CFP EXAM 2026/2027 UPDATE | VERIFIED QUESTIONS & ANSWERS
100% CORRECT | GRADED A+
Adam and Billie have fixed and variable expenses of $80,000 per year. They each make $60,000. Billie
has a small trust which produces marginal income. How much should they have in their emergency
fund?
a. $20,000
b. $40,000
c. $60,000
d. $80,000
e. $120,000 - ANSWER $20,000 - combined earned income indicates they both work. 3 months or
1/4 of $80,000
Jeff and Cathy are in their early 30s with two young children. Jeff works making $5,000 per month.
He never completed college (only for two years). Cathy is a stay-at-home mom. She never complete
college, but the two of them are still paying off college loans. They lost their home in the real estate
downturn and now rent. Rent costs have been increasing. They seem to live from month-to-month
and rely on gifts from parents and food kitchens. What do you do first?
a. establish an emergency fund
b. learn the details of their spending habits
c. determine what kind of home they can afford to buy using current mortgage rates
d. make a list of priorities they consider important - ANSWER Learn the details of their spending
habits - best starting point is data gathering with this couple
What type of specific information should be gathered in the planning process regarding the client's
statement of financial position
Cost or Basis
Encumbrances
Budgeting
Savings and Investment Allocations
Date Assets Were Acquired - ANSWER I, II, IV, V - cash flow only needed for cash flow statement
,Which of the following would be the most recommended method of implementing a savings plan?
a. pay all your expenses first, including credit cards, then deposit the remainder in a money market
account
b. simply wait until the end of the month and see if any money is left over
c. deposit a fixed or specific amount from a paycheck into a savings or money market account.
d. complete a one-year budget, then see if the client can save money - ANSWER deposit a fixed or
specific amount from a paycheck into a savings or money market account - pay yourself first is
generally the best advice to give to succeed at savings
A client, married, has come to you for financial planning advice. He has a high-paying occupation. His
wife is a stay-at-home mom with two young children. He has a very high risk-tolerance with adequate
insurance coverage. After a review of his financial statement, you and he find about 1 month of
cash/cash equivalents and excessive debt. His large investment position is also highly leveraged but
doing very well. What should you suggest he do first?
a. liquidate some investments and reduce his debt
b. establish a budget and save more of the cash flow into liquid assets
c. establish an emergency fund with at least 6 months of fixed and variable expenses available in
emergency fund type assets
d. do a risk tolerance survey and review his investments - ANSWER establish a budget and save more
of the cash flow into liquid assets - emergency fund not realistic investment for risk tolerance
After completing a client questionnaire including a complete financial statement, cash flow
statement, goals, needs, and priorities you have found the following weaknesses. How would you
prioritize them (first, second, etc.)
Lack of Disability Insurance
No Umbrella Coverage
No Emergency Fund
Total Monthly Debt is Greater than 40% of Gross Income - ANSWER IV, III, I, II - assume the exam
might consider emergency fund first, even above debt reduction. however no money available for
emergency fund so debt reduction first
,Your client, age 35, has a wife and 2 young children. Which of the following makes the most sense for
your goal?
a. establish a 6 month emergency fund in the next year from excess cash flow
b. contribute to a 529 plan at the end of the month until two children go to college
c. make contributions to two Roth IRAs each year until retirement
d. make contributions to two deductible IRAs each year until retirement
e. reduce consumer debt over the next year from excess cash flow - ANSWER establish a 6 month
emergency fund in the next year from excess cash flow - having proper emergency fund has the
highest priority
Mr. and Mrs. Delay are approaching retirement. Their statement of financial position shows limited
retirement assets. Although Mr. Delay has worked all his life, his income has always been below the
maximum Social Security threshold. As a result, his benefits for both he and his wife will be about
half the maximum available at NRA. His pension benefits available through a prior employer are also
minimal. Since he has been working almost 40 years, he wants to retire early, what should you do if
he approached you to do a financial plan.
a. tell him he cannot retire until at least NRA
b. do a risk tolerance survey to see if his investments could produce better returns
c. decline him as a client
d. have the client keep a budget to determine current cash flow needs and potential savings
e. suggest he get a better job or second job for the next few years to increase savings and get higher
SS benefits - ANSWER have the client keep a budget to determine current cash flow needs and
potential savings - the budget will determine both their current situation and their potential needs
Which agencies monitor or oversee commercial banks?
FDIC
Federal Reserve
Comptroller of Currency
Department of Commerce
Department of Treasury - ANSWER I, II, and III
, What is in a mutual fund prospectus?
Prior Performance
Future return performance
Fund manager
Investment objectives - ANSWER I, III, IV - the prospectus cannot show future return performance
Tech co. is going to have initial public offering. Which of the following Acts apply?
a. Securities Act of 1933
b. Securities Act of 1934
c. Insider Trading Act of 1988 - ANSWER Securities Act of 1933 - act regulates new securities
The provisions of the Securities Act of 1933 apply to which of the following?
a. trading securities
b. regulation of secondary market
c. issuance of IPOs
d. trading of federal issues (like Treasury Bonds) - ANSWER issuance of IPOs - relates to issuance of
new securities and trading takes place on secondary market
Under the Securities Act of 1934, "sales" include which of the following?
Giving a security as a bonus for securities purchased
Making a bona-fide loan of stock
Entering into a contract to sell a security for value - ANSWER I and III - by definition a sale is an
agreement between uncompleted buyer and seller on the price of a security
Fiscal policy activities of the federal government include which of the following?
