involved in offering investment advice and security analysis, she is required to register. Because Jim solely advises his clients regarding venture capital opportunities, he is exempt from registering as an investment adviser.

Olen and Kiera Littrell have three children. Their oldest child is currently in college, their second child will be starting college next semester, and their third child is still in high school. Olen works at the assembly plant with an income of $45,000 and Kiera is a homemaker. They rent an apartment and carry various credit card balances. What potential avenues would they most likely have to finance college expenses? Perkins loans Stafford loans Parent Loans for Undergraduate Students loans (PLUS loans) Pell grants A)III and IV B)I, II, III, and IV C)I and IV D)I, II, and IV

D)I, II, and IV The answer is I, II, and IV. PLUS loans are taken out by the parents, which requires reasonable credit. Due to the Littrells' finances, they most likely would not qualify for a PLUS loan. Perkins loans, Pell grants, and FSEOG are needs-based. Stafford Loans can be subsidized or unsubsidized—subsidized are needs-based. Most likely they would qualify for the subsidized loans.

Select the categories of conduct defined in the Fitness Standards. Conduct Deemed a Temporary Bar Conduct Deemed a Presumptive Bar Conduct Deemed Unacceptable Conduct Deemed Adverse A) I and III B) I and II C) II and IV D) II and III

D)II and III The answer is II and III. Conduct Deemed Unacceptable and Conduct Deemed a Presumptive Bar are the categories of conduct defined in the Fitness Standards.

Select the relevant element. A)Refrain from lending money to clients B)Specify goals that are unrealistic C)Providing a letter of engagement to a Client D)Identify and manage risks

D)Identify and manage risks Explanation The answer is identify and manage risks. Relevant elements are the components of the Client's personal and financial circumstances that the Financial Advice may affect. Relevant elements vary from Client to Client depending on goals, needs, and overall circumstances. Identifying and managing risks is a relevant element.

"A CFP® professional may not do indirectly, or through or by another person or entity, any act or thing that the Code and Standards prohibit the CFP® professional from doing directly." This statement is included in which of the Standards of Conduct? A)Duties Owed to Clients B)Duties Owed to Firms and Subordinates C)Duties to CFP Board D)Prohibition on Circumvention

D)Prohibition on Circumvention Explanation The answer is Prohibition on Circumvention. Under the Standards of Conduct, this statement identifies Prohibition on Circumvention.

The Securities and Exchange Commission (SEC) was created by A)the Insider Trading and Securities Fraud Enforcement Act of 1988. B)the Securities Act of 1933. C)the Securities Investors Protection Act of 1940. D)the Securities Exchange Act of 1934.

D)the Securities Exchange Act of 1934. The answer is the Securities Exchange Act of 1934. The Securities Exchange Act of 1934 pertains to the trading of existing securities and requires brokers and dealers to register with the SEC. Publicly traded companies are required to file periodic information with the SEC. This is done via Form 10-K and Form 10-Q.

18. Athena would like to reduce her debts, which are listed as follows. She currently has $50 in excess monthly cash flow to start this process. Athena is currently making minimum payments to each account. 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 $20 Credit Card B $575 $30 Credit Card C $1,000 $50 Credit Card D $3,200 $125 Auto loan $15,000 $325 A. $100 B. $150 C. $225 D. $275

D. $275

7. Identify the economic indicators that can best be described as preceding or leading to a change in the business cycle. A. Unemployment rate and bond yields B. Prime rate of interest and industrial production C. Amount of corporate profits and level of personal income D. Level of housing starts and orders for durable goods

D. Level of housing starts and orders for durable goods

Which of the following statements regarding banks is CORRECT? I. The Office of the Comptroller of the Currency (OCC) makes monetary policy. II. The FDIC charters, supervises, and regulates national banks and federal branches of foreign banks located in the United States. A. I only B. II only C. Both I and II D. Neither I nor II

D. Neither I nor II

Clients' psychological ability to deal with uncertain outcomes include risk tolerance, risk capacity, and risk perception. During what step in the financial planning process, should financial planners measure these important abilities?

