Dan Madden, CFP® – Page 46 – Online CFP Program

Annual Return and Compounding

Course: Fundamentals of Financial PlanningLesson 5: Using the Calculator Student Question: My question relates to being able to clearly distinguish when the CFP Board Exam will require an annual or other period for the answer. Question 5(b) asks: “What is the rate of return on Investment 2 using daily compounding?” What is the annual rate of return on Investment 2, made 3 years…

ESOPs and Stock Bonus Plans

Which of the following statements concerning the characteristics of ESOPs and stock bonus plans is correct? The employer is required to make a specific annual contribution. Non-vested account balances of terminated participants are usually reallocated to the remaining participants. The employer assumes the risk associated with the investment of trust fund assets. The increased investment…

Defined Benefit Plan Reversion 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…

Tightening the Money Supply

Which of the following is a monetary policy that will tighten the money supply? Sell government securities Lower the discount rate Decrease government spending Increase taxes CLICK TO REVEAL ANSWER Expand A is the answer. Selling government securities is a monetary policy that will tighten the money supply as the cash used to purchase the…

July 2020 CFP Board Exam Moved to September

CFP® Board Updates On May 4, the CFP Board announced the July 2020 CFP Board Exam has been postponed to September. This was in response to the ongoing Covid-19 pandemic. The new pertinent dates are: Examination Period: September 22-29, 2020 Registration Opens: Already in Progress Registration Deadline: September 8, 2020 Early Bird Discount ($725 rate)…

Black-Scholes Option Valuation Model

All of the following are correct about the impact of an increase in the single variable under the Black-Scholes Option Valuation Model EXCEPT: Market price has a positive impact on put options. Strike price has a positive impact on put options. Expiration time has a positive impact on call options Stock volatility has a positive…

Coverdell ESA versus 529

Course: Fundamentals of Financial PlanningLesson 7: Educational Aid and Funding Calculation Student Question: So, is there ever any benefit to choosing a Coverdell ESA over a 529 Plan? It seems the big difference in the two is that the Coverdell has an AGI limit, so why would you just not always steer clients towards 529 Plans since they can be used across state borders? Stephanie Instructor Response: Hi…

Using Jensen Performance Index

Based on the Jensen performance index, which fund should the investor continue to hold given the following information? FUND 1 FUND 2 Return on Portfolio 13% 17% Beta .95 1.02 Standard Deviation .18 .22 Risk-free rate of return is 7% Market return is 15% Fund 1 Fund 2 Both Fund 1 and 2 Neither Fund 1 nor 2 CLICK…

Ratio Percentage Test

Which of the following statements concerning SEP and Keogh plans is not correct? A SEP must meet fewer reporting requirements than are imposed on a Keogh plan. A SEP is not considered by the IRS to be a qualified plan as is a Keogh plan. A SEP is similar to a defined contribution plan; a…

Ratio Percentage Test

Assume that, of the 100 employees eligible for participation in G Company’s qualified pension plan, 20 are highly compensated employees and all 20 participate. What is the minimum number of G Company’s non-highly compensated employees that must participate in G Company’s qualified pension plan to meet the ratio percentage test? 20 50 56 70 CLICK…