CFP FUNDAMENTALS FINAL REVIEW
QUESTIONS AND ANSWERS
All iof ithe ifollowing istatements iare itrue, iexcept? iWhy? i
A
iThe iAmerican iOpportunity icredit iis iavailable ifor ithe ifirst ifour iyears iof ia idegree
iprogram ior icertificate.
Bi
The iAmerican iOpportunity icredit idoes inot iinclude icourse imaterials.
Ci
The iAmerican iOpportunity icredit iis iawarded ion ia iper istudent ibasis.
Di
The iLifetime iLearning icredit iis iawarded ion ia iper ifamily ibasis. i- icorrect ianswers i-
correct ianswer iis iB. i
The iAmerican iOpportunity icredit inow iincludes icourse imaterials.
American iOpportunity iis iper istudent, ilifetime iis iper ifamily, i(as iis ilifetime ilearning
icredit) i
,- iexcept iAOTC iis ionly ifor ithe ifirst ifor iyears iof ipost isecondary ieducation i(LLC iis ifor
ian iunlimited iamount iof iyears)
The itype iof irisk iwhich imeasures ithe iextent ito iwhich ia ifirm iuses idebt isecurities iand
iother iforms iof idebt iin iits icapital istructure ito ifinance iis iknown ias:
Business irisk
Systematic irisk
Default irisk
Financial irisk i- icorrect ianswers i-The icorrect ianswer iis iD.
Financial irisk ihas ito ido iwith ithe iamount iof ileveraging ior iuse iof iborrowed ifunds ia
ifirm iutilizes ito istructure iits iinvestment iand ifinance iits iassets.
Bob, ia iCFP® iprofessional, iwas iin ia ihurry ito igo iout iof ithe icountry ion ia i3 iweek
ifamily ivacation. iBob, ilet ihis ijunior ipartner, iwho irecently ipassed ithe iCFP® iexam,
iand ihas i2 iyears iof ifinancial iplanning iexperience, iprepare iand ipresent ia ifinancial
iplan ito ia inew iclient. iWhich iof ithe ifollowing iCode iof iEthics iand iStandards iof
iConduct idid iBob iviolate, iif iany?
None, ias ithe ijunior ipartner ipassed ithe iCFP iexam.
Duties iOwed ito iClients
Duties iOwed ito iCFP® iBoard
Duties ito iFirms ior iSubordinates i- icorrect ianswers i-The icorrect ianswer iis iD.
Bob imust iuse iReasonable iCare iWhen iSupervising iA iCFP® iprofessional iand imust
iexercise ireasonable icare iwhen isupervising ipersons iacting iunder ithe iCFP®
iprofessional's idirection, iincluding iemployees iand iother ipersons iover iwhom ithe
iCFP® iprofessional ihas iresponsibility, iwith ia iview itoward ipreventing iviolations iof
iapplicable ilaws, irules, iregulations, iand ithese iStandards.
Robert iSmith iasks ifor iyour ihelp iin ipreparing ihis icash iflow istatement. iHe itells iyou
ithat ihis isalary ibefore itaxes iis i$250,000 iand ithat ihe ihas iNO imortgage ion ihis ihome.
iWhich iof ithe ifollowing istatements iis itrue iabout iRobert's icash iflow istatement?
The ivalue iof ithe ihome iwould ibe ian iincome isource, isince ithere iis iNO imortgage.
The ivalue iof ithe ihome iwould ibe ian iasset.
The itaxes ion ihis isalary iwould ibe ia iliability.
The itaxes ion ihis isalary iwould ibe ian iexpense. i- icorrect ianswers i-The icorrect ianswer
iis iD.
Option i"A" i- iHome iequity iwould inot iprovide ia isource iof iincome. iOption i"B" i- iThe
ivalue iof ithe ihome iis ian iasset, ibut ithis ihas inothing ito ido iwith icash iflow istatements.
iOption i"C" i- iTaxes ion ihis isalary iare ian iexpense. iLiabilities iare ishown ion ithe istate
iof ifinancial iposition, inot ithe icash iflow istatement.
When iproviding ifinancial iplanning iservices ito ia iclient, ieverything imust ibe idisclosed
iin iwriting, iEXCEPT:
Material iconflicts iof iinterest ithat imay iimpact ithe iCFP® iprofessional's iability ito
iprovide iimpartial iadvice.
, The iprocess iof imaintaining iclient iconfidentiality.
