Questions of the Week

Course: Investment PlanningLesson 10: Fixed Income Securities Analysis Student Question: Hi- I’m not clear why holders of long-term bonds are subject to interest rate risk. If a 20-year bond is purchased at par with a coupon rate of 6.25% ($62.50/year), it seems to me that the investor would still receive $62.50 a year regardless of interest rate…

Course: Fundamentals of Financial PlanningLesson 5b: Using the HP 10bII Calculator Student Question: Hi- In Example 2, the solution given has 6 years (including CF0) instead of 5. I believe the first year of Carl’s coin purchase should be CF0, but the fifth year – which includes a purchase and a sale – should be…

Course: Insurance PlanningLesson 10: Social Security Student Question: Hi- This question (below) doesn’t quite make sense to me.  Could you clarify why the correct answer is D? Robin Elizabeth qualifies for a retirement benefit of $250 and a spouse’s benefit of $400. At her full retirement age, she will receive which of the following? Both $250…

Course: Investment PlanningLesson 13: Asset Allocation Student Question: Hi- Can you help me understand the difference between Kurtosis and Skewness?  I can’t quite piece it together. Thanks Meg Instructor Response: Hi Meg, Entire books have been written on this topic but the following summary should get the points for you on the CFP® Board exam…

Course: Insurance PlanningLesson 8: Gift and Estate Valuation Student Question: Hi- Could you please clarify for me what the unused premium would be in term life insurance?  I don’t quite understand how you could not use the premium.  Thanks. Thanks John Instructor Response: Hi John, Certainly.   A lot of different terms in insurance, to be…

Course: Insurance PlanningLesson 17: Stock Redemption/Entity Plan Student Question: Hi- Interesting study here; I see using this method, the entity buys out the estate, and shares are now held by Zion as “treasury stock.” Given the other two living owners own 2/3 of the business, wouldn’t they technically own the treasury stock? A bit confused as…

Course: Fundamentals of Financial PlanningLesson 5: Using the Calculator Student Question: Hi- I am confused as to how to get the correct answer for number 4. Jackie invests her bonus at the beginning of this calendar year. If she earns 7% compounded monthly, what is the annual equivalent rate? Round your answer to two decimal places.…

Course: Income Tax PlanningLesson 10: Recognition of Expenses, Losses, and Deductions Student Question: Hi- Question 5 (below) did not make sense to me. I started out by breaking down by year —  400,000/2,100,000*3,000,000 and so forth, but did not arrive at the correct answer.  So then I tried adding up 3 year —  400+650+700/2100000*3,000,000.  That…

Course: Fundamentals of Financial PlanningLesson 5: Using the Calculator Student Question: Hi- My question relates to being able to clearly distinguish when the CFP Board exam will require an annual, or other period for the answer. Question 5(b) asks: “What is the rate of return on Investment 2 using daily compounding?” What is the annual…

Course: Insurance PlanningLesson 19: Immediate Annuities – A Tax-Advantaged Income Planning Tool Student Question: Hi- The text on this page says the annuities don’t hold mutual funds or ETFs.  What are they holding to provide an S&P “type return?” The text goes on to discuss components that sound a lot like ETFs (mid value, large…