General Principles Flashcards

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1
Q

Monetary Windfalls

A

Structured Settlements: stream of tax free payments from voluntary agreement between personal injury victim & defendant

Compensatory Damages: Injury or sickness generally tax free. Discrimination or non physical injury taxable

Punitive Damages: Taxable award for wrongdoing by highly negligent defendant.

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2
Q

CPI vs PPI

A

Consumer Price Index: Market basket of goods & services in various cities across the country.

  • Food & beverage
  • Apparel
  • Education & communication
  • Housing
  • Transportation
  • Other goods & services
  • Recreation
  • Medical care

Producer Price Index: leading indicator of inflation trends

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3
Q

Agent vs Broker

A

Agent is loyal to the company

Broker is loyal to the customer

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4
Q

Sales Related Compensation & Related Parties

A

Fee only: May not receive sales related compensation in ANY manner

Fee based: Compensation through commissions & fees

Sales related: compensation received when client buys or sells an asset

Related parties: former spouse & every other family member

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5
Q

Reverse Mortgage

A

Repayment: death of individual owner, conclusion of term or absence of elder homeowner minimum 1yr

Available to homeowners 62+ on condos & single family

Doesn’t have to be owned free & clear

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6
Q

Economic Indicators

A

Leading (5 out of 10)
1. Initial unemployment claims
2. New manufacturer orders
3. Private housing units
4. Stock prices
5. Consumer expectation index

Coincident: Industrial products (1 of 3)

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7
Q

Income Contingent Repayment Plan

A

Percent of discretionary income: 20%
Calculation of discretionary income: AGI 100% poverty level
Repayment: 25 yrs (300 payments)
Monthly payments: Adjusted income, family size, total direct debt
Eligibility: Direct Loans ONLY

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8
Q

Income Based Repayment Plan

A

Percent of discretionary income: 15%
Calculation of discretionary income: AGI 150% poverty level
Repayment: 25 yrs (300 payments)
Monthly payments: AGI, family size, total student loan debt, 10-15% discretionary income
Eligibility: FFELP & Direct Loans, partial hardship

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9
Q

Pay As You Earn Repayment Plan

A

Percent of discretionary income: 10%
Calculation of discretionary income: AGI 150% poverty level
Repayment: 20 years (240 payments)
Monthly payments: AGI, family size, total federal student loan debt, 10% discretionary income
Eligibility: ONLY direct loans, partial hardship, new borrower on or after 10/1/07 disbursed on or after 10/1/11

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10
Q

Revised Pay As You Earned Repayment Plan

A

Percent of discretionary income: 10%
Calculation of discretionary income: AGI 150% poverty level
Repayment: Undergrad 20years Grad 25 years
Monthly payments: AGI, family size, 10% discretionary income, total federal student loan
Eligibility: Some direct loans

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11
Q

College Years

A

Having wealthy parents are a PLUS (parent loan undergraduate student)

PooriSh: Pell grants, Supplemental education opportunity, grant subsidized Stafford loans

American Opportunity Credit: Max $2500, no drug conviction, 1st 4yrs only

Lifetime Learning: Max $2000, any higher learning (undergrad, grad, CE)

Coverdell withdrawal: Must be used by 30; tax free

529 withdrawal: NO MAGI phase out; tax free

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12
Q

Education Funding Years

A

UTMA/UGMA: Subject to kiddie tax, present gift, kid owned

EE bonds: parent owned

Coverdell ESA: $2000 non deductible contribution

529 (QTP): $17000 or $85000 within 5 years, 1st cousin eligible

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13
Q

Broker/Dealers

A

Dealers are individuals/firms acting as principal in a securities transaction. Principals trade for own account and risk

Brokers match buyers & sellers

SEC regulates brokerage companies via FINRA

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14
Q

Bank Regulation

A

Comptroller of Currency/Federal Reserve/FDIC: Regulate federally or nationally charted banks

State/Federal Reserve/FDIC: Regulate state charted banks

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15
Q

Serial Payments

A

Allow client to achieve their goal by making inflation adjusted payments rather than fixed payments

i.e. Couple desires to retire in 10yrs & have $1MM and withdraw $150,000 end of each year with life expectancy of 25yrs and would like to leave $1MM to family

Keystrokes:
-1,000,000 CFo
0 CF1
10 gold Nj
150,000 CF
25 gold Nj
1,000,000 CF
gold IRR/YR

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16
Q

Net Present Value (NPV)

A

How much will said investment earn, in dollars, relative to my required rate of return

CFo = negative input (initial investment)
I/YR = required rate of return
gold, NPV = solve

17
Q

internal Rate of Return

A

Also called dollar weight return, unequal cash flows solving for the return

CFo = initial investment
gold, IRR/YR = solve

18
Q

Unequal Cashflow

A

Calculating PV of an investment with unequal cashflow

How much should someone pay for the investment

CFo = 0 ALWAYS input ) for 1st input

Cf = cash flow +/-
gold NPV = solve

19
Q

Capitalized Value

A

Projected flow of income from a business converted into a present value

annual income/cap rate = capitalized value

20
Q

CFP Disciplinary Actions

A

PUBLIC letter of admonition
Suspension
Revocation
PRIVATE censure

21
Q

Coverdell ESAs

A

Set up in a trust or custodial type account
Contributions limited to $2000
Qualified expenses such as academic tutoring, special needs services, room & board

22
Q

American Opportunity Credit

A

Tax credit 100% of first $2,000 plus 25% of the next $2,000 (max credit $2,500) of tuition, fees and material NOT room & board. Can be combined with multiple children

23
Q

Monetary vs Fiscal Policy

A

Monetary action taken by Federal Reserve to influence money supply.

Fiscal represents federal taxation & spending. Think fiscal, financial, federal taxation