CFP® Practice Question

Which of the following clients would be considered fully insured under Social Security rules? Maria, age 45, who has earned 10 quarters of coverage in the past 10 years. James, age 62, who has earned 40 quarters of coverage over his lifetime. Angela, age 28, who has earned 6 quarters of coverage in the past 13…

During a risk management review, a financial planner is explaining the difference between perils and hazards to a client. Which of the following correctly identifies a peril and a hazard? Peril: Fire destroying a home Hazard: Faulty wiring in the home Peril: Ice on the sidewalk Hazard: Slipping and breaking a leg Peril: Car left unlocked…

Maria owns a single-family home insured under an HO-3 homeowners’ policy. Which of the following is covered under Coverage A – Dwelling? Damage to Maria’s detached garage caused by a windstorm Damage to Maria’s personal property inside the home caused by fire Replacement of the roof of Maria’s home after a hailstorm Medical payments to…

Which of the following scenarios best illustrates tax avoidance rather than tax evasion? Sarah intentionally underreports her cash income from a side business to reduce her taxable income. Tom invests in a municipal bond fund to receive tax-free interest income. Lisa pays her household employee in cash and does not issue a Form W-2 or withhold…

James and Lisa are married, both age 40, with two children. They have the following monthly expenses: Mortgage: $2,500 Utilities: $400 Groceries: $1,000 Car loans: $600 Insurance premiums: $500 Discretionary spending: $900 They both have stable jobs and contribute equally to a combined gross income of $190,000/year. According to CFP Board recommendations, how much should…

A client is 40 years old and has a moderate risk tolerance. She has $500,000 to invest and a 20-year time horizon. Which of the following asset allocations best aligns with her risk tolerance and time frame? 80% equities, 20% bonds 60% equities, 35% bonds, 5% cash 50% equities, 50% bonds 90% equities, 10% cash…

William found someone to buy his rental property in Maine. Which of the following properties William would like to purchase as rental property would allow him to complete a like- kind exchange? (1)  A golf course rental property in Arizona that William identified 30 days after selling his Maine property. (2)  A beach rental house…

Which of the following statements concerning a Will are correct? (1) A will can be altered, amended, or completely rewritten at any time before a person’s death. (2)  A will cannot be rewritten but can be amended at any time by a codicil. (3)  A will must be signed by the maker and usually must…

Which of the following statements about 529 savings plans is TRUE? Contributions to a 529 plan are deductible on your federal income tax return. There are income limits for contributors to 529 plans. Qualified withdrawals from a 529 plan are tax-free at the federal level. Account owners lose control of the funds once the beneficiary turns…

During an initial meeting with a new client, financial planner Denise explains her firm’s services and discloses how she will be compensated. She also clarifies her responsibilities and asks the client about their expectations. Which step of the CFP Board’s 7-Step Financial Planning Process is Denise performing? Identifying and selecting goals Developing the financial planning recommendations…