CFP Practice Exam: 60 Questions with Answers on Financial Planning and Insurance, Exams of Engineering

Download CFP Practice Exam: 60 Questions with Answers on Financial Planning and Insurance and more Exams Engineering in PDF only on Docsity! CFP Practice 60 Questions with Answers 2024 Stafford Loans are administered by: A) Private Loan Administration B) Federal Family Education Loan Program C) Parent loans to undergraduate students D) Federal assistance loan program ✔ B Perkins loans ✔ Low-interest federal student loans for undergraduate and graduate students distributed on the basis financial need. Are Parent Loans to Undergraduate Students (PLUS) available to both full and part time students? ✔ No, only available to full time students Perfect elasticity results in a ______ demand curve, perfect inelasticity results in a _____ demand curve A) vertical, horizontal B) horizontal, vertical C) Diagonal, horizontal D) Vertical, diagonal ✔ B, Horizontal, vertical Money in a coverdell savings account must be used by the time beneficiary is ____years of age ✔ 30 A Change in quantity supplied is identified bu which of the following? A) Shifting the demand curve B) Shifting the supply Curve C) Movement along the supply curve D) Movement along the demand curve ✔ C- This is the willingness to offer the same product at different prices. If an RIA has betwen _____ and ____ of assets under management, the IRA may register with either the applicable states where the RIA maintains clients, or the SEC A) 10MM & 100MM B) 25MM and 100MM C) 50MM and 150MM D) 100MM and 200MM ✔ B According to the principle of _______ a CFP Board designee shall enter into a financial planning engagement only when the relationship is warranted based on the individual needs and objectives A) Integrity B) Fairness C) Competence D) Diligence ✔ D Which of the following are among the economic goals of the Federal Reserve and the US Treasury? 1) Full Employment 2) Stable Prices 3) Economic Growth 4) Decrease Governmental Spending A) 1 and 4 B) 3 and 4 C) 1, 2, and 3 D) All of the Above ✔ C Monetary policy refers to actions taken by the ______ to control the money supply, often by targeting a specific rate of interest A) US Treasury B) Federal Reserve C) Executive Branch D) US Secretary of the Treasury ✔ B) Federal Reserve Monetary policy is carried out through all but which of the following methods? A) Taxation B) Open market operations C) Changing the reserve requirements D) Changing the discount rate ✔ A) Taxation A recession is a decline in real GDP for ______ or more consecutive quarters, A depression is a decline in real GDP for ____ or more consecutive quarters a) 2,4 b) 3,6 c) 2,6 d) 4,6 ✔ C) 2,6 A provision in a life insurance policy that prevents an insurer from revoking coverage because of alleged misstatements by an insured after a specified period usually two years, is referred to as A) Indemnity clause B) Misstatement of age clause C) Statute of frauds clause D) Incontestable clause ✔ D The typical grace period for a life insurance policy is A) 7 days B) 14 days C) 30 days D) 60 days ✔ C According to a typical suicide clause, if an insured commits suicide within the first two years after a life insurance policy is issued, which of the following will result A) No death benefit paid B) Full death benefit paid C) Insurance company will pay only the cumulative premiums plus interest earned D) The insurance company will pay only the cumulative premiums minus interest earned ✔ C viatical statement ✔ A process that allows patients with terminal illness to sell their life insurance policies to settlement companies before death and receive payment for a percentage of the policy's face value. If dividends distributed from a life insurance policy exceed the premium paid to date, how are they taxed? A) Ordinary income B) Non-taxable because they are a return of premium C) Dividends are taxed as long term capital gains D) Non-taxable until the the policy is surrendered ✔ A MECs ✔ A modified endowment contract is a cash value life insurance contract in the United States where the premiums paid have exceeded the amount allowed to keep the full tax treatment of a cash value life insurance policy Partial loans and surrenders of MECs are taxed on a ____basis. Partial loans and surrenders of non-MECs are taxed on a ____ basis A) FIFO, LIFO B) LIFO, FIFO C) LIFO, LIFO D) FIFO, FIFO ✔ B How can a life insurance policy deemed to be an MEC be converted into a non MEC A) Satisfy the guideline and premium corridor test B) Satisfy the seven-pay test C) Petition the IRS for a private letter ruling D) Once a life insurance policy becomes an MEC, there is no way to reverse the tax treatment ✔ D For estimated tax payments, what is the penalty imposed on a self-employed taxpayer who did not have any income tax liability for the preceding year, but failed to withhold $10k in tax payments in the current year? A) $0 Penalty B) $1000 Penalty C) $2000 Penalty D) Penalty Depends on Income Tax Bracket ✔ A What are the parameters for a taxpayer's ability to deduct moving expenses when moving locations to a new job? ✔ The tax cuts and jobs act removed this expense deduction, and employers must include moving expense reimbursements as taxable income in employee wages What is the primary source of tax information, and what are some secondary? ✔ Primary is Internal Revenue Code, Secondary are books, newsletters, articles etc. Which are true: (1) A refundable tax credit cannot reduce a taxpayers' income tax liability to below zero (2) A non-refundable tax credit can reduce a taxpayer's income tax liability below zero. A) 1 only B) 2 only C) None of the above D) All of the above ✔ C What is an example of above the line deductions that may be claimed without a taxpayer itemizing deductions? ✔ Capital losses, deductible traditional IRA contributions, ordinary and necessary business expenses, health savings account contributions. above the line vs below the line deductions ✔ The line, in a sense, is your adjusted gross income (AGI), on which your taxes are largely calculated. Above-the-line deductions are taken before you arrive at your final AGI; they appear either as subtractions from income items or as explicit deductions on your 1040 and help you actually arrive at your AGI. Below-the-line deductions are taken after you have determined your AGI and can reduce your taxable income further. To claim a dependency tax exemption, all but which of the following tests must be met? A) Support test B) Age Test C) Member of household test D) Gross income test ✔ B Which of the following professionals is not permitted to represent a taxpayer when audited by the IRS? A) CPA B) Enrolled actuary C) CFP D) Enrolled agent ✔ C Non-business bad debts are deductible as _____ on IRS form 8949. The amount deductible is limited to the taxpayer's basis in the debt A) Long term capital losses B) Short term capital losses C) Passive losses D) Portfolio losses ✔ B All but which of the following are characteristics of a sole proprietorship? A) Simplest form of business entity B) No formal legal requirements C) Lack of continuity of business life D) Limited liability for the owner ✔ B The amount of section 1244 stock that can be deducted as an ordinary loss is limited to how much per year? (Pick 2) (1) $50k if single (2) $50k if filing joint (3) $100k if single (4) $100k if filing joint ✔ 1 and 4 Which IRS ax form serves as an informational return used to report income gains, losses, deductions, and credits from the operation of a partnership