Data gathering The answer is data gathering. As the financial planner collects data from clients, the planner should discuss the clients' ability to accept uncertain outcomes. All of the other answer choices are steps that are too late in the process for this measurement.

Which of the following statements regarding verbal mirroring is CORRECT? I. In verbal mirroring, the planner uses the client's body language. II. In verbal mirroring, the planner imitates the client's word use, tone of voice, and communication method. III. The use of verbal mirroring can improve rapport with clients. IV. Verbal mirroring includes the inflection of voice or emphasis on certain words.

II and III The answer is II and III. Statement I is incorrect because the use of the client's body language is physical mirroring. Statement IV is incorrect because voice tone is the inflection of voice or emphasis on certain words.

Alan and Gretchen are completing a data survey form for their financial planner to use in reviewing their financial plan. Their planner has explained that a step in the financial planning process is understanding the client's personal and financial circumstances. During this step the planner obtains qualitative and quantitative information. Which of the following are qualitative rather than quantitative data? Copies of wills and trusts Risk tolerance level Employee benefits and pension plan information Goals and objectives

II and IV The answer is II and IV. Risk tolerance levels as well as goals and objectives are qualitative wants and/or desires. Completed documents, such as a will or trust, and business-sponsored employee benefit plans are measurable and therefore quantitative.

Which of the following statements regarding people who have a kinesthetic learning style is CORRECT? I. They retain information by hearing or speaking. II. They express themselves through facial expressions. III. They tend to respond to graphs, charts, pictures, and reading information. IV. They prefer their goals and objectives to be presented as a to-do-list in bullet form.

IV only The answer is IV only. Statement I is incorrect because people who retain information by hearing or speaking have an auditory learning style. Statements II and III are incorrect as they represent a visual learner. Statement IV is correct because individuals who prefer goals and objectives to be presented in bullet form exhibit a kinesthetic learning style.

As a planner, you have just finished developing and presenting your recommendations to your client. These steps being completed, what would be one of the next steps that you would expect to undertake?

Identify, analyze, and select actions, products, and services. The answer is identify, analyze, and select actions, products, and services. The step following development and presentation is implementation, and only identifying, analyzing, and selecting actions, products, and services is part of the implementation step. Selecting and prioritizing goals is actually part of the identify and prioritize step in the process. Analyzing the information is part of step one of the financial planning process, and monitoring the client's progress is carried out in step seven of the financial planning process.

Mirtza's friends tell her an investment in Lose-Ease stock is a wise idea because the company sells popular health food that has helped millions lose weight. Even though Matt, her financial planner, advises her that investing in this stock is a poor decision; Mirtza makes the investment anyway. Which of the following statements regarding Mirtza's behavior is CORRECT?

It is an example of confirmation bias. The answer is it is an example of confirmation bias. Mirtza's behavior is representative of confirmation bias, which is paying attention to information that supports a preconceived opinion and poorly made decision while disregarding accurate, unsupportive information. Anchoring is making irrational decisions based on information that should have no influence on the decision at hand. Mental accounting is putting money into separate "accounts" based on the function of these accounts. Overconfidence tends to make individuals believe their levels of ability are much higher than what they are.

Harry Harris owns a financial planning firm with $8 million under management. The CFP Board recently told Harry that his rights to use the CFP marks were being suspended for six months. Harry immediately removed the marks from his stationery, business cards, and website. Thirty calendar days before the suspension was over, Harry filed an affidavit with the board stating that he had fully complied with the terms of the suspension, then immediately added the marks back. Did Harry violate any Rules of Conduct?

Yes, Harry did not notify his existing clients that his right to use the marks had been suspended The answer is yes, Harry did not notify his existing clients that his right to use the marks had been suspended. According to Rule 4.7 of the Rules of Conduct, Harry must advise all current clients of any suspension or revocation received from the CFP Board. If Harry had been an employee he would have an obligation to report the suspension to his employer, but as the owner there is no obligation to notify the employees. Any suspension that lasts less than one year will automatically end upon the certificant's filing with the CFP Board within 30 calendar days of the expiration of the period of suspension an affidavit stating that the suspended certificant has fully complied with the order of suspension unless such condition was waived by the Commission.