Interest Rate Risk in a Bond

Course: Investment PlanningLesson 10: Fixed Income Securities Analysis Student Question: I’m not clear why holders of long-term bonds are subject to interest rate risk. If a 20-year bond is purchased at par with a coupon rate of 6.25% ($62.50/year), it seems to me that the investor would still receive $62.50 a year regardless of interest rate changes. What…

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Annuity Guaranty Pools

Good to Know We’ll address annuity protections in just a moment, but first let’s put a select few other financial protections into context. The Federal Deposit Insurance Corporation (FDIC) extends the full guarantee of the United States of America behind CDs and traditional banking products purchased from a Federally chartered U.S. bank—up to $250,000 per…

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Skewness versus Kurtosis

Course: Investment PlanningLesson 13: Asset Allocation Student Question: Can you help me understand the difference between Kurtosis and Skewness?  I can’t quite piece it together. Instructor Response: Entire books have been written on this topic but the following summary should get the points for you on the CFP® Board exam when these topics are tested. …

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The Myth of High Income Taxes on Social Security Income

Good to Know You and your clients are planning their after-tax retirement income. Your client is apprehensive about how much of their retirement income will be siphoned off by Federal income tax in retirement. For many, if not most, clients you have great news. The combination of Social Security income (SSI) tax breaks and standard…

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Book Value versus Market Cap

Course: Investment PlanningLesson 5: Fundamental Equity Analysis Student Question: How is a company’s book value different from the market cap? Instructor Response: Book value is an accounting concept generally based upon the acquisition costs of and the legally binding amounts of liabilities.  It is the amount of cash that would be left over if all…

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Economic Uncertainty and Client Outlook

CFP® Certificants in the News How will geopolitical conflicts, elevated inflation, staggering Federal deficits, and high interest rates impact client expectations for 2024?  Counterintuitively, a March 19, 2024 CFP Board news release announced an “overwhelmingly positive” client outlook for 2024. Referring to the pie chart below, over 9 of every 10 clients of CFP® practitioners…

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Social Security Retirement Benefits

Course: Insurance PlanningLesson 10: Social Security Student Question: This question (below) doesn’t quite make sense to me.  Could you clarify why the correct answer is D? Robin Elizabeth qualifies for a retirement benefit of $250 and a spouse’s benefit of $400. At her full retirement age, she will receive which of the following? A) Both $250…

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New CFP Board Sanctions and Guidelines

Good to Know CFP Board is changing the way CFP® Certificants and Candidates for CFP® Certification are disciplined (sanctioned) for violations of the Code of Ethics and Standards of Conduct. The new guidelines will be effective on July 1, 2024. In many cases the new potential sanction is more severe than previous sanctions but in…

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Dependent Care Assistance Plan

Course: Retirement PlanningLesson 9: Building Retirement Wealth by Maximizing Fringe Benefits Student Question: Is a Dependent Care Assistance Plan (DCAP) funded by an Flexible Spending Account the same thing as a Dependent Care FSA?  If not, could you provide some additional info as to how the two would work together (could an individual utilize both…

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Golden Anniversary—CFP® Certification Turns Age 50

CFP® Certificants in the News According to a recent CFP Board article, “In 1973, the College for Financial Planning minted its first class of 42 trail-blazing men and women specifically trained in the professional discipline of financial planning. Half a century later, CFP Board certifies nearly 98,000 CFP® professionals in the U.S. That number will…

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