General Principles

Question 1

Question from LR book- recession is ____ consecutive quarters of decline in ______.

Answer 1

two

real GDP

Question 2

Question from LR book- When can AOC credit be used?

Answer 2

first four years of college

Question 3

Question from LR book- during college years, what are the grant and loan options for WEALTHY people?

Answer 3

PPParent LLLoan for Undergraduate Students (Wealthy parents are a plus)

Question 4

Question from LR book- can client funds be commingled?

Answer 4

not with the firm, but in a common investment account for the client

Question 5

Question from LR book- when do you use 3 months as an emergency fund (otherwise use 6)?

Answer 5

• single with 2nd source of income
• married, both work, both reasonable wages
• married, one spouse works, 2nd source of income

Question 6

Question from LR book- EE bonds are owned by ____. Therefore, _____.

Answer 6

The parents

will not work in UGMA or UTMA

Question 7

Question from LR book- What is the max for the lifetime learning credit and when is it used?

Answer 7

$2,000 max

during college years (any- even higher ed)

Question 8

Question from LR book- under the duty of professionalism, if an advisor notices another CFP designee violating the code of ethics, what should they do?

Answer 8

notify the appropriate regulatory authorities include the CFP board

Question 9

Question from LR book- Who regulates the requirements for disclosure via form ADV? (for registered investment advisors)

Answer 9

the SEC

Question 10

Question from LR book- What are the three funding options for graduate years?

Answer 10

Fullbright schol
stafford loan
529 distribution or coverdell withdrawal

Question 11

Questions from LR book- As far as creditor protection during bankruptcy, what kind of educational accounts are creditor protected?

Answer 11

money held in a coverdell

money held in a 529 for MORE THAN TWO YEARS

Question 12

Question from LR book- during a question regarding mortgages, when do you automatically know if the VA and FHA answer options can be crossed out?

Answer 12

when the mortgage amount being discussed is over about $740k. if the mortgage is over 1,000,000, they definitely can’t do it.

Question 13

Question from LR book- during college years, what are the grant and loan options for POORISH (UNDER $60,000) people?

Answer 13

Pell Grants
Supplemental education opportunity grant
Subsidized Stafford loans
(these sound familiar? that’s because mom probably got them. If you are familiar, use it)

Question 14

Question from LR book- depression is ____ consecutive quarters of decline in ______.

Answer 14

six

real GDP

Question 15

Question from LR book- When NPV is zero what is happening with the interest rates?

Answer 15

THE INTEREST RATE IS THE SAME AS THE REQUIRED RATE OF RETURN

Question 16

Question from LR book- after preparing the financial plan, what’s the next step?

Answer 16

communicate the plan

Question 17

Question from LR book- A CFP is meeting with a new client- what is the first step he should take?

Answer 17

provide the client with written disclosure of all material information

Question 18

Question from LR book- what are the permissible words that can be followed after CFP

Answer 18

certificant 
practictioner 
professional 
certification 
mark 
exam 
*registrant- OK but not currently certified 

NOT test
NOT letters

Question 19

Question from LR book- What is the American Opportunity tax credit?

Answer 19

$2000 +25% of next $2000 of expenses (max $2500 credit)

Question 20

Question from LR book- what’s the best answer for a question regarding the client believing inflation is way different, and investment assumptions are way different.

Answer 20

Apply a 10 year average inflation rate and historically reasonable return

Question 21

Question from LR book- If someone’s marks are revoked, what can they do?

Answer 21

appeal within 30 days

a revocation is permanent

Question 22

Question from LR book- if the question says, “a significant decline in economic activity spread across the economy lasting more than a few months” what are they referring to?

Answer 22

a recession
- so even if the question says 12 months of economic decline, they are talking about a recession even though it sounds like a depression.

Question 23

Question from LR book- What are three triggers for repayment in a reverse mortgage?

Answer 23

death of the individual
conclusion of a term of years
by certain events like absence of the elder homeowner from the home for a minimum of one year

Question 24

Question from LR book- what is the goal of both fiscal and monetary policy?

Answer 24

a stable domestic economy

Question 25

Question from LR book- if home equity loan proceeds are used to improve the taxpayer’s home, is interest deductible?

Answer 25

Yes

Question 26

Question from LR book- when is a fixed interest mortgage rate good?

Answer 26

when rates may rise in the future

Question 27

What is usually the order of concerns for a couple

Answer 27

something like this

1. medical insurance if they have none
2. guardianship
3. life insurance if they have none
4. emergency fund