CFP Exam Questions With Complete Solutions!!!

Lisa purchased 500 shares of XYZ stock trading at $40 per share, with an initial margin requirement of 60% and a maintenance margin of 30%. At What price would Lisa receive a margin call? A. $20 B. $22.86 C. $57.14 D. $80.00 - ANS B. $22.86 40*(1-.60)/ 1-.30= 22.86 Lareen purchased 1000 shares of CWC stock for $80 per share with an initial margin requirement of 65% and a maintenance margin of 40%. Assume the stock price falls to $30 per share, how much equity must Laureen contribute? A. $2/share B. $8/share C. $10/share D. $12/share - ANS C. $10 per a share Required Equity Actual Equity Price: 30 Price: 30 Main. Margin *.40 Debt: (28) Required Equity 12 Actual: $2 Debt = $80* (1-.65) = $28 Required - Actual = contribution amount 12-2=10 MSFT declared a dividend payable to shareholders on the record date of Wed. May 15th. Which is the last possible date an investor could purchase the stock and still receive the dividend? A. purchased on May 13th B. purchased on May 12th C. purchased on May 11th D. purchased on May 10th - ANS D. May 10th. Ex dividend date would be Monday the 13th, and in order to receive the dividend the investor would have to purchase prior to the ex-dividend date. Since the 13th is a Monday the last possible date an investor could purchase the stock and still receive the dividend would be Friday the 10th. If June 4 is the date of record, when must Joe purchase the stock in order to receive the dividend? A. June 1 B. June 2 C. June 3 D. June 4 E. May 31 - ANS A. June 1st Date of record minus 3 days. When purchasing a stock you have to buy before the ex dividend date to receive the dividend. You are interviewing James Smith, CFP to manage your investments and provide financial guidance in other areas of your life. James states that his investment philosophy is as a contrarian; he buys securities that are losing favor and sells securities that are gaining favor. You review his previous track record, which is about equal with the market. His investments are typically in a security that has lost at least 10% for its most recent high. What type of bias is James exhibiting? A. Anchoring B. Herding C. Overconfidence D. Believe Perserverance - ANS A. Anchoring He is subject to anchoring. His belief is a stock that falls 10% for its high is likely to return to that high. He is fixated on that high price. Kevin has subscribed to various investment magazines and data resources, which he religiously reads and analyzes. Kevin utilizes this analysis to make shifts in his high beta portfolio on a daily basis. Which behavioral finance bias is Kevin subject to? A. Hindsight Bias B. Overconfidence C. Regret Avoidance D. Herd Mentality - ANS B. Overconfidence This is a classic example of overconfidence. Kevin believes that his information is perfect, that his analysis is perfect, so he trades too often and has a very risky portfolio (high beta). Which of the following would you use to ascertain the chairman's perspective for progress completed and expected for the coming year? A. 10K report. B. Annual report. C. 10Q report. D. Quarterly report - ANS B. Annual Report You own 1,000 shares of ePlace stock. You purchased these shares for $25 per share on margin with a %50 initial margin requirement and a 25% maintenance margin requirement. ePlace has experienced some reversals in the pummeling that tech stocks have received recently. The price has dropped to $13 per share. Will there be a margin call? If so, how much? A. $1,500 B. $2,750 C. $3,250 D. No margin call required - ANS B. $2,750 Required Equity = Stock price X Main. Margin ( 13*12.5= 3.25) Actual Equity= Stock price - Debt ( 13-12.5=.5) Margin Call = Required - Actual (3.25-.5= 2.75) times 1000 shares. How do the stock split and stock dividend impact the shareholders without bringing about any changes in the value of the company on the balance sheet? A. The value of the stock split and value of the stock dividend are generally small enough that the impact of the balance sheet is minimal B. The value of the stock split and the value of the stock dividend increase the number of shares but not the total value of those shares C. The value of the stock split and value of the stock dividend cause dilution, which keeps the value of the stock up, but without increasing the overall value o n the balance sheet. D. The value of the stock split and the value of the stock dividend offset one another, thereby eliminating any changes that might occur to the balance sheet of the company. - ANS B. The value of the stock split and the value of the stock dividend increase the number of shares but not the total value of those share. Which of the following would serve as an analytical tool to provide information to a client regarding small-cap growth stocks? A. Wilshire 5000 B. S&P 500 C. Russell 2000 D Dow Jones Small-Cap Average - ANS C. Russell 2000