CFP® Practice Question

In 2026, Maria, age 52, is single and has MAGI of $210,000, making her ineligible to contribute directly to a Roth IRA. She makes a $7,500 nondeductible contribution to a traditional IRA and immediately converts the entire balance to a Roth IRA. At the time of conversion, Maria also owns a rollover traditional IRA from a former…

If a client dies intestate, which of the following statements is correct? All assets automatically pass by beneficiary designation The state determines how probate assets are distributed The executor can distribute assets according to verbal wishes Property held jointly with rights of survivorship becomes subject to probate CLICK TO REVEAL ANSWER Expand B is the…

Under an HO-3 homeowners’ policy, which of the following losses is NOT covered unless an endorsement is purchased? Fire damage to the dwelling Theft of personal property Damage caused by a burst pipe Flood damage from rising groundwater CLICK TO REVEAL ANSWER Expand D is the answer. An HO-3 policy covers the dwelling for open perils and…

Linda sells stock she has held for 14 months at a $12,000 gain. She is in the 24% marginal income tax bracket. How is the gain taxed? As ordinary income at 24% As a long-term capital gain at 15% As a long-term capital gain at 20% As a qualified dividend taxed at 15% CLICK TO…

Which of the following bonds would be expected to experience the greatest price decline if interest rates rise by 1%? A 3-year corporate bond with a 5% coupon A 10-year Treasury bond with a 7% coupon A 10-year Treasury bond with a 3% coupon A 5-year municipal bond with a 6% coupon CLICK TO REVEAL ANSWER…

After Maria reaches age 73, she fails to take her required minimum distribution (RMD) from her traditional IRA. What is the consequence under current tax law? A 25% excise tax on the amount not withdrawn A 70% excise tax on the amount not withdrawn A 10% penalty plus ordinary income tax No penalty if she…

An investor owns two mutual funds. Fund A has an expected return of 8% and a standard deviation of 10%; Fund B has an expected return of 12% and a standard deviation of 20%. The correlation between the funds is 0.4. Which of the following statements is most accurate? Combining the two funds will not…

A participant age 52 wants to contribute the maximum elective deferral to her 401(k) plan in 2025. What is the maximum employee contribution, including any catch-up? $23,000 $24,000 $30,500 $34,500 CLICK TO REVEAL ANSWER Expand C is the answer.  For 2025, the 401(k) elective deferral limit is $23,000 plus a $7,500 catch-up for those age…

In 2025, Jordan, a single taxpayer, has $80,000 in wages, $3,000 of qualified dividends, and $2,000 of tax-exempt municipal bond interest. What is Jordan’s gross income? $80,000 $83,000 $85,000 $82,000 CLICK TO REVEAL ANSWER Expand B is the answer. Gross income includes wages and taxable dividends but excludes tax-exempt municipal bond interest. $80,000 + $3,000 =…

Olivia is a 25-year old single mother with twin girls who just turned three. Olivia has worked for the last 5 years as an administrative assistant for a local law firm. Olivia’s firm provides her with a basic medical insurance policy and a split definition disability. Which of the following is the biggest risk exposure…