Expenditures
Taxation
100% CORRECT | GRADED A+
Adam and Billie have fixed and variable expenses of $80,000 per year. They each make $60,000. Billie
has a small trust which produces marginal income. How much should they have in their emergency
fund?
a. $20,000
b. $40,000
c. $60,000
d. $80,000
e. $120,000 - ANSWER $20,000 - combined earned income indicates they both work. 3 months or
1/4 of $80,000
Jeff and Cathy are in their early 30s with two young children. Jeff works making $5,000 per month.
He never completed college (only for two years). Cathy is a stay-at-home mom. She never complete
college, but the two of them are still paying off college loans. They lost their home in the real estate
downturn and now rent. Rent costs have been increasing. They seem to live from month-to-month
and rely on gifts from parents and food kitchens. What do you do first?
a. establish an emergency fund
b. learn the details of their spending habits
c. determine what kind of home they can afford to buy using current mortgage rates
d. make a list of priorities they consider important - ANSWER Learn the details of their spending
habits - best starting point is data gathering with this couple
What type of specific information should be gathered in the planning process regarding the client's
statement of financial position
Cost or Basis
Encumbrances
Budgeting
Savings and Investment Allocations
Date Assets Were Acquired - ANSWER I, II, IV, V - cash flow only needed for cash flow statement
,Which of the following would be the most recommended method of implementing a savings plan?
a. pay all your expenses first, including credit cards, then deposit the remainder in a money market
account
b. simply wait until the end of the month and see if any money is left over
c. deposit a fixed or specific amount from a paycheck into a savings or money market account.
d. complete a one-year budget, then see if the client can save money - ANSWER deposit a fixed or
specific amount from a paycheck into a savings or money market account - pay yourself first is
generally the best advice to give to succeed at savings
A client, married, has come to you for financial planning advice. He has a high-paying occupation. His
wife is a stay-at-home mom with two young children. He has a very high risk-tolerance with adequate
insurance coverage. After a review of his financial statement, you and he find about 1 month of
cash/cash equivalents and excessive debt. His large investment position is also highly leveraged but
doing very well. What should you suggest he do first?
a. liquidate some investments and reduce his debt
b. establish a budget and save more of the cash flow into liquid assets
c. establish an emergency fund with at least 6 months of fixed and variable expenses available in
emergency fund type assets
d. do a risk tolerance survey and review his investments - ANSWER establish a budget and save more
of the cash flow into liquid assets - emergency fund not realistic investment for risk tolerance
After completing a client questionnaire including a complete financial statement, cash flow
statement, goals, needs, and priorities you have found the following weaknesses. How would you
prioritize them (first, second, etc.)
Lack of Disability Insurance
No Umbrella Coverage
No Emergency Fund
Total Monthly Debt is Greater than 40% of Gross Income - ANSWER IV, III, I, II - assume the exam
might consider emergency fund first, even above debt reduction. however no money available for
emergency fund so debt reduction first
,Your client, age 35, has a wife and 2 young children. Which of the following makes the most sense for
your goal?
a. establish a 6 month emergency fund in the next year from excess cash flow
b. contribute to a 529 plan at the end of the month until two children go to college
c. make contributions to two Roth IRAs each year until retirement
d. make contributions to two deductible IRAs each year until retirement
e. reduce consumer debt over the next year from excess cash flow - ANSWER establish a 6 month
emergency fund in the next year from excess cash flow - having proper emergency fund has the
highest priority
Mr. and Mrs. Delay are approaching retirement. Their statement of financial position shows limited
retirement assets. Although Mr. Delay has worked all his life, his income has always been below the
maximum Social Security threshold. As a result, his benefits for both he and his wife will be about
half the maximum available at NRA. His pension benefits available through a prior employer are also
minimal. Since he has been working almost 40 years, he wants to retire early, what should you do if
he approached you to do a financial plan.
a. tell him he cannot retire until at least NRA
b. do a risk tolerance survey to see if his investments could produce better returns
c. decline him as a client
d. have the client keep a budget to determine current cash flow needs and potential savings
e. suggest he get a better job or second job for the next few years to increase savings and get higher
SS benefits - ANSWER have the client keep a budget to determine current cash flow needs and
potential savings - the budget will determine both their current situation and their potential needs
Which agencies monitor or oversee commercial banks?
FDIC
Federal Reserve
Comptroller of Currency
Department of Commerce
Department of Treasury - ANSWER I, II, and III
, What is in a mutual fund prospectus?
Prior Performance
Future return performance
Fund manager
Investment objectives - ANSWER I, III, IV - the prospectus cannot show future return performance
Tech co. is going to have initial public offering. Which of the following Acts apply?
a. Securities Act of 1933
b. Securities Act of 1934
c. Insider Trading Act of 1988 - ANSWER Securities Act of 1933 - act regulates new securities
The provisions of the Securities Act of 1933 apply to which of the following?
a. trading securities
b. regulation of secondary market
c. issuance of IPOs
d. trading of federal issues (like Treasury Bonds) - ANSWER issuance of IPOs - relates to issuance of
new securities and trading takes place on secondary market
Under the Securities Act of 1934, "sales" include which of the following?
Giving a security as a bonus for securities purchased
Making a bona-fide loan of stock
Entering into a contract to sell a security for value - ANSWER I and III - by definition a sale is an
agreement between uncompleted buyer and seller on the price of a security
Fiscal policy activities of the federal government include which of the following?
Expenditures
Taxation
