Dan Madden, CFP® – Online CFP Program

Value of Life Insurance in Buy-Sell Agreements

Course: Insurance Planning Lesson 17: Business Uses of Life Insurance Student Question: Do buy sell agreements accounts for projected growth of the company? Do the life insurance benefits increase over time to account for projected growth, or perhaps can they invest and grow conservatively to keep up with inflation (or COLA on the plan)? Thanks,…

Bond Interest Rate Risk

Which of the following bonds would be MOST sensitive to changes in interest rates? A 2-year Treasury bond A 5-year corporate bond A 10-year municipal bond A 30-year Treasury bond CLICK TO REVEAL ANSWER Expand D is the answer. Interest rate risk increases with longer maturities. A 30-year bond has the greatest duration and…

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…

Roth IRA Withdrawal Taxation

A client withdraws $30,000 from her Roth IRA in 2026. The account consists of $20,000 in contributions and $10,000 in earnings. She is age 45 and does not meet any exception to the early withdrawal penalty. How will the $30,000 distribution be treated for tax purposes? Entire amount is tax-free and penalty-free Contributions are tax-free;…

Solving for Annual Equivalent Rate

Course: Fundamentals of Financial PlanningLesson 5: Using the Calculator Student Question: I am confused as to how to get the correct answer for number 4 Jackie invests her bonus at the beginning of this calendar year. If she earns 7% compounded monthly, what is the annual equivalent rate? Round your answer to two decimal places. I…

Earnings Test Calculation

A CFP® professional is evaluating a client’s life insurance needs using the capital needs analysis approach. Which of the following would be classified as a capital need rather than an income need? Monthly living expenses for surviving family members Future college education costs for children Mortgage payoff at death Replacement of the client’s salary CLICK…

Understanding the Relationship Between Coupon Rates and Duration

Course: Investment PlanningLesson 9: Fixed Income Securities Student Question: There is a question regarding duration that I continue to struggle with. Which of the following are true: 1-Lower coupon bonds are more sensitive to interest rates  than high coupon bonds. 2-There is inverse relationship between bond prices and  change in interest rates. 3-There is a positive relationship between coupon rates and  duration. Can…

Earnings Test Calculation

A client turns age 73 in 2026 and must begin taking required minimum distributions (RMDs) from her traditional IRA. Which of the following statements is CORRECT regarding her first RMD? It must be taken by December 31, 2026 It may be delayed until April 1, 2027 It is not required until age 75 It can…

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 a 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…

Earnings Test Calculation

An employee pays premiums for an individual disability income insurance policy with after-tax dollars. The employer does not contribute to the policy. If the employee becomes disabled and begins receiving benefits, how will the benefits be taxed? Fully taxable as ordinary income Partially taxable based on employer contributions Tax-free Subject to capital gains tax rates…