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Practice Question: Sharpe vs Treynor Index

By Dan Madden, CFP®

Which of the following statements are correct about Fund 1 and 2 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% (1) Fund 1 was more efficient under the Sharpe performance index (2)…

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CFP® Certificants in the News: Rick’s Story

By Bruce Starks, CPA, CFP®

CFP® Certificant in the News People Helping People  It was the way I was raised – you help people out who need help. That is why I got into this business as a financial planner. It is meaningful to me to help people make changes in their lives.” –Rick Fingerman, CFP® When a cancer diagnosis…

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Self-Employment Deduction Calculation

By Dan Madden, CFP®

Course: Income Tax Planning Lesson 7: Arriving at Adjusted Gross Income Student Question: Dan, can you help me with the below question? While I know a self-employed person can reduce AGI by 50%, I still couldn’t seem to come up with an answer that matched any of the choices. QUESTION Scott is a self-employed financial…

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Practice Question: Efficient Market Hypothesis

By Dan Madden, CFP®

Which of the following correctly states an implication of the efficient market hypothesis? Security prices adjust slowly to new information. The strong form asserts that technical analysis can produce superior performance. An investor will earn a risk-adjusted return consistent with the market. It is difficult to produce superior performance in nonfinancial markets. CLICK TO REVEAL…

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Challenging Three Mistaken Beliefs About Spousal Retirement Benefits from Social Security

By Bruce Starks, CPA, CFP®

Good to Know The earth is flat. At least that’s what the mistaken belief was during the middle ages. If you told someone that the earth is flat today, you could get a laugh (or a raised eyebrow doubting your sanity).  Yet, some of those who would laugh at the prospect of a flat earth…

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Power Exercisable with Consent of Another – Include in Estate?

By Dan Madden, CFP®

Course: Estate Planning Lesson 6: Transfer Taxation III Student Question: For “Power exercisable with consent of another”, can you explain  why the assets WOULD be included in John’s estate? Since he has  power to appoint property, wouldn’t that be adverse to Betty and  her ability to enjoy the property? The example is below. EXAMPLE Albert…

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Practice Question: Bond Compound Yield

By Dan Madden, CFP®

An investor bought a bond at par that matures in 15 years. The bond pays an annual coupon of $130 and the reinvestment rate is 9%. What is the realized compound yield of this bond? 11.05% 12.55% 13.00% 14.10% CLICK TO REVEAL ANSWER A is the answer. One would anticipate a realized compound yield rate…

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Are Gifts Taxable as Income?

By Bruce Starks, CPA, CFP®

Course: Income Tax Planning Lesson 5: Gross Income Exclusions Student Question: In the Gifts & Inheritance section of Income Tax Planning and, how come there is not mention of the $15,000 gift tax limit. All it says is that gifts can be excluded from Gross Income. The amount of gifts excluded from taxable income is limited,…

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Standard Deviation

By Dan Madden, CFP®

Big Blue Company stock has an average return of 7% and a standard deviation of 3%. What percentage of the time should an investor in Big Blue Company expect to earn 4% or more? A.34% 68% 84% 95% CLICK TO REVEAL ANSWER C is the answer. Big Blue Company will earn between 4% and 11%,…

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