CANNON CTFA EXAMS SCRIPT 2025/2026 QUESTIONS
WITH ANSWERS RATED A+
✔✔If you own a 7% Bond maturing in twenty years, and long term rates go to 10%:
A. your bond will sell at a premium.
B. your bond will be called.
C. the annual interest payments on your bond will decline.
D. your bond will sell at a discount. - ✔✔D. your bond will sell at a discount.
✔✔A customer, who is terminally ill, wishes to make several gifts by check to friends
before she dies. Since these individuals are not beneficiaries under her will, she is
anxious to have the gifts completed before her death. Which of the following should
represent your advice to her?
A. If the checks are dated before she dies, they will constitute completed gifts
B. If the gifts are not made before her death, they can be made by her executor based
on her verbally expressed intent
C. If the checks are delivered to the recipients before her death, they are considered to
be completed gifts
D. The checks must be deposited for cashing at the bank before her death in order to
qualify as completed gifts - ✔✔D. The checks must be deposited for cashing at the bank
before her death in order to qualify as completed gifts
✔✔Shareholders must receive financial statements from investment companies:
A. monthly
B. quarterly
C. semi-annually
D. annually - ✔✔C. semi-annually
✔✔The "conduit theory" for a regulated investment company says which of the
following?
A. the flow of revenues should be unimpeded by redemptions.
B. investment income flows to the investor after taxes.
C. the investor and the fund are taxed as a single entity.
D. the investment income is taxable to the investor only. - ✔✔D. the investment income
is taxable to the investor only.
✔✔If interest rates are expected to decline, which of the following bonds would offer the
greatest potential for price appreciation?
A. Treasury bond with duration of 15 years
B. Treasury bond with duration of 12 years
,C. Treasury bond maturing in 10 years
D. Treasury bond maturing in 15 years - ✔✔A. Treasury bond with duration of 15 years
✔✔Absent any relevant language in the instrument, under common law a trust is
considered to be which of the following?
A. irrevocable and not amendable
B. irrevocable but amendable
C. revocable but not amendable
D. revocable and amendable - ✔✔A. irrevocable and not amendable
✔✔In a Qualified Terminable Interest Property (QTIP) marital trust, the surviving spouse
may be given various powers of appointment. Which of the following may be included
for the surviving spouse to have maximum control available as a beneficiary of a QTIP
while retaining election options for the executor?
A. only limited powers of appointment
B. limited powers and the 5x5 power
C. only general powers of appointment, except the 5x5 power
D. general powers including the 5x5 power - ✔✔B. limited powers and the 5x5 power
✔✔At the death of a decendent, the decedent's will creates a trust paying all income to
the surviving spouse and permits principal encroachment, at the trustee's discretion, for
benefit of the surviving spouse and/or children during the surviving spouse's lifetime.
Which of the following is true of this arrangement?
A. The trust can qualify for the QTIP election.
B. The trust can not qualify for the QTIP election.
C. The trust will not be included in the gross estate of the decendent.
D. The trust is invalid since a will cannot creat a trust. - ✔✔B. The trust can not qualify
for the QTIP election.
✔✔A will provides as follows: "If the settlor's spouse survives the settlor, then at the
settlor's death the trustee shall retain and administer as the FAMILY TRUST an amount
equal to the maximum dollar amount which, without considering the federal estate tax
marital deduction in effect at the time of settlor's death, can pass from the settlor's gross
estate free of federal estate taxation, taking into consideration the value of all available
credits against estate tax and all taxable transfers which pass outside of this article."
This is an example of which kind of funding clause?
A. marital pecuniary
B. reverse pecuniary
C. pro rata fractional
D. "pick & choose" fractional - ✔✔B. reverse pecuniary
, ✔✔Which of the following powers of appointment best describes the right granted to a
beneficiary under a Crummey trust provision?
A. Limited
B. Ascertainable standard
C. General
D. Testamentary - ✔✔C. General
✔✔Which of the following is TRUE with respect to general powers of appointment?
I. All general powers of appointment are similar to outright ownership of property.
II. All general powers of appointment allow the power holder to appoint the assets to his
creditors.
III. All general powers of appointment have transfer tax consequences.
A. I and III
B. II only
C. II and III
D. III only - ✔✔D. III only
✔✔An "easing" of money and credit in the economy would probably be the result of:
I. Increasing reserve requirements
II. Increasing the discount rate
III. Decreasing the discount rate
IV. Decreasing reserve requirements
A. I and II
B. I and III
C. II and IV
D. III and IV - ✔✔D. III and IV
✔✔A value manager's portfolio would be expected to:
A. have a PE ratio higher then the market.
B. sell at a premium to the S&P.
C. have a Beta equal to the market or less.
D. have a yield lower than the market. - ✔✔C. have a Beta equal to the market or less.
✔✔Dr. Jones purchases a $5,000,000 life insurance policy. On the advice of her
attorney, she transfers all incidents of ownership in the policy to a n irrevocable trust for
the benefit of her children the following year. Dr. Jones dies two years later, and the
insurance proceeds are paid to the trust. What are the estate tax consequences to Dr.
Jones' estate?
