Paraplanning Real Exam Questions And Correct Answers Success Guaranteed.

Which of the following is a characteristic of properly stated financial goals? - correct answer Definite The current yield from already invested assets is first identified in which step in the financial planning process? - correct answer Gathering client data, including goals What is correct about financial planners? - correct answer It is up to clients to determine whether someone using the title of "financial planner" is really a financial planner or not. What is a requirement of being an FPQP? - correct answer Must abide by a code of ethics The primary reason a financial goal needs to be measurable is so that it can be - correct answer Monitored Is health status qualitative data or quantitative data? - correct answer Qualitative What is an example of an invested asset? - correct answer Vested pension benefits The financial statement that summarizes actual cash receipts and cash disbursements for a specified period of time is the - correct answer Cash flow statement What is generally considered a healthy savings ratio? - correct answer 10% or higher A mortgage that starts with smaller initial payments and then increases to larger than normal payments later in the life of the loan is - correct answer a graduated-payment mortgage The nonmortgage debt-to-income ratio is considered healthy when that ratio is - correct answer 20% or lower The Fair Credit Billing Act - correct answer requires creditors to send a statement to the consumer that describes procedures to follow when billing errors occur Full bankruptcy (Chapter 7) calls for the immediate liquidation of available assets to pay down any outstanding debt as much as possible, and then cancels the remaining debt outstanding, but it does not cancel which one of the following? - correct answer government guaranteed student loans What general percentage of income allocated to rent do landlords consider preferable for a potential renter? - correct answer 20%-40% Which one of the following is a correct listing of the major components of net worth? - correct answer home equity, personal property, and retirement benefits One factor lenders use in evaluating a borrower is capital. Capital is the - correct answer net worth of the borrower Which of the following statements about an education grant is true? - correct answer An education grant is money given outright to a student, with no expectation of repayment Which one of the following statements is correct about annuities? - correct answer The future value of an annuity due will be greater than the future value of an ordinary annuity. Jack Taylor invested $100,000, and after one year, the account was worth $107,000. Assuming monthly compounding, approximately what rate of return did he earn? - correct answer 6.78% (12 P/YR, end mode, C ALL. 100000 +/- PV, 107000 FV, 1, downshift, N, (12 compounding periods), solve for I/YR = 6.78%) How does an assumption on the future rate of inflation impact the achievement of a specific goal? - correct answer A rate of inflation assumption that is too low may mean that more years will be needed to achieve the goal. Fritz has had a $175,000, 30-year mortgage with a 5% interest rate for two years. He has asked you to determine how much he has paid in interest so far. You would advise him that the interest he has paid on the first 24 payments is - correct answer $17,251 (12 P/YR, end mode, 175000 PV, 5 I/YR, 30, downshift, N (360 compounding periods), solve for PMT = $939.44. Then 1, INPUT, 24, downshift, AMORT, = (5,295.93 principal paid), = (17,250.63 interest paid—this is the answer), = (169,704.07 principal remaining).) Which of the following statements is correct about annuities? - correct answer All else being equal, contributing to an IRA as an annuity due rather than an ordinary annuity will result in a higher account balance in the future. James has just won the lottery, and has the choice of either taking a lump sum of $500,000 or receiving a payment of $62,000 at the beginning of each year for the next 10 years. If James believes the opportunity cost is 6%, what should James do? - correct answer The $500,000 lump sum is greater than the present value of the annuity, so James should take the lump sum. (To make a comparison we need to determine the PV of the annuity that is being offered. 1 P/YR, begin mode, C ALL. 62000 PMT, 6 I/YR, 10, downshift, N (10 compounding periods), solve for PV = $483,704.92. Based on a present value of $483,705 for the annuity, James would be better off taking the $500,000 lump sum, since it is greater.) With amortization over time, the amount of each payment being applied to principal is - correct answer increasing. The present value of $1,000 ordinary annuity payments that are made once a year for nine years and discounted at an annual rate of 6% is - correct answer $6,802. (1 P/YR, end mode, C ALL. 1000 PMT, 6 I/YR, 9, downshift, N (9 compounding periods), solve for PV = 6,801.69.) Which one of the following statements concerning negligence is correct? - correct answer An individual can still be found liable for negligence even if he or she behaves responsibly and hasn't done anything wrong Which one of the following statements is correct about nonparticipating policies? - correct answer Nonparticipating policies are only sold by stock companies. Which of the following statements is correct about the elimination period of disability and long-term care policies? - correct answer All else being equal, the longer the elimination period, the lower the premium for the insured Which one of the following situations would be best suited for a decreasing term insurance policy (a policy that provides a lower death benefit each passing year)? - correct answer a single parent with a home mortgage and a son in college Which one of the following elements is not considered in the process of determining the cost of a life insurance premium? - correct answer morbidity charges What occurs if an irrevocable beneficiary passes away before the insured? - correct answer Policy rights usually revert to the owner. Which one of the following is a characteristic of the Affordable Care Act (ACA)? - correct answer There are market exchanges for comparison and choice of plans Which one of the following is the most important factor to focus on when obtaining life insurance? - correct answer insurance need When purchasing disability insurance, which one of the following is the least restrictive definition of disability from the perspective of the insured? - correct answer his or her own occupation The income-based (human life) method of calculating the necessary amount of life insurance coverage - correct answer puts a value on replacing economic worth—the amount of earning power that would be lost.