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Emily CFP Cards > General Principles and Conduct > Flashcards

General Principles and Conduct Flashcards

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1
Q

Real GDP Excludes:
1)
2)
3)
4)
5)

A

1) imports
2) inflation
3) transactions where money changes hands, but no new goods or services are produced
4) income of U.S. citizens working abroad
5) profits earned by U.S. companies in foreign countries

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2
Q

Real GDP Includes:
1)
2)
3)

A

1) market value of all final goods and services produced within an economy
2) income of foreigners working in the U.S.
3) profits that foreign companies earn in the U.S.

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3
Q

When investors consider the past, they will tend to suffer from:
1)
2)
3)

A

1) house-money effect (take more risk)
2) snakebite effect (take less risk)
3) break-evenitis (take more risk)

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4
Q

The percentage of deposits that must be held on reserve

A

reserve requirement

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5
Q

The rate at which member banks borrow from the government

A

discount rate

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6
Q

What are the Fed’s 3 primary tools?

A

1) discount rate
2) reserve requirement
3) open market activities

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7
Q

Who controls Fiscal Policy?

A

Congress

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8
Q

Who controls Monetary Policy?

A

The Fed

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9
Q

When a good’s quantity demanded responds little to price changes

A

inelastic

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10
Q

When a good’s quantity demanded responds greatly to price changes

A

elastic

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11
Q

What is the GDP formula?

A

C + I + G + (X-M)
C = consumer spending
I = investment made by industry
G = government spending
X = exports
M = imports

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12
Q

The market value of goods and services produced by labor and property in the U.S.

A

GDP

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13
Q

A recession is defined as:

A

2 consecutive quarters of negative (year-over-year) GDP growth

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14
Q

Contraction in the business cycle is characterized by:

A

decreasing GDP and increasing unemployment rate

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15
Q

Expansion in the business cycle is characterized by:

A

increasing GDP and decreasing unemployment rate

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16
Q

A written reproach of the respondent’s behavior published in a press release

A

public letter of admonition

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17
Q

Prohibition of using CFP marks, stating or suggesting they are a CFP for a minimum of 90 days and a maximum of 5 years

A

suspension

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18
Q

The termination of a respondent’s right to use the CFP marks. A permanent bar from using or obtaining CFP certification

A

revocation

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19
Q

An unpublished written reproach mailed by the DEC to a censured respondent

A

private censure

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20
Q

An appeal to the Board of Directors’ Appeals Committee must be filed within how many days of issuance of DEC final order?

A

30

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21
Q

Hearing documents, written statements, and stipulations are due within how many days after delivery of a written complaint?

A

45

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22
Q

Consists of at least 3 people, most of whom must be a CFP professional, and the Chair must be a DEC member

A

hearing panel

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23
Q

Has the authority to issue a final order that finds facts, determines whether a violation has occurred, and, where appropriate, imposes discipline in the form of a sanction

A

Disciplinary and Ethics Committee (DEC)

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24
Q

What are the 3 levels of Fiduciary Duty?

A

1) duty of care
2) duty of loyalty
3) duty to follow client instructions

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25
Q

Written notice must be delivered to the CFP board how many days after adverse conduct?

A

30 calendar days

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26
Q

What is the “signal” to Fiduciary Duty?

A

financial advice

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27
Q

How many days must a CFP disclose material changes (such as fees) to a client?

A

90

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28
Q

What are the 3 ladders under the Duty of Loyalty?

A

1) above my own interests
2) above my firm’s interests
3) avoid material conflicts of interest

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29
Q

The witness list is due within how many days after receiving a complaint?

A

30

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30
Q

Has the authority to investigate and file a complaint against a respondent for alleged violations

A

CFP Board Counsel

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31
Q

The rate at which banks borrow from each other

A

fed funds rate

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32
Q

The rate at which banks lend to their customers

A

prime rate

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33
Q

What is the ideal GDP %?

A

3-3.5%

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34
Q

What is the ideal unemployment rate?

A

4%

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35
Q

What is the target inflation rate?

A

2-2.5%

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36
Q

This theory happens when people suffer more greatly from losses than they benefit from gains

A

prospect theory

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37
Q

What effect lends to people seeking pride and avoiding regret?

A

disposition effect

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38
Q

What bias can lead to single stock concentrations?

A

familiarity

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39
Q

Under SEC Rule 415, how long do issuing firms have to issue shares from their IPO filing?

A

2 years

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40
Q

When a new issue is released to the public for the first time, who is the issue registered with?

A

the SEC

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41
Q

Items on a personal balance sheet are listed at what value?

A

FMV

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42
Q

Items on a corporate balance sheet are reported at what value?

A

the lower of cost or FMV

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43
Q

The purpose of a balance sheet is to look at what?

A

financial position

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44
Q

The purpose of a statement of cash flows is to look at what?

A

cash movements

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45
Q

What are the 4 types of financial ratios?

A

1) liquidity ratio
2) activity ratio
3) profitability ratio
4) debt ratio

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46
Q

What is the current ratio?