A. Insurance proceeds are included in her estate.
B. Insurance proceeds are not included in her estate.
WITH ANSWERS RATED A+
✔✔If you own a 7% Bond maturing in twenty years, and long term rates go to 10%:
A. your bond will sell at a premium.
B. your bond will be called.
C. the annual interest payments on your bond will decline.
D. your bond will sell at a discount. - ✔✔D. your bond will sell at a discount.
✔✔A customer, who is terminally ill, wishes to make several gifts by check to friends
before she dies. Since these individuals are not beneficiaries under her will, she is
anxious to have the gifts completed before her death. Which of the following should
represent your advice to her?
A. If the checks are dated before she dies, they will constitute completed gifts
B. If the gifts are not made before her death, they can be made by her executor based
on her verbally expressed intent
C. If the checks are delivered to the recipients before her death, they are considered to
be completed gifts
D. The checks must be deposited for cashing at the bank before her death in order to
qualify as completed gifts - ✔✔D. The checks must be deposited for cashing at the bank
before her death in order to qualify as completed gifts
✔✔Shareholders must receive financial statements from investment companies:
A. monthly
B. quarterly
C. semi-annually
D. annually - ✔✔C. semi-annually
✔✔The "conduit theory" for a regulated investment company says which of the
following?
A. the flow of revenues should be unimpeded by redemptions.
B. investment income flows to the investor after taxes.
C. the investor and the fund are taxed as a single entity.
D. the investment income is taxable to the investor only. - ✔✔D. the investment income
is taxable to the investor only.
✔✔If interest rates are expected to decline, which of the following bonds would offer the
greatest potential for price appreciation?
A. Treasury bond with duration of 15 years
B. Treasury bond with duration of 12 years
,C. Treasury bond maturing in 10 years
D. Treasury bond maturing in 15 years - ✔✔A. Treasury bond with duration of 15 years
✔✔Absent any relevant language in the instrument, under common law a trust is
considered to be which of the following?
A. irrevocable and not amendable
B. irrevocable but amendable
C. revocable but not amendable
D. revocable and amendable - ✔✔A. irrevocable and not amendable
✔✔In a Qualified Terminable Interest Property (QTIP) marital trust, the surviving spouse
may be given various powers of appointment. Which of the following may be included
for the surviving spouse to have maximum control available as a beneficiary of a QTIP
while retaining election options for the executor?
A. only limited powers of appointment
B. limited powers and the 5x5 power
C. only general powers of appointment, except the 5x5 power
D. general powers including the 5x5 power - ✔✔B. limited powers and the 5x5 power
✔✔At the death of a decendent, the decedent's will creates a trust paying all income to
the surviving spouse and permits principal encroachment, at the trustee's discretion, for
benefit of the surviving spouse and/or children during the surviving spouse's lifetime.
Which of the following is true of this arrangement?
A. The trust can qualify for the QTIP election.
B. The trust can not qualify for the QTIP election.
C. The trust will not be included in the gross estate of the decendent.
D. The trust is invalid since a will cannot creat a trust. - ✔✔B. The trust can not qualify
for the QTIP election.
✔✔A will provides as follows: "If the settlor's spouse survives the settlor, then at the
settlor's death the trustee shall retain and administer as the FAMILY TRUST an amount
equal to the maximum dollar amount which, without considering the federal estate tax
marital deduction in effect at the time of settlor's death, can pass from the settlor's gross
estate free of federal estate taxation, taking into consideration the value of all available
credits against estate tax and all taxable transfers which pass outside of this article."
This is an example of which kind of funding clause?
A. marital pecuniary
B. reverse pecuniary
C. pro rata fractional
D. "pick & choose" fractional - ✔✔B. reverse pecuniary
, ✔✔Which of the following powers of appointment best describes the right granted to a
beneficiary under a Crummey trust provision?
A. Limited
B. Ascertainable standard
C. General
D. Testamentary - ✔✔C. General
✔✔Which of the following is TRUE with respect to general powers of appointment?
I. All general powers of appointment are similar to outright ownership of property.
II. All general powers of appointment allow the power holder to appoint the assets to his
creditors.
III. All general powers of appointment have transfer tax consequences.
A. I and III
B. II only
C. II and III
D. III only - ✔✔D. III only
✔✔An "easing" of money and credit in the economy would probably be the result of:
I. Increasing reserve requirements
II. Increasing the discount rate
III. Decreasing the discount rate
IV. Decreasing reserve requirements
A. I and II
B. I and III
C. II and IV
D. III and IV - ✔✔D. III and IV
✔✔A value manager's portfolio would be expected to:
A. have a PE ratio higher then the market.
B. sell at a premium to the S&P.
C. have a Beta equal to the market or less.
D. have a yield lower than the market. - ✔✔C. have a Beta equal to the market or less.
✔✔Dr. Jones purchases a $5,000,000 life insurance policy. On the advice of her
attorney, she transfers all incidents of ownership in the policy to a n irrevocable trust for
the benefit of her children the following year. Dr. Jones dies two years later, and the
insurance proceeds are paid to the trust. What are the estate tax consequences to Dr.
Jones' estate?
A. Insurance proceeds are included in her estate.
B. Insurance proceeds are not included in her estate.
