Posts by Dan Madden, CFP®
Modified 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 MoreCalculating Rate of Return
Course: Investment PlanningLesson 1: Key Principles of Investing Student Question: Hey Dan, Hope you are doing well. Can you help solve a practice question? I looked through the textbook and my notes and just couldn’t wrap my brain about how to solve the problem below. The confusing part to me is that the fund was not…
Read MoreSolving for Mortgage Payment
Shannon refinanced her home mortgage to a 30-year fixed mortgage with biweekly payments. How much is each payment if she owed $350,000 at the time of the refinance and the interest rate is 4.5%? $818 $881 $1,012 $1,229 CLICK TO REVEAL ANSWER Expand A is the answer. Shannon pays her mortgage every two weeks which…
Read MoreImpact on Net Worth
Last year, David paid down his motorcycle loan by $4,000 and his school loan by $8,000. He was also able to add $11,000 to his IRA from his checking account. David’s investment account grew by $15,000 during the year. How much did David’s net worth increase for the year? $12,000 $23,000 $27,000 $38,000 CLICK TO…
Read MoreSection 303 Redemption
A Sec. 303 Redemption is most likely appropriate for which of the following estates? At Fred’s death, Fred owned all of his assets, including the stock of a closely-held corporation in joint tenancy WROS with his wife. Before Gloria’s death, she transferred all of her assets, including the stock, in a closely-held corporation to an…
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