CFP® Practice Question

Acme Financial Services, Inc., an accrual basis taxpayer, was paid $3,000 in March for tax planning services it performed for Ed Snow. In July, Snow informed Acme that the services were not performed satisfactorily and that he wanted his money back. The dispute was not resolved before the end of the year. Early in the…

Reginald Rich owns a parcel of commercial real estate worth $500,000. He has an estate valued at $5 million. He has a son, age 25, by his first marriage and two daughters by his present wife. Mr. Rich would like to see his son receive the real estate but does not want his present wife…

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…

Erika wants $50,000 a year in today’s dollars in retirement. She anticipates retiring in 10 years and living in retirement for 30 years. Erika can earn 7% on her investments and she expects inflation to average 4%. Approximately how much should Erika have saved by the day she retires to meet this goal? $913,000 $983,000…

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…

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…

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…

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…

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…

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…