1 of 49
Term
Jamal Knight purchased a plot of raw land for $25,000 this week. His
real estate agent is confident the land will appreciate at an average
annual compound rate of 14.72% per year. Jamal wants to sell the
land for $75,000. Approximately how many years must he own the
property to receive $75,000 when he sells it?
A. Six years.
B. Seven years.
C. Eight years.
D. Nine years.
Give this one a try later!
,Solution: 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
Since the payment you solved for is made at the end of the period (one year
from today), we need to account for the year of inflation before we make the first
payment. The calculator inflates from the first payment forward, it does not
account for the time between today and the first payment.
Further information to verify the above calculation: $350,000 today, inflated at
6%, is equal to 704,269 in 12 years PV = 350,000 N = 12 I = 6 solve for FV $704,269
solve for the serial payment amount: N=12 I = (1.09/1.06) - 1 × 100 FV = 350,000
note: the inflation is being accounted for in the PMT solve forPMT $24,900.59
since the first payment is not being made until the end of the year, you have to
multiply by (1 + inflation rate) because you have to "make up" for the first year of
inflation 24,900.59 × 1.06 = 26,394.63 here is what is happening: End of Year
Payment amount earnings at 9% ending balance
1 26,394.63 2,375.52 28,770.15
2 27,978.31 5,107.36 61,855.82
3 29,657.01 8,236.15 99,748.98
4 31,436.43 11,806.69 142,992.09
5 33,322.61 15,868.32 192,183.02
6 35,321.97 20,475.45 247,980.44
7 37,441.29 25,687.96 311,109.68
Solution:
8 39,687.76 The correct
31,571.77 answer is C.
382,369.22
N = ? 38,199.44 462,637.69
9 42,069.03
i = 14.7245,650.78 552,881.64
10 44,593.17
PV = (25,000)
11 47,268.76 54,013.54 654,163.94
PMT = 0
12 50,104.89 704,268.83
FV = 75,000
Solve for N: 8
Solution: The correct answer is B.
According to the CFP Board Code and Standards, the certificant shall timely
disclose to the client any material changes to compensation.
A is incorrect because there is not a 10 day requirement.
C is incorrect because "immediately" is not required, not defined in the code of
ethics.
D is incorrect because there is not a 45 day requirement.
, Solution: The correct answer is B.
Begin Mode
N = 12
i = [(1.07/1.05) - 1] × 100 = 1.9048
PV = ?
PMT = 30,000
FV = 0
If you thought $319,123.10 was correct, your calculator is likely in END mode
when it should be in BEGIN mode. Charles needs an income stream at the
beginning of the year. Don't know?
2 of 49
Term
Hershel, a client of Jonah, deposited $40,000 into a securities
account at Jonah's firm. At the time, Jonah's only services to Hershel
involved investment recommendations and executing transactions.
Over the next two years, Jonah conducted numerous trades in
Hershel's account without Hershel's approval, including during a
month when Hershel was hospitalized. Jonah and the Firm received
commissions from the trades that exceeded Hershel's initial deposit.
By this time, Hershel's account was only worth $15,000. The New York
Stock Exchange ("NYSE") initiated an inquiry regarding Hershel's
matter. Jonah and the NYSE entered into a Stipulation and Consent
to Penalty. Jonah consented to the following findings: 1. Respondent
engaged in conduct inconsistent with just and equitable principles
of trade when he: 1) recommended transactions in the accounts of a
customer which were unsuitable in light of his investment objectives,
investment experience and/or financial resources; and 2) effected
excessive transactions in the accounts of a customer of his member
firm employer; and 2. Jonah violated NYSE Rule 408(a) when he
exercised discretion in the accounts of a customer without first
obtaining written authorization from him. Following the events
above, Jonah completed the requirements and became certified to
, use the CFP® marks. At his hearing with the Disciplinary and Ethics
Commission, Jonah:
・ expressed a commitment to the financial planning process;
・ noted that his actions took place several years before he began
to pursue CFP® certification;
・ had made changes to his practice to prevent similar occurrences
in the future; and
・ advocated CFP® certification to employees under his supervision.
Jonah's conduct violated all of the following provisions of the Rules
of Conduct EXCEPT?
A. A certificant shall treat prospective clients and clients fairly and
provide professional services with integrity.
B. A certificant may not intentionally or recklessly participate or
assist in violation of these standards or the laws, rules and
regulations governing professional services.
C. A CFP® professional must be objective. A CFP® professional must
exercise judgment that is not subordinated in the interest of the CFP®
professional or others.
D. At all times, when providing financial advice to a client, a CFP®
professional must adhere to a fiduciary duty and act in the best
interest of their client.
Give this one a try later!
Solution: The correct answer is B.
The duty of competence requires the planner to either refer the client to an
expert or bring an expert into the engagement. Preparing the plan with the help
of an expert is acceptable under the Code and Standards.
A is incorrect because the Code of Ethics and Standards of Conduct simply
require the planner to either refer the client to an expert or bring an expert into
the engagement.
C is incorrect because the planner can still accept the engagement, but must
bring an expert into the engagement.
