Question 1: Tim invested $21,000 in a high tech firm four years ago. The firm paid no dividends for the first two years. In the third year, he received $420 in dividends. In the next year, he received $525 in dividends and sold the stock for $43,000. What was his internal rate of return?
16.04%
20.27%
20.33%
44.97%
Question 2: Grace borrowed $10,000 from her aunt. Her aunt is charging her 3.5% annual interest compounded monthly. If Grace can pay her aunt $250 a month, how long will it take her to repay the loan?
3 years and 8 months
3 years and 2 months
3 years and 4 months
3 years and 7 months
Question 3: George and Martha want to buy a new home. They will finance it with a $350,000 conventional 30-year, 5.75% fixed rate mortgage. If their property taxes are $300 per month, their homeowners insurance is $50 per month, and they have minimum monthly consumer debt payments of $820 per month, do they meet the 36% test if their gross income is $7,000 per month?
Yes
No
Question 4: The Truth in Lending Act requires which of the following?
Requires a lessor to provide a clear disclosure of important terms used in the lease agreement and a list of all costs charged for a lease.
Requires a lender to protect consumers' personal information held by financial institutions.
Made identity theft a federal crime and gives consumers specific rights when they become (or believe they have become) the victim of identity theft.
Places restrictions on home loans to curtail predatory lending
Requires a lender to provide a clear disclosure of important terms used in the loan agreement and a list of all costs charged for a loan,
Question 5: George and Sue want to refinance their home. They still owe $200,000 on their current mortgage. There are no closing costs involved in the refinancing. The new mortgage will be a 30-year, 6.38% fixed rate loan. Their property taxes are $250 per month and the homeowners insurance is $30 per month. They also have consumer debt payments of $690 per month. If their combined monthly gross income is $6,000, do they meet the 28% test?
Yes
No
Question 6: Which of the following cannot be the result of an increase in inflation?
Stock prices change
Paychecks increase
Purchasing power increases
Interest rates increase
Question 7: To be effective and useful, client goals and objectives must meet all of the following criteria EXCEPT?
The client's objectives must be positive.
The client's objectives must be devisable or useful for planning.
The client's objectives must be reasonable.
The client's objectives must be specific.
The client's objectives must be measurable.
Question 8: Which of the following could NOT appear on the Statement of Cash Flows?
Income taxes
This year's increase in the value of an IRA account
Mortgage payments
Amount contributed to a 529 Plan
Life insurance premiums
Question 9: Frank received an inheritance that he immediately invested in a money market fund earning 3% per year compounded monthly. He has been taking $600 at the end of each month from the account and expects to deplete the account in 9 years. How much did Frank originally put into the account?
$4,671.67
$56,727.18
$56,869.00
$19,178.50
Question 10: Gloria is ready to retire and has accumulated $550,000 in her 401(k) account. She is currently 65 and expects to live another 20 years. She believes her account will continue to earn 6%. If she takes equal annual payments at the beginning of each year, exhausting the account in 20 years, how much will she receive each year?
$47,951.51
$45,237.27
$41,124.79
$51,869.18
Question 11: The ______________________ is a significant economic statistic and the broadest measure of the general state of the economy. It indicates the dollar value of all goods and services produced in the United States in a given year.
The S&&;P 500
Net Domestic Production
Index of Leading Indicators
Gross Domestic Product
Gross National Income
Question 12: Bill bought a new car in January. He made the first payment of $669.04 on February 28. He originally financed $32,230 on a 5-year loan at 9% interest. What is the loan balance if he has made 36 payments?
$14,644.75
$6,500.26
$24,085.44
$17,585.25
Question 13: J. Fred invested $5,000 in an established company. It paid no dividends the first year. In the second year, he received $25 in dividends. He sold the stock in the third year for $10,500 after he received a $50 dividend. What is J. Fred's internal rate of return?
20.66
28.39
40.56
28.19
Question 14: Three years ago, Elaine Johnson invested $2,000 in a growth mutual fund in her IRA. The fund has grown at a 12% annual rate compounded quarterly. How much does Elaine currently have in her IRA if this was her only investment?
$2,852
$2,810
$7,559
$7,792
Question 15: Bill wants to buy a new boat in 2½ years. He will need a down payment of $5,000. If he is able to earn 8% after tax, how much will Bill have to save from his quarterly commission checks to purchase the boat?
