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CFP > General Principals > Flashcards

General Principals Flashcards

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CFP® flashcards
1
Q

If the Dow is falling, housing is on a downward trend, consumer confidence is down, and unemployment is rising.. what would the fed want to do?

A

The fed is going to loosen the money supply

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2
Q

What does the IAA of 1940 require?

A

Persons or firms advising others about securities investments must register with the SEC

Defines the role and responsibilities of an investment advisor

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3
Q

What is the American Opportunity Credit

A

Covers 4 years post secondary education

CANNOT have felony drug conviction

Tax credit for max of $2500

Does NOT cover room/board

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4
Q

What is the lifetime learning credit?

A

Per credit, NOT per student

20% of first 10k of qualified expenses

*max credit of 2k

Undergrad and graduate

Does NOT cover room/board

Unlimited period

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5
Q

PLUS loans

A

Not need based

Parents can borrow for entire cost of college

Must meet federal standard of credit worthiness

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6
Q

Subsidized Staford loans

A

Available to students who show financial need AFTER EFC, pell grant, and other aid has been subtracted from cost

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7
Q

Pell Grant

A

Max is 6k

Undergrad only

Eligibility determined by EFC formula

Based on need. Eligible AGI below 60k

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8
Q

What is the financial need formula

A

Financial need= cost of attendance - EFC

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9
Q

Who is public service loan forgiveness available to?

A

Government and nonprofit employees with federal student loans

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10
Q

What industries are typically more affected by a recession?

A

Capital goods

Consumer durable goods

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11
Q

Do credit unions do business loans?

A

No

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12
Q

Securities investors protection act of 1970

A

Established SIPC

insured against failure of brokerage firm

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13
Q

Can you put EE bonds in a UTMA/UGMA

A

No, because parents own the bonds

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14
Q

PooriSh

A

Pell Grants
Supplemental Education Opportunity Grant
Subsidized Stanford Student loans

Use for less than 60k income cap

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15
Q

Wealthy

A

Parent loan
Undergrad Students
Wealthy parents are a PLUS

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16
Q

What are the options for funding for graduate years?

A

Fulbright scholarship
Stafford loan
529 distribution or coverdell
Lifetime learning credit

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17
Q

What another name for a 529

A

Qualified Tuition Plan (QTP)

Will refer to it as a QTP on exam

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18
Q

Does the federal reserve control the fed funds rate?

A

No!!

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19
Q

Does GDP include inflation?

A

No

It counts economic activity without regard to yearly price fluctuations

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20
Q

What do you need to sell variable contracts

A

Series 6 or 7

And variable state life insurance license

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21
Q

Are home equity loans deductible?

A

Only if used for home equity

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22
Q

How will taking out a home equity loan for 25k to make a home improvement affect net worth?

A

Loan decreases 25k
Improvements increase 25k
*it is a wash

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23
Q

Can a checking account always be used for an emergency fund?

A

Not it is not always available because it’s balance may be used for regular expenses

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24
Q

Chapter 13 bankruptcy

A

Reorganization/repayment plan

Payments to creditors are reduced

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25
Q

What is disinflation

A

Slowing down of price increases

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26
Q

Chapter 7 bankruptcy

A

Straight bankruptcy-allows you to walk away from debt

Permits debtor to claim either federal or state exemptions

Examples of exempt property: homestead, personal property, equity in a motor vehicle, wages due to head of family, ERISA plans, cash value of LI/annuities

Must satisfy means test

Net inc 60M >10k = not an option

Net inc 60M <10k = allowed

Net inc between 6-10k = can file if net inc is <25% of all non priority unsecured debt

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27
Q

Repo

A

Fed gives the dealer funds in return for a temporary pledge of gov securities

Buy bonds

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28
Q

Reverse repo

A

Fed gives the dealer a temporary pledge of gov securities in return for cash

Sells bonds

29
Q

What is the producer price index

A

Index of price of various items such a farm products and industrial commodities

This is the leading indicator of inflation trends

30
Q

What does compliance within the rules of the insurance company fall under

A

Law of agency

31
Q

Discount rate

A

Rate the federal bank charges its member banks to borrow to meet reserve requirements

