CERTIFIED FINANCIAL PLANNER (CFP) EXAMINATION QUESTIONS AND CORRECT ANSWER WITH EXPLANATION GRADED A+ STUDY GUIDE

CERTIFIED FINANCIAL PLANNER (CFP) EXAMINATION
QUESTIONS AND CORRECT ANSWER WITH
EXPLANATION GRADED A+ STUDY GUIDE SOUTHERN
NEW HAMPSHIRE UNIVERSITY
1. The primary goal of financial planning is to:
A. Achieve client’s financial goals
B. Maximize bank profits
C. Increase taxation
D. Reduce savings
Answer: A
Rationale: Financial planning focuses on client goals.

2. A Certified Financial Planner primarily provides:
A. Comprehensive financial advice
B. Legal services
C. Medical advice
D. Construction planning
Answer: A
Rationale: CFPs guide financial decisions.

3. Financial planning is a:
A. Continuous process
B. One-time activity
C. Random task
D. Government duty
Answer: A
Rationale: Planning is ongoing.

4. The first step in financial planning is:
A. Gathering client information
B. Investing money
C. Buying insurance
D. Paying taxes
Answer: A
Rationale: Data collection is foundational.

,5. Client risk tolerance refers to:
A. Ability to handle financial risk
B. Bank profit level
C. Tax rate
D. Loan interest
Answer: A
Rationale: It measures risk comfort.

6. Net worth is:
A. Assets minus liabilities
B. Income minus expenses
C. Revenue only
D. Savings only
Answer: A
Rationale: Net worth shows wealth position.

7. Cash flow planning focuses on:
A. Income and expenses management
B. Only investments
C. Only taxes
D. Only insurance
Answer: A
Rationale: Cash flow ensures liquidity.

8. Emergency fund is used for:
A. Unexpected expenses
B. Luxury spending
C. Investments only
D. Tax payments
Answer: A
Rationale: It covers emergencies.

9. Inflation affects:
A. Purchasing power
B. Employment only
C. Taxes only
D. Banking system only
Answer: A
Rationale: Inflation reduces value.

, 10. Budgeting is:
A. Planning income and expenses
B. Borrowing money
C. Investing only
D. Tax filing
Answer: A
Rationale: Budget controls spending.

11. Fixed expenses are:
A. Regular and constant costs
B. Random costs
C. Investment gains
D. Income sources
Answer: A
Rationale: Fixed costs do not change.

12. Variable expenses are:
A. Changing costs
B. Fixed payments
C. Savings only
D. Investments only
Answer: A
Rationale: Variable costs fluctuate.

13. Insurance planning is used to:
A. Manage financial risk
B. Increase income
C. Reduce taxes only
D. Eliminate savings
Answer: A
Rationale: Insurance protects against loss.

14. Life insurance provides:
A. Financial protection for dependents
B. Investment only
C. Loans
D. Tax exemption only
Answer: A
Rationale: It protects families.