$345.15
$111.92
$447.68
$456.63
Question 16: Carol and Chuck qualify for a $200,000, 30-year fixed rate mortgage at 6.6%. If their first mortgage payment was made on April 12th of this year, what is amount of interest they will pay next year?
$9,864.44
$13,023.45
$13,036.05
$13,030.41
Question 17: Sally and Harry have a gross annual income of $108,000. They want to buy a $350,000 home and have saved $70,000 for a down payment. They can obtain a 30-year, fixed rate mortgage at 6.7%, on which the monthly payment will be $1,807, plus property taxes of $3,600 per year. They will also have to pay an annual premium of $300 for homeowners insurance. If they have monthly credit card debt payments of $1,200, do they pass the 36% test?
Yes
No
Question 18: Pat and Patricia refinanced the mortgage on their home last year and made their first payment on October 30 of last year. They have a $200,000, 15-year, fixed rate mortgage at 6%. If they make all the payments as called for, what is their loan balance on December 31 of this year?
$197,926.54
$189,445.70
$189,315.30
$197,951.83
Question 19: Which of the following is/are liquid?
1. Municipal Bond Fund
2. Growth Mutual Fund
3. Money Market Fund
4. Passbook Savings Account
5. Stamp Collection
3, 4 and 5
1, 3 and 4
3 and 4
All of the above
1 and 3
Question 20: The financial planning process consists of several steps. Which of the following is not one of those steps?
Recommending the Plan
Developing a Financial Plan
Prospecting
Getting Data
Monitoring the Plan
Question 21: Lisa and Andy just got married and received a $25,000 wedding gift from Andy's godfather. They want to use the gift as the down payment on a new house and can afford a $650 monthly mortgage payment. What price home can they purchase, assuming they can qualify for a 30-year mortgage at 6.75%?
$125,216.14
$100,216.14
$100,779.86
$125,779.86
Question 22: Pierre's sister, Marie, has asked Pierre to lend her $6,000. She offers to repay the loan using the following schedule: $1,500 at the end of the first year and $2,000 payable at the end of the next 3 years. Pierre thinks the loan is risky and feels he needs to earn 15% interest to offset the risk. If Marie makes the payments as she proposed, what is the NPV of this transaction and should Pierre make the loan?
$1,500 - Yes
$725 - Yes
-$725 - No
- $1,500 - No
Question 23: What is the total net effect of the following transactions on your client's net worth?
1. Buys a boat for $50,000 using $10,000 cash from a money market fund and taking out a $40,000 loan
2. Makes a $3,500 direct deposit into an IRA from discretionary cash flow received as part of a performance bonus
3. Invests $50,000 from the $100,000 proceeds from a maturing CD into a no-load mutual fund and deposits the balance in a money market fund
Decrease by $3,500
Increase by $50,000
Increase by $3,500
Decrease by $50,000
No change
Question 24: Which of the following objectives is stated in a manner that would allow a CFP®practitioner to prepare a financial analysis?
1. I want to buy a car for my son when he turns 16.
2. I want to make the maximum contribution to a Section 529 education savings plan for my son and not incur any gift tax liability.
3. I want to retire when I reach age 60 with sufficient assets to have $6,000 after-tax income in today's dollars for the rest of my life.
4. I want to be able to have sufficient funds available to pay for my children's education if I die in the next 4 years.
5. I want to buy a vacation home.
2 and 3
1, 2, 4 and 5
3 and 4
3, 4 and 5
2, 3 and 5
Question 25: While reviewing a client's Statement of Financial Position, a CFP®practitioner sees the following information:
1. Money Market Fund: $10,000
2. Whole Life Insurance: Face amount: $150,000; cash value: $13,000
3. Term Life Insurance: Face amount: $150,000
4. IRA: $50,000
5. Residence: Cost: $200,000; FMV: $290,000; Mortgage: $225,000
6. Car: Cost: $30,000; FMV: $25,000; loan balance: $23,500
7. Credit Card Balance: $7,500
8. Profit Sharing Plan: Value: $50,000 (80% vested)
9. Personal Property: $75,000
What is the client's net worth?
$418,000
$257,000
$668,000
$247,000