Basic Need To Know Flashcards

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1
Q

The 7 practice standards of CFP PROCESS

A

1) understand Clients
2) identify and select goals
3) Analyze course of action and alt action
4) develop recommendations
5) present recommendations
6) implement recommendations
7) monitor plan

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2
Q

Who must register as investment advisor

A

ABC
A: give advice
B: business
C: compensation

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3
Q

Expansion (market cycle)

A

Low inflation
Low interest rates
Low unemployment
WILL LEAD TO
Increase in interest and inflation

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4
Q

Peak (market cycle)

A

Highest GDP
Low unemployment
WILL LEAD TO
Increased unemployment

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5
Q

Monetary policy

A

Federal reserve controls money supply and influences interest rates

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6
Q

Ease monetary policy

A

Increase money supply, decrease interest rates

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7
Q

Tighten monetary policy

A

Decrease money supply, increase interest rates

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8
Q

4 tools of Fed Reserve for Monetary policy

A

1) reserve requirement
2) discount rate
3) open market operations
4) excess reserve requirement

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9
Q

Monetary policy: Reserve Requirement

A

Percent of deposits a bank is requested to maintain in cash

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10
Q

Monetary policy: discount rate

A

Overnight interest rate banks can borrow from federal reserve

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11
Q

Monetary Policy: open market discount operations

A

Buying and selling gov bond securities

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12
Q

Monetary Policy: excess reserve rate

A

Money banks hold at federal reserve in excess of reserve requirement
Ex: higher rate encourages more cash to be held

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13
Q

fiscal Policy

A

Congress controls spending, taxation and influences money supply and interest rates

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14
Q

3 tools for Fiscal policy

A

1) taxation
2) spending
3) debt management

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15
Q

FDIC insurance amount

A

$250k of insurance per ownership per institution

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16
Q

Current Ratio

A

Ability to meet short term obligations
= current assets / current liabilities

17
Q

Emergency Fund

A

Should have 3-6 months saved of non discretionary expenses
= current assets / monthly non discretionary expenses

18
Q

Housing Ratio: 28%

A

Monthly housing costs / monthly gross income
Should be less than 28%

19
Q

Housing ratio: 36%

A

Monthly housing costs + ALL other reoccurring debt / monthly gross income
Should be less than 36%

20
Q

PLUS loan

A

Loan for parents for undergrad students
Needs to relayed in 10 years

21
Q

Pell Grant

A

Need based grant, depends on expected family contribution
Undergrad only

22
Q

Coverdell Education savings account

A

$2k max contribution per beneficiary
Funds must be distributed by age 30
Income phase outs

23
Q

Systematic risk

A

Risk to broader market
Cannot be diversified

24
Q

Unsystematic risk

A

Diversifiable risk
Risk tied to company or industry

25
Q

Types of Systematic risk

A

Market risk
Interest rate risk
Purchasing power risk
Exchange rate risk

26
Q

Types of unsystematic Risk

A

Business risk
Financial risk
Operational risk

27
Q

ExCeption to Register as Advisor

A

The Publisher was Broke bc he was LATE to a US Bank
- publishers,
- broker dealers
- L: Lawyers
- A: Accoutants
- T : Teachers
- E : engineers
- banks and bank holding companies
- advisors whose service is strictly US securities guaranteed by US

28
Q

Structured Communication (Types)

A

1) Interviewing
2) Advising
3) Counseling