CFP® Practice Question

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…

An investor bought a bond at par that matures in 20 years. The bond pays an annual coupon of $190 and the reinvestment rate is 4%. What is the realized compound yield of this bond? 6.21% 8.18% 10.21% 11.10% CLICK TO REVEAL ANSWER Expand B is the answer. One would anticipate a realized compound yield…

Which of the following combinations correctly describes a spread? A combination of a short sale and a purchase of a call for the same stock A combination of buying and selling calls on the same stock with different expiration dates and exercise prices A combination of a put and a call on the same stock…

Evan refinanced his home mortgage to a 30-year fixed mortgage with monthly payments. How much is each payment if he owed $250,000 at the time of the refinance and the interest rate is 7%? $891 $1,211 $1,459 $1,663 CLICK TO REVEAL ANSWER Expand D is the answer. Evan pays his mortgage every month which means…

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? 10.21% 11.48% 13.00% 14.10% CLICK TO REVEAL ANSWER Expand A is the answer. One would anticipate a realized compound yield…

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…

Terry received a notice from the IRS correcting a math error on his individual income tax return. As a result, Terry owes $1,000 in taxes, penalties and interest. Which of the following is the most likely penalty or interest assessed against Terry? Understatement penalty Failure to file penalty Fraud penalty Underpayment penalty CLICK TO REVEAL…

In which of the following situations would the grantor of a trust not be considered the owner? The grantor has a reversionary interest in the trust, of which the grantor’s son is the sole beneficiary, but the grantor cannot exercise this power until eight years after transfer of property to the trust. The grantor retains…

Which of the following statements concerning OASDI disability income benefits is correct? Disability is defined as the inability to perform all major duties of the insured’s own occupation. Unless specifically exempted, a waiting period of 12 months must be satisfied. If the disabled worker is also receiving workers compensation benefits, the full OASDI benefit is…

Sam carries an H0-3 policy with $500,000 of coverage and a $2,000 deductible. It would cost $700,000 to rebuild Sam’s house. How much will his insurance company pay on a $200,000 claim related to a fire that started in Sam’s kitchen? $176,571 $178,571 $231,235 $198,000 CLICK TO REVEAL ANSWER Expand A is the answer. Frank…