A

current assets / current liabilities

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47
Q

What is the quick ratio?

A

(current assets - inventories) / current liabilities

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48
Q

What is the working capital ratio?

A

current assets - current liabilities

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49
Q

What is the debt to equity ratio?

A

total long-term debt / equity

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50
Q

What is the times interest earned ratio?

A

EBIT / interest expense

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51
Q

What is the debt ratio?

A

total debt / total assets

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52
Q

What is PITI?

A

principal, interest, taxes, and insurance

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53
Q

What is the front-end housing ratio?

A

PITI / gross income

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54
Q

What is the back-end housing ratio?

A

PITI + other debts / gross income

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55
Q

What is the front-end housing percentage limit?

A

28%

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56
Q

What is the back-end housing percentage limit?

A

36%

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57
Q

For a household with 2 earners, or 1 earner and the other having “substantial income,” what is the emergency fund requirement?

A

3 months of expenses

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58
Q

For a household with only 1 source of income, what is the emergency fund requirement?

A

6 months of expenses

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59
Q

If both spouses work at the same company, thus having a double income, what is the rule of thumb for emergency funding?

A

6 months, in case the business goes under and they both lose their job

60
Q

How do you calculate the adjusted basis to a donee when gift taxes have been paid?

A

1) find the appreciation factor:

FMV - basis / FMV- annual exclusion

2) multiply the appreciation factor by gift taxes paid

3) add step 2 to the original basis

61
Q

Below what number is a credit score considered “poor?”

A

below 580 is a poor credit score

62
Q

At the commencement of an investigation, a Respondent must deliver to CFP Board Counsel a document acknowledging receipt of the Notice of Investigation within ____________from delivery to Respondent of the Notice of Investigation.

A

14 days

63
Q

Who reviews and decides all appeals?

A

the appeals committee of the board of directors

64
Q

What are the 3 main types of assets listed on a statement of financial position?

A
  1. cash and cash equivalents
  2. investment assets
  3. personal use assets
65
Q

A Respondent must deliver a written Answer to an Amended Complaint no later than the later of ____________ of delivery of the Amended Complaint or the date an Answer to the original Complaint was due.

A

14 days

66
Q

If CFP Board Counsel finds probable cause to believe that Respondent violated the Code and Standards or the Pathway to CFP® Certification Agreement, then CFP Board Counsel must take one or more of the following actions:

A
  1. letter of dismissal
  2. settlement offer
  3. complaint
67
Q

A liquidation type bankruptcy procedure. This eliminates a consumer’s debt by having a trustee sell some of the debtor’s personal property to repay creditors

A

chapter 7

68
Q

What debts cannot be ignored after 115 days of Ch 7 filing?

A

child support, alimony, income tax less than 3 years past due, student loans, and secured debt

69
Q

This type of bankruptcy allows debtors to keep their personal assets, but are required to pay their debt in full over a period

A

chapter 13

70
Q

What is the most common type of bankruptcy for businesses?

A

chapter 11

71
Q

The right to know costs and terms of credit

A

consumer credit protection act

72
Q

The right to a fair opportunity to obtain credit

A

equal credit opportunity act

73
Q

The right to know what’s in your credit file

A

fair credit reporting act

74
Q

The right to have billing mistakes resolved

A

fair credit billing act

75
Q

The right to be protected from collection agencies

A

fair debt collection practices act

76
Q

The ultimate overseer of all things debt

A

consumer financial protection bureau (CFPB)

77
Q

In Ch. 13 bankruptcy, an individual must have no more than $_______ in unsecured debt (credit cards, personal loans)

A

$419,275

78
Q

In Ch. 13 bankruptcy, an individual must have no more than $_______ in secured debt (mortgage, car loans)

A

$1,257,850

79
Q

The standard for credit scoring

A

FICO

80
Q

The 3 main credit bureaus that maintain a consumer’s credit report:

A
  1. Experian
  2. Equifax
  3. TransUnion
81
Q

Payment history accounts for what percent of a credit score?

A

35%

82
Q

Amounts owed accounts for what percent of a credit score?

A

30%

83
Q

Length of credit history accounts for what percent of a credit score?

A

15%

84
Q

New credit accounts for what percent of a credit score?

A

10%

85
Q

Credit mix accounts for what percent of a credit score?

A

10%

86
Q

What is considered an exceptional credit score?

A

850

87
Q

Between what numbers is considered a “fair” credit score?

A

580-670

88
Q

Between what numbers is a “good” credit score?

A

740-800

89
Q

How many years does it take for a missed payment to be removed from a credit report?

A

7 years

90
Q

Mortgages under $______ are considered conventional

A

$766,550

91
Q

Mortgages above $766,550 are considered _____ mortgages and require higher interest rates

A

jumbo

92
Q

Borrowers who put down less than 20% on a home will be required to:

A

pay PMI until the 20% equity is reached, following 2 years of on-time payments

93
Q

A mortgage in which a large portion of the borrowed principal is repaid in a single payment at the end of the period:

A

balloon mortgage

94
Q

Under the provisions of the Equal Credit Opportunity Act, a potential borrower must receive a response from a creditor within _________ after an application indicating whether the request has been approved or denied.

