CFP Mock Exam #1 Flashcards
wants 1,000,000 in investments in 10 years
currently have 100,000 invested in account
anticipates acct will appreciate in annual rate of 10% before taxes or 8% after taxes
how much must he invest at the end of each month to achieve his goal?
n = 120 i = 8/12 pv (100,000) fv = 1,000,000 [END] PMT = 4253.82
what are considered part of a kids asset vs parents asset for financial aid (education/FAFSA)?
retirement assets are not considered for financial aid. personal property such as vehicles are not considered
non retirement savings and investment accounts of parents and the student are considered
a client who is an accredited investor, is convinced that stock market prices will rise significantly over the next year. which of the following strategies is the most appropriate for this investor?
- sell an index call and buy an index put
- sell a money market fund and buy an index call
- sell an index call and sell an index put
- sell a money market fund and buy an index put
sell a money market fund and buy an index call
an index call option would increase in value in a rising market
a married couple in a community property state with 1 kid opened a 529 account and funded with 84,000 - each filed a form 709
want to contribute to their kids 529 after a big bonus year
how much can the couple contribute without filing a gift tax return?
$13,200
original $84,000 gift is required to be reported over 5 years = $16,800 annual amount
the difference between $30,000 annual limit and $16,800 is reported in year 4 is 13,200
tax consequences of a married couple making a one time contribution of $150,000 to a section 529 plan
a form 709 is required by BOTH spouses when on uses a five year front loading strategy for 529 funding
if a mutual life insurance company experiences increases in yields on invested assets, those increases in yield may
- decrease the premium on a whole life insurance policy
- decrease the expenses on a variable universal life (VUL) insurance policy
- increase the dividends paid on a whole life policy
- increase the cash value of a variable whole life insurance policy
increase the dividends paid on a whole life policy
a mutual insurance company is owned by the policyholders who are in a position similar to stockholders. they benefit from increased earnings
a cfp professional determines that the client owns more life insurance than is needed. the client no longer wishes to pay premiums. which of the following is a nonforfeiture option most likely suited to the needs of the client
- paid up extended term insurance
- paid up additional insurance
- reduced paid up insurance
- reduced premium
reduced paid up insurance purchases a paid up policy in an amt somewhat less than the original face amt. permanent coverage remains in force with no further premiums due
the most important factor in analyzing a tax sheltered real estate limited partnership (RELP) is the
- tax benefit
- fundamental investment strength
- interest rate risk
- audit risk
fundamental investment strength
strength of the partnership is the most important characteristic of the investment
portfolio immunization attempts to balance which two of the following components of interest rate risk?
- price risk and credit risk
- price risk and reinvestment risk
- reinvestment risk and credit risk
- default risk and price risk
immunization attempts to balance price risk and reinvestment risk
it offers protection against changes in interest rate risk
QRP company has a 25 year bond with a 10% coupon paid annually and is currently trading at PAR. if QRP has the option to call the bond in 5 years at 105, which of the following is the ytm and ytc
the YTM for a par bond equals the coupon rate
YTC formula n = 5 pmt = (10) pv = 100 fv (105) i = 10.80
which of the following best represents an example of using fiscal policy to constrain economic activity?
- increasing the discount rate
- increasing government purchases of treasury securities
- decreasing the budget of the department of transportation
- decreasing the corporate federal income tax rate
decreasing the budget of the department of transportation
*this is an example of contractionary fiscal policy
federal fiscal policy is restrictive when the government does which of the following?
- increases taxes and expenditures
- decreases debt and reserve requirement
- increases interest rates and taxes
- decrease expenditures and debt
decreased expenditures by the government means the government is not buying goods and services from the private sector.
decreased debt means the government is reducing liquidity. increased taxes means the government is removing money from the private sector
are compensatory damaged related to physical injury tax free?
yes
what amount of investment income or expense can you deduct?
the lesser of investment income or investment expense can be deducted
