Dan Madden, CFP® – Page 49 – Online CFP Program

Multiple Insurance Provider Claim Solutions

Course: Insurance PlanningLesson 2: Fundamentals of Insurance Student Question: I’m having difficulty seeing the difference between pro-rata liability, contribution by equal shares, and primary and excess. Could you explain the review exercise? Review Exercise Three companies insure Josh’s $250,000 house. Insurer A has it insured for 10%, insurer B for 35%, and insurer C for…

Tax Law Sources

Sheila found four different sources to support her position for deducting an expense on her individual income tax return. Which of the following sources provides the least support for her position? Treasury Regulation Private Letter Ruling Revenue Ruling Internal Revenue Code CLICK TO REVEAL ANSWER Expand B is the answer. Private Letter Rulings are only…

Market Anomaly

Which of the following correctly identifies a market anomaly? Stocks with high P/E ratios outperform stocks with low P/E ratios. Stocks of small firms outperform stocks of large firms. Stocks rated “5” by Value Line outperform stocks rated “1”. Stocks followed by financial analysts outperform those that are neglected. CLICK TO REVEAL ANSWER Expand B…

Intrinsic Value of a Put

Shares of DAGER Corp sell for $25 per share and a client holds a put for DAGER shares with an exercise price of $29. The premium for the put was $3. What is the intrinsic value of the put? $0 $1 $3 $4 CLICK TO REVEAL ANSWER Expand D is the answer. The intrinsic value…

Recognizing Income – Cash Basis

Course: Income Tax Planning Lesson 3: Accounting of Gross Income Student Question: The first example in “Recognizing Income” about not recognizing the check payment until it can actually be cashed seems contradictory to the CFP Board question below which states that income is included when a check is RECEIVED. Any clarification you can provide here? Thanks. Jay Coursework…

Interest Rate Risk

Which of the following correctly describes interest rate risk? Interest payments will have less purchasing power in the future. Bond prices decrease as interest rates increase. Interest payments may not be paid if the issuer goes bankrupt. The bond may be called because interest rates have decreased. CLICK TO REVEAL ANSWER Expand B is the…

Maxing Out Defined Benefit Plans

Course: Retirement Planning Lesson 8: Fitting Deferred Compensation into the Retirement Plan Student Question: Curious as to why the net result is $525,000.00 and not $500,000.00. Wouldn’t 100% of her current year compensation be $500,000.00? Is it just that the Board decided to max out the limits of the DBP and the NQEBP so that’s…

Odd Lot Theory

Which of the following tells the investor that the Odd Lot Theory indicates a bull market? The ratio of odd lot purchases to sales is constant. Odd lot sales exceed odd lot purchases. The ratio of odd lot purchases to sales reaches the resistance point. Odd lot purchases exceed odd lot sales. CLICK TO REVEAL…

SIPC Reimbursement

Course: Investment Planning Lesson 2: Securities Markets and the Fed Student Question: The coursework states that the SIPC will pay claims up to $500,000, but in Example 2, they only gave Bruce $350,000. Why is that? Thanks. Wesley Example 2 Bruce had $400,000 in cash and $100,000 in securities in his brokerage account. His broker/dealer…

Practice Question: Correlation between International Stocks and T-Bills

What is the correlation in returns between international stocks and Treasury bills? Low Moderate High Perfectly negative CLICK TO REVEAL ANSWER Expand A is the answer. The correlation in returns between international stocks and Treasury bills is typically slightly negative (slightly below zero), meaning the correlation in returns is low and often they will move…