A

30 days

95
Q

529s can make a qualified distribution up to $__________ per year in tuition expenses for K-12 schools

A

$10,000

96
Q

You must use the funds in a Coverdell account by what age?

A

30

97
Q

Is there an age limit to using a 529 account?

A

no

98
Q

A Coverdell ESA can be funded with a maximum of $_________ per beneficiary, per year, combined from all sources

A

$2,000

99
Q

To buy a qualifying U.S. savings bond, the bond purchaser must be at least ____ years old at the time of bond issue

A

24

100
Q

529 plans are considered to be whose asset in consideration for financial aid?

A

parent

101
Q

Coverdell accounts are considered to be whose asset in consideration for financial aid?

A

parent

102
Q

EE/I bonds are considered to be whose asset in consideration for financial aid?

A

the owner of the bond

103
Q

UTMA/UGMA accounts are considered to be whose asset in consideration for financial aid?

A

student

104
Q

EE/I bonds can be used to pay for what?

A

tuition and fees only

105
Q

If the owner of an EE/I bond dies before bond maturity, how is it considered in their gross estate?

A

the value of the bond is part of their gross estate

106
Q

When applying for financial aid, is a Roth IRA or a traditional IRA considered in the calculation?

A

no

107
Q

FDIC insurance coverage for an irrevocable trust is up to:

A

$250,000 for the non-contingent interest of each plan beneficiary

108
Q

Which law indicates that supply for an economic product will vary directly with its price?

A

the law of supply (the law of supply states that producers will supply more of an economic good the higher the price and visa-versa)

109
Q

If the FMV (at the time of the gift) is greater than the donor’s basis then:

A
  • the donee will use the donor’s basis as their own
  • the donee will assume the donor’s holding period
110
Q

What % are parental assets counted in EFC?

A

5.64%

111
Q

What % are student assets counted in EFC?

A

20%

112
Q

What % is student income counted in EFC?

A

50%

113
Q

What is the financial need formula?

A

Cost of Attendance (COA) - EFC = financial need

114
Q

What is not counted towards EFC?

A

retirement assets and home equity

115
Q

What is the protected amount for student’s income for calculating EFC?

A

$9,410

116
Q

FAFSA has a __ year look-back for reported income

A

2

117
Q

As EFC increases, financial aid awards _________

A

decrease

118
Q

AOTC is not available to be used for what?

A

room and board

119
Q

How much is the AOTC credit refundable?

A

40% (up to $1,000)

120
Q

Is the LLC a refundable credit?

A

no

121
Q

What is the maximum benefit for AOTC?

A

up to $2,500 per eligible student

122
Q

What is the maximum benefit for LLC?

A

up to $2,000 per return

123
Q

Can you use the AOTC if you have a felony drug conviction?

A

no

124
Q

The LLC qualified expenses:

A

tuition and fees only

125
Q

The AOTC qualified expenses:

A

tuition, fees, and materials needed for the course of study

126
Q

What years are the AOTC credit available for?

A

first 4 years of undergrad

127
Q

Can you use the LLC if you are in graduate school?

A

yes

128
Q

What kind of student loan is needs based?

A

subsidized loan

129
Q

Who pays the interest in a subsidized loan?

A

the federal government

130
Q

A PLUS loan can be used for what kind of school?

A

grad, undergrad, or professional student

131
Q

The amount of a PLUS loan cannot exceed:

A

cost of tuition - any other financial aid

132
Q

Subsidized loans can only be used for what kind of school?

A

undergraduate

133
Q

Unsubsidized loans can be used for what kind of school?

A

graduate or undergraduate

134
Q

Who pays the interest in an unsubsidized loan?

A

the student

135
Q

Is blindness considered a disability that qualifies for a 529 ABLE account?

A

yes

136
Q

What is the maximum you can put into an ABLE account each year?

A

$18,000

137
Q

What is the age limit for ABLE accounts?

A

26

138
Q

Having 2 or more personal bankruptcies is deemed:

A

a presumptive bar

139
Q

What is the maximum loan amount you can take from a 401(k)?

A

the greater of $10,000 or 50% of your vested balance OR $50,000, whichever is less

140
Q

Provides individuals with the right to know the terms and costs of their credit

A

Consumer Credit Protection Act

141
Q

Which law indicates that demand for a product will vary inversely with its price?

A

the law of demand

142
Q

What is the minimum time frame for a CFP board issued Administrative Order of Suspension?

A

1 year and 1 day

143
Q

In theory, are all goods considered to be elastic in the long-term?

A

yes

144
Q

What is subject to an automatic stay under Ch. 7 and Ch. 13 bankruptcy?

A

foreclosures, property repossessions, and sales of property while repayments are being made

145
Q

Which law indicates that supply for an economic product will vary directly with its price?

A

the law of supply

Emily CFP Cards (7 decks)

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