How ithe iclient ipays ifor iproducts, iservices iand iadditional iincurred icosts iincluding
isurrender icharges iand isales iloads.
Disclosure iof iEconomic iBenefit ifor iReferral ior iEngagement iof iAdditional iPersons. i-
icorrect ianswers i-The icorrect ianswer iis iA.
Material iconflicts iof iinterest imay ibe idiscussed iorally ior iin iwriting. iB, iC i& iD imust ibe
iin iwriting iwhen iproviding ifinancial iplanning ito ia iclient i(Duties iowed ito ia iclient i10,
iProvide iInformation ito ia iClient).
The iprimary idifference ibetween iopen iend iand iclosed iend iinvestment icompanies iis:
Closed iend ifunds ialways isell iat ipar ivalue.
Open iend ifunds ido inot icharge isales ifees.
Closed iend ifunds iguarantee ithe iNet iAsset iValue i(NAV) iat ithe itime iof isale ior
ipurchase.
Closed iend ifunds isell ionly ia ilimited inumber iof ishares. i- icorrect ianswers i-D
The itype iof irisk iwhich iCANNOT ibe ieliminated ithrough idiversification iis:
Unsystematic iRisk.
Company iSpecific iRisk.
Systematic iRisk.
Business iRisk. i- icorrect ianswers i-The icorrect ianswer iis iC.
Unsystematic irisk, icompany ispecific irisk iand ibusiness irisk ican iall ibe ieliminated
ithrough idiversification.
According ito ithe icash iflow iapproach, iall iof ithe ifollowing irecommendations imay ihave
ia ipositive iimpact ito icash iflow iexcept:
Raise iinsurance ideductibles.
Reduce ithe iamount iof iinsurance icoverage.
Payoff iexisting idebt iwith ibalance isheet iassets.
Purchase inew iinsurance ito icover ian iexisting irisk. i- icorrect ianswers i-The icorrect
ianswer iis iD.
The ipurchase iof ia inew iinsurance iproduct iwill ihave ia inegative icash iflow iimpact.
Which iof ithe ifollowing iis/are ia iDuty iOwed ito iClients iin ithe iCFP iBoard iStandards iof
iConduct?
Independence
Professionalism
Competence
Fairness
I ionly
QUESTIONS AND ANSWERS
All iof ithe ifollowing istatements iare itrue, iexcept? iWhy? i
A
iThe iAmerican iOpportunity icredit iis iavailable ifor ithe ifirst ifour iyears iof ia idegree
iprogram ior icertificate.
Bi
The iAmerican iOpportunity icredit idoes inot iinclude icourse imaterials.
Ci
The iAmerican iOpportunity icredit iis iawarded ion ia iper istudent ibasis.
Di
The iLifetime iLearning icredit iis iawarded ion ia iper ifamily ibasis. i- icorrect ianswers i-
correct ianswer iis iB. i
The iAmerican iOpportunity icredit inow iincludes icourse imaterials.
American iOpportunity iis iper istudent, ilifetime iis iper ifamily, i(as iis ilifetime ilearning
icredit) i
,- iexcept iAOTC iis ionly ifor ithe ifirst ifor iyears iof ipost isecondary ieducation i(LLC iis ifor
ian iunlimited iamount iof iyears)
The itype iof irisk iwhich imeasures ithe iextent ito iwhich ia ifirm iuses idebt isecurities iand
iother iforms iof idebt iin iits icapital istructure ito ifinance iis iknown ias:
Business irisk
Systematic irisk
Default irisk
Financial irisk i- icorrect ianswers i-The icorrect ianswer iis iD.
Financial irisk ihas ito ido iwith ithe iamount iof ileveraging ior iuse iof iborrowed ifunds ia
ifirm iutilizes ito istructure iits iinvestment iand ifinance iits iassets.
Bob, ia iCFP® iprofessional, iwas iin ia ihurry ito igo iout iof ithe icountry ion ia i3 iweek
ifamily ivacation. iBob, ilet ihis ijunior ipartner, iwho irecently ipassed ithe iCFP® iexam,
iand ihas i2 iyears iof ifinancial iplanning iexperience, iprepare iand ipresent ia ifinancial
iplan ito ia inew iclient. iWhich iof ithe ifollowing iCode iof iEthics iand iStandards iof
iConduct idid iBob iviolate, iif iany?
None, ias ithe ijunior ipartner ipassed ithe iCFP iexam.
