CFP EXAM 2025 QUESTIONS WITH
CORRECT ANSWERS
CFP suspension of marks is for how long? - ANSWER-Up to 5 years
After final order of discipline has been given by CFP Board, how long do you have to
appeal? - ANSWER-15 days
Chapter 7 means test for income - ANSWER-1 . Monthly income >$10k: NOT allowed
2. Monthly income <$6k: Allowed
3. Monthly income btw $6-10k: Allowed only if income < 25% of unsecured debts
Contract Requirements (5) - ANSWER-1. Offer
2. Acceptance
3. Consideration
4. Lawful Purpose
5. Principal must have legal capacity (no incompetent/intoxicated adults, minors can
only contract for necessities)
NOTE: Contract is valid but voidable by the incompetent party only
educational savings bonds rules and taxability - ANSWER-U.S. bonds whose proceeds
are used for qualified higher educational expenses for the taxpayer, the taxpayer's
spouse, or a dependent.
- Purchased in name of the parent (or other adult)
- Must be redeemed DURING college, only for tuition and fees (NOT room and board)
- The interest may be excluded from gross income, provided the taxpayer's adjusted
gross income does not exceed certain amounts.
Series EE vs Series I bonds - ANSWER-Series EE has fixed interest rate, doubles face
value at 20 year mark
Series I has fixed rate plus inflation adjustment
Both are exempt from state and local taxes. I bonds may also be exempt from federal
taxes if used for education.
Kiddie tax - ANSWER-Passive income, such as interest and dividends, that is
recognized by a child under age 19 (or under age 24 if a full-time student) is taxed to
him or her at the rates that would have applied had the income been incurred by the
child's parents, generally to the extent the income exceeds $2,200 for 2020. First $1100
is at 0%, next $1100 is at 10%, then the rest is subject to the parent's marginal rate.
UGMA/UTMA - ANSWER--ASSET OF THE CHILD for financial aid purposes
-UNEARNED INCOME:
a. taxed at child's rate if greater than 19
b. MAY be taxed at parent's rate if less than 19
,-ASSETS:
a. UTMA: real estate, stocks, mutual funds, and bonds
b. UGMA: same but NO REAL ESTATE
-RISK:
-child uses assets for something other than education
- UTMA released up to age 25
- UGMA released at age of maturity (18 or 21)
Who regulates banks? (3) - ANSWER-1. The OCC (Office of the Comptroller of
Currency)
2. The Federal Reserve
3. The Federal Deposit Insurance Corporation (FDIC)
Who regulates mutual funds? - ANSWER-SEC (Securities and Exchange Commision)
Who regulates securities brokers? - ANSWER-FINRA (Financial INdustry Regulatory
Authority)
Investment Advisers Act of 1940 - ANSWER-Legislation governing who must register
with the SEC as an investment adviser. Defines "investment advice."
Securities Act of 1933 and Securities Exchange Act of 1934 - ANSWER-1933:
Regulates IPOs
1934: Created SEC to enforce laws, regulates secondary market, defines stock "sales"
Securities Investors Protection Act of 1970 - ANSWER-- Established the SIPC to protect
investors for losses resulting from brokerage firm failures.
- Does not protect investors from incompetence or bad investment decisions
Emergency Fund guidelines - ANSWER-3 or 6 months' expenses
3 months if there are two sources of income (e.g. 2 wages, alimony, trust income,
investment income)
Monetary Policy Who, Why, and What (3) - ANSWER-Who: Federal Reserve Board
Why: The Fed increases liquidity to create economic growth. It reduces liquidity to
prevent inflation.
What:
1. Set the discount rate: lower rate = increased liquidity
2. Set reserve (margin) requirements: lower req. = increased liquidity
3. Open market operations: buy bonds (short term US Treasuries) = increased liquidity
Living expenses rule of thumb - ANSWER-PITI or Rent =< 28% of Gross Income
,Trust Companies - ANSWER-financial institutions that specialize in managing the
money and property of others
- They act as "trustee", fiduciary, executor
- For someone incapable of doing it themselves (minors, cognitively impaired)
Fiscal Policy Who, Why, and What - ANSWER-Who: Office of Debt Management
Why: stabilize the economy
What: government spending and taxes
Federal Funds Rate (FFR) - ANSWER-The interest rate that a bank must pay on an
overnight loan from another bank. Set by auction.
Federal Funds - ANSWER-Deposits that private banks hold on reserve at the Federal
Reserve Bank.
Pre-College Funding Years Strategies (4) - ANSWER-1. UGMA/UTMA
2. EE Educational Bonds
3. Coverdell ESA ($2k/year per child)
4. 529 Savings/ Prepaid tuition ($15k/year per child)
During College Funding Strategies (2) - ANSWER-Pick One:
[Rich] - Parent Loan to Undergraduate Student (PLUS)
[PooriSh <$60k AGI] - Pell grants, Subsidized Stafford Student Loans, Supplemental
Educational Opportunity Grant
Pell Grant rules - ANSWER-A grant (up to $6,345) awarded based on financial need by
the U.S. federal government to help students pay for higher
education. Does not have to be repaid. Students must carry 12 credit hours and be full-
time, or grant will be prorated down.
