Posts by Dan Madden, CFP®
Transfer of Interest in Property Held in Joint Tenancy
Gary Chapelle owns a duplex with his brother in joint tenancy with right of survivorship. Gary would like to pass his interest in the property to his son Bill and Gary has provided in his will that his interest in the duplex will pass to Bill. Which of the following statements concerning the transfer of…
Read MoreInternal Rate of Return Calculation
Course: Fundamentals of Financial PlanningLesson 5b: Using the HP 10bII Calculator Student Question: In Example 2, the solution given has 6 years (including CF0) instead of 5. I believe the first year of Carl’s coin purchase should be CF0, but the fifth year – which includes a purchase and a sale – should be CF4.…
Read MoreActuarial Assumptions in Defined Benefit Contribution Plans
Which of the following statements concerning the various actuarial assumptions used in estimating an employer’s contributions to a Defined Benefit Pension Plan is correct? The higher the assumed rate of investment income, the larger the employer’s assumed contribution rate. The higher the employee turnover or termination rate, the larger should be the employer’s assumed contribution…
Read More529 Plan Contribution Limits
Course: Fundamentals of Financial PlanningLesson 6: Educational Savings Techniques Student Question: Good morning, Do the limits on 529 Plan contributions apply to that specific account, the child, or the contributor? Is it possible for a contributor to have more than one 529 Plan if they’ve reached the limit on one? Thanks, Aaron Instructor Response: Hi…
Read MoreModified Endowment Contract Loan
Alan paid $70,000 for a MEC policy when he was 50 years old. What are the income tax ramifications if he takes a $15,000 loan 3 years after purchasing the policy? The policy was worth $78,000 at the time of the loan. Alan would not have to report any taxable income or penalty. Alan would…
Read MoreSupply and Demand Impact on Prices
Course: Fundamentals of Financial PlanningLesson 2: Economic Concepts and Consumer Protection Laws Student Question: Hi, Can you please provide an explanation for the correlation between demand and the equilibrium price? I’m aware that demand is influenced by price increases or decreases; however, I’m having a hard time deciphering the relationship between demand and the equilibrium…
Read MoreRefinance Payment Calculation
Dale refinanced his home mortgage to a 30-year fixed mortgage with biweekly payments. How much is each payment if he owed $350,000 at the time of the refinance and the interest rate is 3%? $680 $771 $1,136 $1,242 CLICK TO REVEAL ANSWER Expand A is the answer. Brandon pays his mortgage every two weeks which…
Read MoreReversion Tax
Lucky Star Corp has been extremely lucky with their defined benefit plan as it is currently overfunded. Management decided to terminate the plan while they are overfunded and share the excess with the employees. What amount of reversion tax will Lucky Star Corp have to pay upon termination? 0% 10% 20% 50% CLICK TO REVEAL…
Read MoreSolving for Bond Yield
An investor bought a bond at par that matures in 10 years. The bond pays an annual coupon of $110 and the reinvestment rate is 7%. What is the realized compound yield of this bond? 7.23% 8.01% 9.67% 14.10% CLICK TO REVEAL ANSWER Expand C is the answer. One would anticipate a realized compound yield…
Read MoreCFP Board Relaunches Financial Planning Website
CFP Board Updates Based on feedback from consumer research and user testing, the CFP Board has revamped and now relaunched the financial planning website – letsmakeaplan.org. The goal of the new website is to provide content that enables the consumer to gain a better understanding of the importance of financial planning and then how to…
Read More