Fundamentals Practice Q's

Question 1

Elasticity indicates a lower price will:

Answer 1

increase overall revenues

Question 2

Duties to the CFP Board require CFP Professionals to disclose:

Answer 2

FINRA investigations & outcomes other than an uncontested minor rule violation (under $2500 award)

Question 3

Duties owed to the client:

Answer 3

diligence, competence, & integrity

Question 4

A client should aim to save:

Answer 4

10-12% of gross income

Question 5

A CFP Professional must disclose conflicts of interest:

Answer 5

at the initiation of the client relationship, before providing services

Question 6

You cannot make a transaction on behalf of one client:

Answer 6

that will knowingly cause harm to another client

Question 7

CFP professionals must adhere to practice standards when:

Answer 7

performing financial planning

Question 8

Competence includes the planners ability to recognize:

Answer 8

his or her limitations

Question 9

CFP Board does NOT:

Answer 9

impose fines on CFP Professionals

Question 10

CFP Professionals are required to hold a fiduciary duty:

Answer 10

when they recommend financial assets or engage in financial planning

Question 11

A CFP Professional must follow the code of ethics:

Answer 11

when providing professional services

Question 12

Total debt should not exceed:

Answer 12

36% of gross income

Question 13

Establishing which services will be provided during the engagement:

Answer 13

is done prior to the first practice standard - understanding the clients personal and financial circumstances

Question 14

Public disciplinary history must be disclosed to a client when:

Answer 14

providing financial advice, but it is not an example of a conflict of interest

Question 15

A CFP Professional is required to make the disclosure about third parties and areas of expertise:

Answer 15

prior to entering into a planning agreement

Question 16

Conflicts of interest must be disclosed:

Answer 16

before providing services and as material conflicts occur

Question 17

An individual w/ special needs should not be:

Answer 17

named as a beneficiary on a life insurance plan

Question 18

A CFP Professional shall not borrow or comingle funds is stated:

Answer 18

under the standards of conduct

Question 19

The CFP certification can be suspended for up to:

Answer 19

5 years

Question 20

If a CFP Professional believes a client has unrealistic goals:

Answer 20

when appropriate, the practitioner shall try to assist the client in recognizing the implications of unrealistic goals and objectives

Question 21

What would constitute a material conflict of interest:

Answer 21

it could cause harm or impact potential advice

Question 22

Prepaid tuition is treated as an asset:

Answer 22

of the parents’ and is included in the expected family contribution formula

Question 23

The Federal Pell Grant is usually awarded to:

Answer 23

undergraduate students who have a high degree of unmet financial need

Question 24

What document must be disclosed in writing whether providing financial advice or financial planning?

Answer 24

the privacy policy

Question 25

When is a CFP engaged in financial planning?

Answer 25

if the client has a reasonable basis to believe the CFP professional will provide or has provided financial planning

Question 26

Parents PLUS Loans:

Answer 26

for parents to pay undergraduate course work

Question 27

American Opportunity Tax Credit:

Answer 27

100% of first $2000, 25% of second $2000. Max: $2500/per student / per year

Question 28

Lifetime learning credit:

Answer 28

20% of up to $10,000 in qualified expenses. Max: $2000 / per family / per year

Question 29

Included in the first step of the financial planning process (Understanding the clients personal and financial circumstances):

Answer 29

obtaining qualitative and quantitative information, analyzing information, & addressing incomplete information

Question 30

What is the purpose of the CFP Board Code of Ethics and Standards of Conduct?

Answer 30

to reflect the high standards of the profession and ultimately benefit the public