Educational Credits (2) - ANSWER-American Opportunity Credit, Lifetime Learning
Credit
American Opportunity Tax Credit - ANSWER-Up to $2500 per year per student for
tuition expenses incurred in the first 4 years of post-secondary education.
100% of the first $2000, and 25% of the next $2000, subject to AGI phaseouts.
Expenses cannot be for room, board, or textbooks. The student must be enrolled at
least half time in a program that leads to a degree or certificate.
Lifetime Learning Credit - ANSWER-A nonrefundable credit equal to 20% of the first
$10,000 of qualified higher education tuition and fees or job training paid during the year
on behalf of the taxpayer, his spouse, or his dependents. Undergrad and grad school,
can be part time.
, Educational Funding Coordination: Pick one of (4) - ANSWER-1. American Opportunity
Credit
2. Lifetime Learning Credit
3. Coverdell withdrawal
4. Qualified 529 distribution/UTMA/UGMA
Graduate School Funding (6) - ANSWER-1. Fulbright Scholarship
2. Graduate PLUS Loans
3. Stafford Loans
4. Lifetime Learning Credit
5. 529 withdrawal
6. Coverdell withdrawal (<30 years old)
reverse mortgage/home-equity conversion loan - ANSWER-Allows a homeowner 62
and older to continue living in the home and to borrow against the equity in a home that
is fully paid for and to receive the proceeds as a combination of:
- a lump sum
- monthly payments
- a line of credit
The repayment is the amount of loan or home value, whichever is lower. Once the loan
is repaid, any remaining equity is distributed back to borrower or to their estate.
HELOC rules - ANSWER-Home Equity Line of Credit
- deduction limited to interest on first $750k
- interest deductible for any loan used to buy, build, or improve your house
Chapter 7 Bankruptcy non-dischargeable debt (3) - ANSWER-1. Student/gov loans
2. Child support + alimony
3. Wage withholding/ tax due
"You can't get rid of your ex or the government through bankruptcy"
Which student loan forgiveness is taxable income? - ANSWER-The income based loan
forgiveness.
Kinds of Student Loan Forgiveness (4) - ANSWER-1. Income-based
2. PSLF - Public Service Loan Forgiveness
3. Perkins Loan
4. Teacher Loan
Income based loan forgiveness - ANSWER-Balance after 20/25 years forgiven, counted
as taxable income.
PSLF - ANSWER-Public Service Loan Forgiveness - work in public service for 10
years/120 payments
CORRECT ANSWERS
CFP suspension of marks is for how long? - ANSWER-Up to 5 years
After final order of discipline has been given by CFP Board, how long do you have to
appeal? - ANSWER-15 days
Chapter 7 means test for income - ANSWER-1 . Monthly income >$10k: NOT allowed
2. Monthly income <$6k: Allowed
3. Monthly income btw $6-10k: Allowed only if income < 25% of unsecured debts
Contract Requirements (5) - ANSWER-1. Offer
2. Acceptance
3. Consideration
4. Lawful Purpose
5. Principal must have legal capacity (no incompetent/intoxicated adults, minors can
only contract for necessities)
NOTE: Contract is valid but voidable by the incompetent party only
educational savings bonds rules and taxability - ANSWER-U.S. bonds whose proceeds
are used for qualified higher educational expenses for the taxpayer, the taxpayer's
spouse, or a dependent.
- Purchased in name of the parent (or other adult)
- Must be redeemed DURING college, only for tuition and fees (NOT room and board)
- The interest may be excluded from gross income, provided the taxpayer's adjusted
gross income does not exceed certain amounts.
Series EE vs Series I bonds - ANSWER-Series EE has fixed interest rate, doubles face
value at 20 year mark
Series I has fixed rate plus inflation adjustment
Both are exempt from state and local taxes. I bonds may also be exempt from federal
taxes if used for education.
Kiddie tax - ANSWER-Passive income, such as interest and dividends, that is
recognized by a child under age 19 (or under age 24 if a full-time student) is taxed to
him or her at the rates that would have applied had the income been incurred by the
child's parents, generally to the extent the income exceeds $2,200 for 2020. First $1100
is at 0%, next $1100 is at 10%, then the rest is subject to the parent's marginal rate.
UGMA/UTMA - ANSWER--ASSET OF THE CHILD for financial aid purposes
-UNEARNED INCOME:
a. taxed at child's rate if greater than 19
b. MAY be taxed at parent's rate if less than 19
,-ASSETS:
a. UTMA: real estate, stocks, mutual funds, and bonds
b. UGMA: same but NO REAL ESTATE
-RISK:
-child uses assets for something other than education
- UTMA released up to age 25
- UGMA released at age of maturity (18 or 21)
Who regulates banks? (3) - ANSWER-1. The OCC (Office of the Comptroller of
Currency)
2. The Federal Reserve
3. The Federal Deposit Insurance Corporation (FDIC)
Who regulates mutual funds? - ANSWER-SEC (Securities and Exchange Commision)
Who regulates securities brokers? - ANSWER-FINRA (Financial INdustry Regulatory
Authority)
Investment Advisers Act of 1940 - ANSWER-Legislation governing who must register
with the SEC as an investment adviser. Defines "investment advice."
