CFP® Practice Question

Dan and Karen Burles have 2 children, Coy (age 12, student) and Roger (age 21, student). Dan and Karen own a security equipment sales and installation business, an LLC. Dan and Karen are in the highest income tax bracket. They have a portfolio with $130,000 of municipal bonds (annual income $5,200), $80,000 of corporate bonds…

Maria owns a small consulting firm with 12 employees. She wants to establish a retirement plan that is easy to administer, has low costs, and requires minimal annual reporting. She also wants employees to be able to contribute to the plan through salary deferrals. Which of the following options would best meet Maria’s objectives? 401(k)…

Which of the following statements best describes the characteristics of the expansion phase of the business cycle? Interest rates are rising, unemployment is low, and consumer spending is increasing. Stock market values are at their lowest, businesses reduce inventories, and inflationary pressures ease. Economic growth slows, corporate profits decline, and the Federal Reserve may lower interest…

During an initial client meeting, a CFP® professional gathers details about the client’s current financial situation, including income, assets, liabilities, and expenses. The client also shares that she hopes to retire early, purchase a vacation home, and fund her grandchildren’s college education. Which of the following actions best represents Step 2 of the financial planning…

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…

Lucky Star Corp has been extremely lucky with their defined benefit plan as it is currently overfunded. Management decided to terminate the plan while they are overfunded and share the excess with the employees. What amount of reversion tax will Lucky Star Corp have to pay upon termination? 0% 10% 20% 50% CLICK TO REVEAL…

Which of the following statements correctly describes a difference between preferred stock and common stock? Preferred stockholders generally have voting rights, while common stockholders do not. Preferred stock dividends are typically fixed and paid before common stock dividends. Common stock dividends must be paid, while preferred dividends are optional. Common stockholders have a higher claim on…

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…