Questions of the Week

Course: Fundamentals of Financial PlanningLesson 3: Personal Financial Statements Student Question: Hi, Why is the answer to review question down below 22,500 (only 3 months of income needed)? I would have thought it would be 45,000 (six months of income needed). I thought six months would be needed since they (1) both did not have…

Course: Investment PlanningLesson 4: International Equity Securities Student Question: Hi, On the CFP board practice question (below), the correct answer was “4 only.”  How come ADRs don’t eliminate currency risk? Aren’t they purchased and sold with US dollars? American depository receipts (ADRs) are used to Instructor Response: Hi Great question.  I can see exactly why you…

Course: Fundamentals of Financial PlanningLesson 5: Using the Calculator Student Question: Hi, Good afternoon.  Can you explain why we didn’t take inflation into consideration for the second calculation in the first problem? Kind regards, Austin Dawn wants to have $25,000 in today’s dollars for a round-the-world cruise when she retires 11 years from now. She…

Course: Fundamentals of Financial PlanningLesson 6: Educational Savings Techniques Student Question: Hi, Do the limits on 529 plan contributions apply to that specific account, the child, or the contributor? Is it possible for a contributor to have more than one 529 plan, if they’ve reached the limit on one? Instructor Response: Hi Good question.  It’s…

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 6: Commercial Property and Liability Insurance Student Question: Hi, The way I understand the example below is that since the cost, current value and depreciation are not relevant, it seemed to me that the building is only insured for 77.77% of its replacement value ($14,000,000/$18,000,000).  This would lead to the payout from…

Course: Investment PlanningLesson 13: Asset Allocation Student Question: Hello, Can you help me understand the difference between Kurtosis and Skewness?  I can’t quite piece it together. Thanks! Instructor Response: Great question, You’re right that as total capital in a pooled investment grows, the overall dollar amount of earnings can Entire books have been written on this…

Course: Fundamentals of Financial PlanningLesson 5: Using the Calculator Student Question: Hello, 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: Investment PlanningLesson 8: Pooled Investments Student Question: Hello, One of the disadvantages of pooled investments is Dilution of earnings. Can you explain how? I would think that as the capital grows, the earnings will grow as well? Thanks! Instructor Response: Great question, You’re right that as total capital in a pooled investment grows, the…

Course: Retirement PlanningLesson 7: Income Distribution Planning for Qualified Plans Student Question: Hi- The lesson says: Annual distributions are required in years 1 – 9 if the participant died after his or her required beginning date. Any undistributed amount must then be distributed no later than December 31 of the tenth year following the year of…