Securities Act of 1933 and Securities Exchange Act of 1934 - ANSWER-1933:
Regulates IPOs
1934: Created SEC to enforce laws, regulates secondary market, defines stock "sales"
Securities Investors Protection Act of 1970 - ANSWER-- Established the SIPC to protect
investors for losses resulting from brokerage firm failures.
- Does not protect investors from incompetence or bad investment decisions
Emergency Fund guidelines - ANSWER-3 or 6 months' expenses
3 months if there are two sources of income (e.g. 2 wages, alimony, trust income,
investment income)
Monetary Policy Who, Why, and What (3) - ANSWER-Who: Federal Reserve Board
Why: The Fed increases liquidity to create economic growth. It reduces liquidity to
prevent inflation.
What:
1. Set the discount rate: lower rate = increased liquidity
2. Set reserve (margin) requirements: lower req. = increased liquidity
3. Open market operations: buy bonds (short term US Treasuries) = increased liquidity
Living expenses rule of thumb - ANSWER-PITI or Rent =< 28% of Gross Income
,Trust Companies - ANSWER-financial institutions that specialize in managing the
money and property of others
- They act as "trustee", fiduciary, executor
- For someone incapable of doing it themselves (minors, cognitively impaired)
Fiscal Policy Who, Why, and What - ANSWER-Who: Office of Debt Management
Why: stabilize the economy
What: government spending and taxes
Federal Funds Rate (FFR) - ANSWER-The interest rate that a bank must pay on an
overnight loan from another bank. Set by auction.
Federal Funds - ANSWER-Deposits that private banks hold on reserve at the Federal
Reserve Bank.
Pre-College Funding Years Strategies (4) - ANSWER-1. UGMA/UTMA
2. EE Educational Bonds
3. Coverdell ESA ($2k/year per child)
4. 529 Savings/ Prepaid tuition ($15k/year per child)
During College Funding Strategies (2) - ANSWER-Pick One:
[Rich] - Parent Loan to Undergraduate Student (PLUS)
[PooriSh <$60k AGI] - Pell grants, Subsidized Stafford Student Loans, Supplemental
Educational Opportunity Grant
Pell Grant rules - ANSWER-A grant (up to $6,345) awarded based on financial need by
the U.S. federal government to help students pay for higher
education. Does not have to be repaid. Students must carry 12 credit hours and be full-
time, or grant will be prorated down.
Educational Credits (2) - ANSWER-American Opportunity Credit, Lifetime Learning
Credit
American Opportunity Tax Credit - ANSWER-Up to $2500 per year per student for
tuition expenses incurred in the first 4 years of post-secondary education.
100% of the first $2000, and 25% of the next $2000, subject to AGI phaseouts.
Expenses cannot be for room, board, or textbooks. The student must be enrolled at
least half time in a program that leads to a degree or certificate.
Lifetime Learning Credit - ANSWER-A nonrefundable credit equal to 20% of the first
$10,000 of qualified higher education tuition and fees or job training paid during the year
on behalf of the taxpayer, his spouse, or his dependents. Undergrad and grad school,
can be part time.
, Educational Funding Coordination: Pick one of (4) - ANSWER-1. American Opportunity
Credit
2. Lifetime Learning Credit
3. Coverdell withdrawal
4. Qualified 529 distribution/UTMA/UGMA
Graduate School Funding (6) - ANSWER-1. Fulbright Scholarship
2. Graduate PLUS Loans
3. Stafford Loans
4. Lifetime Learning Credit
5. 529 withdrawal
6. Coverdell withdrawal (<30 years old)
reverse mortgage/home-equity conversion loan - ANSWER-Allows a homeowner 62
and older to continue living in the home and to borrow against the equity in a home that
is fully paid for and to receive the proceeds as a combination of:
- a lump sum
- monthly payments
- a line of credit
The repayment is the amount of loan or home value, whichever is lower. Once the loan
is repaid, any remaining equity is distributed back to borrower or to their estate.
HELOC rules - ANSWER-Home Equity Line of Credit
- deduction limited to interest on first $750k
- interest deductible for any loan used to buy, build, or improve your house
Chapter 7 Bankruptcy non-dischargeable debt (3) - ANSWER-1. Student/gov loans
2. Child support + alimony
3. Wage withholding/ tax due
"You can't get rid of your ex or the government through bankruptcy"
Which student loan forgiveness is taxable income? - ANSWER-The income based loan
forgiveness.
Kinds of Student Loan Forgiveness (4) - ANSWER-1. Income-based
2. PSLF - Public Service Loan Forgiveness
3. Perkins Loan
4. Teacher Loan
Income based loan forgiveness - ANSWER-Balance after 20/25 years forgiven, counted
as taxable income.
PSLF - ANSWER-Public Service Loan Forgiveness - work in public service for 10
years/120 payments
