Zahn - General Principles Flashcards
You have prepared a financial plan for your client. Which of the following needs to be established next?
A. Process and analyze information
B. Recommend the plan
C. Gather client data
D. Establish goals
E. Establish and define the client-planner relationship
B. The planner identifies the appropriate techniques for achieving client objectives while preparing the financial plan. The next step is to Recommend the plan. Answer A is the third step (A). Answer C is the second step (G). Answers D and E are the first step (E).
EGADIM. Personal financial planning process
Mr. X sold his business for $10 million. You (a CFP practitioner) have performed comprehensive financial planning in the past to account for selling his business. What is your next step to assist the client in his personal financial planning?
A. Invest money in insured municipal bonds (intermediate term).
B. Make gifts to various family members using the maximum exclusion
C. Establish a CRT
D. Establish and define the client-planner relationship
D. Althought A, B, and C are good answers, D is the best answer. Establishing and defining the relationship with the client is the first step in the personal financial planning process. You only planned for his business.
Under what circumstances may a CERTIFIED FINANCIAL PLANNER disclose otherwise confidential client data?
I. When the person who referred the client requests it
II. If the client initiates litigation against the CFP licensee
III. When it is needed to impress a prospective client
IV. When the client requests it to be sent to his attorney
V. If the client files a complaint with a regulatory agency
A. I, II, IV, V
B. II, IV, V
C. II, III, IV, V
D. II, III
B.
How many continuing education (CE) hours are generally required per the 2-year reporting period for renewing your CFP certification? A. 10 B. 20 C. 30 D. 40
C. Only during the first reporting period may the number of hours be less than 30
Thomas' net worth increased from $700,000 to $800,000 over the past year. During the year, he spent $7,000 from his money market account to contribute $2,000 to a Roth IRA and $5,000 as a down payment on a new $30,000 car. His investment assets grew by $60,000. He invested $30,000 that he saved out of his earned income. He paid $24,000 on his home mortgage. What was the principal reduction on his mortgage? A. $3,000 B. $5,000 C. $10,000 D. $14,000 E. $15,000
C. Gain in net worth $100,000
Investment Growth - 60,000
Savings - 30,000
Principal Reduction = 10,000
Don and Sally Burnhart, married and both working, are expecting their first child later this year. Sally plans to return to work. How much should they have in an emergency fund?
A. 3 months
B. 6 months
B. The prudent answer is 6 months. Sally “may” return to work but may be out for a period of months.
You client and his spouse have gross income of $100,00 and net income of $70,000. Their house, worth $150,000, has a mortgage (15-yr. fixed) of $120,000 with payments of $1,012 per month. Property taxes are $3,000 per year. Insurance costs of $500 per year for property and $500 per year for flood. What percent of PITI are housing expenses?
A. They are less that 28% of gross income
B. They are 16.14% of gross income
C. They are 23.06% of net income
B. Answer A is true, but answer B is a better answer.
Mortgage $1,012 x 12 = $12,144
Property Taxes 3,000
Insurance 1,000
= 16,144 / 100,000 = 16.14%
Mr. and Mrs. Rich own a home valued at $2,000,000 with a mortgage ($1,000,000). They have decided to purchase a lot in North Carolina for $100,000. If they take out a $150,000 home equity loan, the home equity loan would be subject to which of the following?
A. Interest expense limitations
B. Active participation rules
C. Excess qualified residence limitations
D. A capitalization rate limitation
C. Taxpayers may claim itemized deductions for qualified residential interest up to $1,000,000 for acquisition debt and $100,000 of home equity debt. A home equity loan of $100,000 would not have caused an excess.
Mr. and Mrs. Adams obtained a $120,000 30-year mortgage 10 years ago. The interest rate at that time was 12% with monthly payments of $1,234.34. They have been making 2 extra payments each year to shorten the note. They have a chance to refinance their remaining note, but it will cost them $3,000 in points. They decided to add the points to the refinanced note. How much will their monthly payment be if they refinance the remainder of their loan ($104,000) at 7 1/2% with monthly payments for 20 years?
A. $861.98
A client has a 30-year $100,000 mortgage at 7 1/2% interest with monthly payments. If the client is in the 20% bracket, what is the net after-tax mortgage payment for the first year?
A. $6,639
B. $6,838
C. $6,896
C.
