CFP® Practice Question

Tom gave his son, David, a birthday present of Big M stock with a fair market value of $50,000. Tom paid gift tax of $11,700 as Tom had previously given David earlier this year a cash gift equal to the annual gift tax exclusion amount. Tom’s adjusted basis in the stock on the date of…

Which of the following individuals currently covered by Medicare Part A will not have any of their expenses covered by Medicare Part A? Evan who spent one week in hospice care before losing his battle with cancer. Felicia who was treated by her doctor for Strep throat. Greg who was needed a walker following hip…

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…

Which of the following assets would be included in Martin’s gross estate? Life insurance on Martin’s life purchased one year before he died by the trustee of Martin’s irrevocable life insurance trust. Life insurance on Martin’s life purchased by Martin’s wife two years before he died. Life insurance on Martin’s life purchased three years before…

KC Corporation offers a 401(k) plan. Under the ADP rules, what is the maximum salary percentage the highly compensated employees can contribute if the non-highly compensated employees contribute 6% of their salary? 6% 8% 10% 12% CLICK TO REVEAL ANSWERExpandB is the answer. Since the non-highly compensated employees contributed between 2% and 8%, the highly…

Which of the following individuals would typically qualify for accelerated death benefits under their term life insurance policy? Ida who is expected to die within 7 months from cancer. Jacob who is expected to die within 10 months from AIDS. Kay who is expected to die within 3 months from kidney failure All of the…

Mary carries an H0-3 policy with $500,000 of coverage and a $2,000 deductible. It would cost $700,000 to rebuild Mary’s house. How much will his insurance company pay on a $150,000 claim related to a fire that started in Mary’s kitchen? $119,498 $121,231 $131,928 $150,000 CLICK TO REVEAL ANSWERExpandC is the answer. Mary should have…

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 ANSWERExpandA is the answer. One would anticipate a realized compound yield rate less…

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…

Chuck lost his job last year when his company moved their factory overseas. Chuck has been unable to find another job and had to file for a Chapter 7 bankruptcy. Which of the following debts can be discharged in the bankruptcy? $10,000 of rent he owes his landlord $20,000 of taxes he owes the IRS…