CFP FUNDAMENTALS |ACTUAL QUESTIONS AND
VERIFIED ANSWERS|BRAND NEW 2026-2027
UPDATE|GRADED A+
Question 1
As a rule of thumb, it is best if consumer debt does not exceed:
A. 20% of net income.
B. 20% of gross income.
C. 3 to 6 months of expenses.
D. 36% of gross monthly income.
CORRECT ANSWER
A. 20% of net income
This is a rule of thumb, along with the others that recommend housing debt be limited to
28% of gross income, and total debt not to exceed 36% of gross income.
Question 2
David has won the Illinois state lottery. He must decide whether to receive annual
payments of $250,000 at the beginning of each year for the next 20 years, or a lump sum
payout. What lump sum amount does David need to receive to equal the $250,000
payments for the next 20 years, if he can earn an 8% return on his investments, assuming
inflation is 3%?
$2,454,537
$2,650,900
$2,875,900
$3,307,511
1
,CORRECT ANSWER
$2,650,900
This is a present value of an annuity due problem. So, N = 20, I = 8, PV = ?, PMT =
250,000, FV = 0. Put your calculator in BEGIN mode and solve for PV. Inflation is not
necessary in this calculation, lotto winnings income streams will not increase for
inflation, they are the equivalent to a fixed annuity.
Question 3
Cathy and John Gonnerman would like to retire in twelve years. At that time, they would
like to have accumulated $350,000 in today's dollars. To achieve this goal, they plan to
invest a sum at the end of each year that will remain constant in purchasing power. They
anticipate average inflation at 6% and have an after tax investment earning capacity of 9%.
What payment is required at the end of the first year for them to reach their goal?
$34,806.25
$26,394.63
$27,978.31
$50,104.88
$45,563.97
CORRECT ANSWER
$26,394.63
The correct answer is B. The payments increasing each year will keep pace with inflation at
the end of 12 years.
N=12 i=[(1.09/1.06)-1] × 100=2.83 PMT=24,900 × 1.06=26,394 FV=350,000
Question 4
2
, Which of the following is/are true regarding registering as an investment adviser?
I. Exceptions are not governed by the Investment Advisers Act of 1940 at all.
II. Exemptions are governed by Section 206 of the Investment Advisers Act of 1940.
III. Exceptions include advisers whose only clients are insurance companies.
IV. Exemptions include banks and bank holding companies.
I only.
I and II only.
II and III only.
II and IV only.
CORRECT ANSWER
I & II
Exceptions are not governed by the Act. Exemptions need not register, but are governed
by the "anti-fraud" provision (Section 206) of the Act.
Question 5
Hannah currently has $715,000 saved. She will retire in 10 years and wants to take
$100,000 income for 25 years at the beginning of each year. She also wishes to have
$1,000,000 35 years from now to leave to her heirs. What is the internal rate of return
needed to accomplish this?
6.99%
7.09%
7.13%
7.26%
CORRECT ANSWER
3
VERIFIED ANSWERS|BRAND NEW 2026-2027
UPDATE|GRADED A+
Question 1
As a rule of thumb, it is best if consumer debt does not exceed:
A. 20% of net income.
B. 20% of gross income.
C. 3 to 6 months of expenses.
D. 36% of gross monthly income.
CORRECT ANSWER
A. 20% of net income
This is a rule of thumb, along with the others that recommend housing debt be limited to
28% of gross income, and total debt not to exceed 36% of gross income.
Question 2
David has won the Illinois state lottery. He must decide whether to receive annual
payments of $250,000 at the beginning of each year for the next 20 years, or a lump sum
payout. What lump sum amount does David need to receive to equal the $250,000
payments for the next 20 years, if he can earn an 8% return on his investments, assuming
inflation is 3%?
$2,454,537
$2,650,900
$2,875,900
$3,307,511
1
,CORRECT ANSWER
$2,650,900
This is a present value of an annuity due problem. So, N = 20, I = 8, PV = ?, PMT =
250,000, FV = 0. Put your calculator in BEGIN mode and solve for PV. Inflation is not
necessary in this calculation, lotto winnings income streams will not increase for
inflation, they are the equivalent to a fixed annuity.
Question 3
Cathy and John Gonnerman would like to retire in twelve years. At that time, they would
like to have accumulated $350,000 in today's dollars. To achieve this goal, they plan to
invest a sum at the end of each year that will remain constant in purchasing power. They
anticipate average inflation at 6% and have an after tax investment earning capacity of 9%.
What payment is required at the end of the first year for them to reach their goal?
$34,806.25
$26,394.63
$27,978.31
$50,104.88
$45,563.97
CORRECT ANSWER
$26,394.63
The correct answer is B. The payments increasing each year will keep pace with inflation at
the end of 12 years.
N=12 i=[(1.09/1.06)-1] × 100=2.83 PMT=24,900 × 1.06=26,394 FV=350,000
Question 4
2
, Which of the following is/are true regarding registering as an investment adviser?
I. Exceptions are not governed by the Investment Advisers Act of 1940 at all.
II. Exemptions are governed by Section 206 of the Investment Advisers Act of 1940.
III. Exceptions include advisers whose only clients are insurance companies.
IV. Exemptions include banks and bank holding companies.
I only.
I and II only.
II and III only.
II and IV only.
CORRECT ANSWER
I & II
Exceptions are not governed by the Act. Exemptions need not register, but are governed
by the "anti-fraud" provision (Section 206) of the Act.
Question 5
Hannah currently has $715,000 saved. She will retire in 10 years and wants to take
$100,000 income for 25 years at the beginning of each year. She also wishes to have
$1,000,000 35 years from now to leave to her heirs. What is the internal rate of return
needed to accomplish this?
6.99%
7.09%
7.13%
7.26%
CORRECT ANSWER
3