Term
Jamal Knight purchased a plot of raw land for $25,000 this week. His
real estate agent is confident the land will appreciate at an average
annual compound rate of 14.72% per year. Jamal wants to sell the
land for $75,000. Approximately how many years must he own the
property to receive $75,000 when he sells it?
A. Six years.
B. Seven years.
C. Eight years.
D. Nine years.
Give this one a try later!
,Solution: 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
Since the payment you solved for is made at the end of the period (one year
from today), we need to account for the year of inflation before we make the first
payment. The calculator inflates from the first payment forward, it does not
account for the time between today and the first payment.
Further information to verify the above calculation: $350,000 today, inflated at
6%, is equal to 704,269 in 12 years PV = 350,000 N = 12 I = 6 solve for FV $704,269
solve for the serial payment amount: N=12 I = (1.09/1.06) - 1 × 100 FV = 350,000
note: the inflation is being accounted for in the PMT solve forPMT $24,900.59
since the first payment is not being made until the end of the year, you have to
multiply by (1 + inflation rate) because you have to "make up" for the first year of
inflation 24,900.59 × 1.06 = 26,394.63 here is what is happening: End of Year
Payment amount earnings at 9% ending balance
1 26,394.63 2,375.52 28,770.15
2 27,978.31 5,107.36 61,855.82
3 29,657.01 8,236.15 99,748.98
4 31,436.43 11,806.69 142,992.09
5 33,322.61 15,868.32 192,183.02
6 35,321.97 20,475.45 247,980.44
7 37,441.29 25,687.96 311,109.68
Solution:
8 39,687.76 The correct
31,571.77 answer is C.
382,369.22
N = ? 38,199.44 462,637.69
9 42,069.03
i = 14.7245,650.78 552,881.64
10 44,593.17
PV = (25,000)
11 47,268.76 54,013.54 654,163.94
PMT = 0
12 50,104.89 704,268.83
FV = 75,000
Solve for N: 8
Solution: The correct answer is B.
According to the CFP Board Code and Standards, the certificant shall timely
disclose to the client any material changes to compensation.
A is incorrect because there is not a 10 day requirement.
C is incorrect because "immediately" is not required, not defined in the code of
ethics.
D is incorrect because there is not a 45 day requirement.
, Solution: The correct answer is B.
Begin Mode
N = 12
i = [(1.07/1.05) - 1] × 100 = 1.9048
PV = ?
PMT = 30,000
FV = 0
If you thought $319,123.10 was correct, your calculator is likely in END mode
when it should be in BEGIN mode. Charles needs an income stream at the
beginning of the year. Don't know?
2 of 49
Term
Hershel, a client of Jonah, deposited $40,000 into a securities
account at Jonah's firm. At the time, Jonah's only services to Hershel
involved investment recommendations and executing transactions.
Over the next two years, Jonah conducted numerous trades in
Hershel's account without Hershel's approval, including during a
month when Hershel was hospitalized. Jonah and the Firm received
commissions from the trades that exceeded Hershel's initial deposit.
By this time, Hershel's account was only worth $15,000. The New York
Stock Exchange ("NYSE") initiated an inquiry regarding Hershel's
matter. Jonah and the NYSE entered into a Stipulation and Consent
to Penalty. Jonah consented to the following findings: 1. Respondent
engaged in conduct inconsistent with just and equitable principles
of trade when he: 1) recommended transactions in the accounts of a
customer which were unsuitable in light of his investment objectives,
investment experience and/or financial resources; and 2) effected
excessive transactions in the accounts of a customer of his member
firm employer; and 2. Jonah violated NYSE Rule 408(a) when he
exercised discretion in the accounts of a customer without first
obtaining written authorization from him. Following the events
above, Jonah completed the requirements and became certified to
, use the CFP® marks. At his hearing with the Disciplinary and Ethics
Commission, Jonah:
・ expressed a commitment to the financial planning process;
・ noted that his actions took place several years before he began
to pursue CFP® certification;
・ had made changes to his practice to prevent similar occurrences
in the future; and
・ advocated CFP® certification to employees under his supervision.
Jonah's conduct violated all of the following provisions of the Rules
of Conduct EXCEPT?
A. A certificant shall treat prospective clients and clients fairly and
provide professional services with integrity.
B. A certificant may not intentionally or recklessly participate or
assist in violation of these standards or the laws, rules and
regulations governing professional services.
C. A CFP® professional must be objective. A CFP® professional must
exercise judgment that is not subordinated in the interest of the CFP®
professional or others.
D. At all times, when providing financial advice to a client, a CFP®
professional must adhere to a fiduciary duty and act in the best
interest of their client.
Give this one a try later!
Solution: The correct answer is B.
The duty of competence requires the planner to either refer the client to an
expert or bring an expert into the engagement. Preparing the plan with the help
of an expert is acceptable under the Code and Standards.
A is incorrect because the Code of Ethics and Standards of Conduct simply
require the planner to either refer the client to an expert or bring an expert into
the engagement.
C is incorrect because the planner can still accept the engagement, but must
bring an expert into the engagement.