32
Q

What is implied authority

A

Actual authority the agent to carry out business

That in which THE PUBLIC believes

33
Q

Prime rate

A

Interest rate that commercial banks charge its most creditworthy corporate customers

This is often an option for exam questions about monetary policy and is WRONG

34
Q

What effect does paying down mortgage principal have on net worth

A

Increases net worth

35
Q

What is a time deposit

A

CD

36
Q

Express authority

A

Written, explicit direction from the insurance company to the agent

37
Q

Apparent authority

A

Arises out of negligence to principal

Allows the agent to appear to have authority due to past actions

38
Q

Common coincident economic indicator

A

Industrial production

39
Q

What does GDP measure

A

Dollar value of all goods and services newly produced within a countries boarder

40
Q

Difference between durable and non durable goods

A

Durable-items that don’t wear out quickly
Cars, appliances, home furnishings, electronics

No durable-items that are used up quickly or have a short life span
Makeup, food, paper products, fuel, clothing

41
Q

List of a few leading economic indicators

A 
Initial claims of unemployment insurance
New manufacturing orders
New private housing units
Stock prices, 500 common stocks
Index of consumer expectations
42
Q

Chapter 11 bankruptcy

A

For individuals who do not qualify under chapter 13 bc they exceeded debt limit or don’t have regular source of income

43
Q

What nouns MUST follow CFP

A 
Certificant
Practitioner
Professional
Certification
Mark
Exam
44
Q

Who regulates the requirements for form ADV?

A

Sec

45
Q

Debts not cancelable by bankruptcy

A 
Student loans
Child support
Taxes
Gov loans
Alimony
46
Q

Is money in a coverdell or 529 creditor protected?

A

Only if it has been in the account for 2 years or more

47
Q

What happens when an insurance broker writes an application and it is submitted with misinformation

A

Actions of brokers authority to not extend to insurers

Insurer is not obligated to pay claim and the carrier would refund the premium

48
Q

Difference between agent and broker

A

Agent-acts on behalf of the insurer

Broker- represents policy owner

49
Q

Who controls the monetary policy for the US

A

FOMC

50
Q

What age brackets match up with investments for education accounts?

A

Age 12 and below- can add stocks
Age 13-16- less risk, bonds with time horizon
Age 17 and up-cash

51
Q

Can 529 plans be taken during a bankruptcy?

A

Yes, if the plans have not been established for 2 years

52
Q

In what stage of the financial planning process are unrealistic goals addressed?

A

Identifying and selecting goals

53
Q

What does fiscal policy promote

A

Federal taxation and spending designed to level out business cycle, achieve full employment, price stability and sustained growth in economy

54
Q

Do monetary and fiscal policy have the same objective

A

Yes-stable domestic economy

55
Q

Is the federal reserve over fiscal or monetary policy?

A

Monetary policy

56
Q

What are the 4 ways the fed can ease the money supply

A

Reduce reserve requirement
Lower discount rate
Buy bonds
Decrease margin percentage required

57
Q

What are the 4 ways the fed tightens the money supply?

A

Increase reserve requirement
Raise discount rate
Sell bonds
Increase margin percentage requirement

58
Q

What is the federal funds rate and how is it set?

A

Is excess reserves maintained at the fed by member banks

Is the charge for overnight loans from one bank to another

Set by auction

59
Q

Is a contribution to a coverdell deductible?

A

No

60
Q

Is a contribution to a coverdell present or future interest?

A

Present interest

61
Q

What balance of a students UTMA will impact the EFC?

A

20%

62
Q

What percentage of unprotected assets would be counted in the EFC?

A

Colleges expect 5.64% of “unprotected” assets toward EFC

63
Q

Is there a protected amount of student income that is not counted toward EFC?

A

6k

64
Q

What is the parent protection allowance for EFC?

A

17k-37k

65
Q

How does having more family members in college affect EFC?

A

Lowers EFC

the lower it is the more aid a family can apply for

66
Q

Are books or room and board a qualified expense for EE bonds?

A

No. Only tuition

67
Q

How much of the AOTC can be a refundable credit?

A

40% up to $1,000

68
Q

To use the AOTC how does a taxpayer need to document their payments of tuition and fees?

A

Form 1098-T

CFP (10 decks)

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