Duties iOwed ito iClients
Duties iOwed ito iCFP® iBoard
Duties ito iFirms ior iSubordinates i- icorrect ianswers i-The icorrect ianswer iis iD.
Bob imust iuse iReasonable iCare iWhen iSupervising iA iCFP® iprofessional iand imust
iexercise ireasonable icare iwhen isupervising ipersons iacting iunder ithe iCFP®
iprofessional's idirection, iincluding iemployees iand iother ipersons iover iwhom ithe
iCFP® iprofessional ihas iresponsibility, iwith ia iview itoward ipreventing iviolations iof
iapplicable ilaws, irules, iregulations, iand ithese iStandards.
Robert iSmith iasks ifor iyour ihelp iin ipreparing ihis icash iflow istatement. iHe itells iyou
ithat ihis isalary ibefore itaxes iis i$250,000 iand ithat ihe ihas iNO imortgage ion ihis ihome.
iWhich iof ithe ifollowing istatements iis itrue iabout iRobert's icash iflow istatement?
The ivalue iof ithe ihome iwould ibe ian iincome isource, isince ithere iis iNO imortgage.
The ivalue iof ithe ihome iwould ibe ian iasset.
The itaxes ion ihis isalary iwould ibe ia iliability.
The itaxes ion ihis isalary iwould ibe ian iexpense. i- icorrect ianswers i-The icorrect ianswer
iis iD.
Option i"A" i- iHome iequity iwould inot iprovide ia isource iof iincome. iOption i"B" i- iThe
ivalue iof ithe ihome iis ian iasset, ibut ithis ihas inothing ito ido iwith icash iflow istatements.
iOption i"C" i- iTaxes ion ihis isalary iare ian iexpense. iLiabilities iare ishown ion ithe istate
iof ifinancial iposition, inot ithe icash iflow istatement.
When iproviding ifinancial iplanning iservices ito ia iclient, ieverything imust ibe idisclosed
iin iwriting, iEXCEPT:
Material iconflicts iof iinterest ithat imay iimpact ithe iCFP® iprofessional's iability ito
iprovide iimpartial iadvice.
, The iprocess iof imaintaining iclient iconfidentiality.
How ithe iclient ipays ifor iproducts, iservices iand iadditional iincurred icosts iincluding
isurrender icharges iand isales iloads.
Disclosure iof iEconomic iBenefit ifor iReferral ior iEngagement iof iAdditional iPersons. i-
icorrect ianswers i-The icorrect ianswer iis iA.
Material iconflicts iof iinterest imay ibe idiscussed iorally ior iin iwriting. iB, iC i& iD imust ibe
iin iwriting iwhen iproviding ifinancial iplanning ito ia iclient i(Duties iowed ito ia iclient i10,
iProvide iInformation ito ia iClient).
The iprimary idifference ibetween iopen iend iand iclosed iend iinvestment icompanies iis:
Closed iend ifunds ialways isell iat ipar ivalue.
Open iend ifunds ido inot icharge isales ifees.
Closed iend ifunds iguarantee ithe iNet iAsset iValue i(NAV) iat ithe itime iof isale ior
ipurchase.
Closed iend ifunds isell ionly ia ilimited inumber iof ishares. i- icorrect ianswers i-D
The itype iof irisk iwhich iCANNOT ibe ieliminated ithrough idiversification iis:
Unsystematic iRisk.
Company iSpecific iRisk.
Systematic iRisk.
Business iRisk. i- icorrect ianswers i-The icorrect ianswer iis iC.
Unsystematic irisk, icompany ispecific irisk iand ibusiness irisk ican iall ibe ieliminated
ithrough idiversification.
According ito ithe icash iflow iapproach, iall iof ithe ifollowing irecommendations imay ihave
ia ipositive iimpact ito icash iflow iexcept:
Raise iinsurance ideductibles.
Reduce ithe iamount iof iinsurance icoverage.
Payoff iexisting idebt iwith ibalance isheet iassets.
Purchase inew iinsurance ito icover ian iexisting irisk. i- icorrect ianswers i-The icorrect
ianswer iis iD.
The ipurchase iof ia inew iinsurance iproduct iwill ihave ia inegative icash iflow iimpact.
Which iof ithe ifollowing iis/are ia iDuty iOwed ito iClients iin ithe iCFP iBoard iStandards iof
iConduct?
Independence
Professionalism
Competence
Fairness
I ionly
