FP1 COMPREHENSIVE STUDY GUIDE 2026
CORE CONCEPTS SOLUTIONS VERIFIED
A+
◉ Indicate the type of risk that would be exemplified by a country's
implementation of expropriating natural resource assets.
A. Market risk
B. Political risk
C. Credit risk
D. Purchasing power risk
Answer: B. Political risk
General Feedback:
In most cases, political risk takes the form of government regulation
or deregulation but nationalization or expropriation cannot be ruled
out entirely. Government regulation has always been a potential
economic reality and has become increasingly important in
determining business profitability. Reference: Module 3, Section 2.
◉ Select the type of risk that SAG Co. encounters by using only
common stock to finance its growth and acquisitions.
,A. Business Risk.
B. Financial Risk.
C. Market Risk.
D. Systematic Risk.
Answer: A. Business Risk.
General Feedback:
A company that strictly uses common stock for financing incurs only
business risk, which is the uncertainty associated with return on
business investments. Reference: Module 3, Section 2.
◉ Calculate the accounting rate of return on a stock purchase of
$5,250 that is sold at the end of one year for a gain of $375. Round
your answer to 2 decimal places.
A. 6.38%.
B. 7.14%.
C. 7.69%.
D. 9.30%.
Answer: B. 7.14%
General Feedback:
, The accounting rate of return is calculated as (net gain or
loss)/Initial investment x 100. Therefore, in this case, the return
would be calculated as $375/5,250x100=7.14%. Reference: Module
3, Section 2.
◉ It is December 31, 2015. Scott, a 45-year old Canadian resident
has a Tax-Free Savings Account (TFSA). The fair market value of the
TFSA is $45,000. Scott's unused TFSA contribution room at the end
of last year was $12,000. Last year, Scott took a distribution from his
TFSA of $4,000. Assume that for that year, the TFSA contribution
limit is still $5,000. This year, Scott has not made any TFSA
contributions. Calculate Scott's unused TFSA contribution room.
A. $16,000
B. $18,500
C. $21,000
D. $24,500
Answer: C. $21,000
General Feedback:
Feedback: Contribution room every year consists of the TFSA dollar
limit for that year plus any withdrawals made in the preceding year,
along with any unused contribution room. In this scenario,
$12,000+$5,000+$4,000 = $21,000. Reference: Module 3, Section 2.
CORE CONCEPTS SOLUTIONS VERIFIED
A+
◉ Indicate the type of risk that would be exemplified by a country's
implementation of expropriating natural resource assets.
A. Market risk
B. Political risk
C. Credit risk
D. Purchasing power risk
Answer: B. Political risk
General Feedback:
In most cases, political risk takes the form of government regulation
or deregulation but nationalization or expropriation cannot be ruled
out entirely. Government regulation has always been a potential
economic reality and has become increasingly important in
determining business profitability. Reference: Module 3, Section 2.
◉ Select the type of risk that SAG Co. encounters by using only
common stock to finance its growth and acquisitions.
,A. Business Risk.
B. Financial Risk.
C. Market Risk.
D. Systematic Risk.
Answer: A. Business Risk.
General Feedback:
A company that strictly uses common stock for financing incurs only
business risk, which is the uncertainty associated with return on
business investments. Reference: Module 3, Section 2.
◉ Calculate the accounting rate of return on a stock purchase of
$5,250 that is sold at the end of one year for a gain of $375. Round
your answer to 2 decimal places.
A. 6.38%.
B. 7.14%.
C. 7.69%.
D. 9.30%.
Answer: B. 7.14%
General Feedback:
, The accounting rate of return is calculated as (net gain or
loss)/Initial investment x 100. Therefore, in this case, the return
would be calculated as $375/5,250x100=7.14%. Reference: Module
3, Section 2.
◉ It is December 31, 2015. Scott, a 45-year old Canadian resident
has a Tax-Free Savings Account (TFSA). The fair market value of the
TFSA is $45,000. Scott's unused TFSA contribution room at the end
of last year was $12,000. Last year, Scott took a distribution from his
TFSA of $4,000. Assume that for that year, the TFSA contribution
limit is still $5,000. This year, Scott has not made any TFSA
contributions. Calculate Scott's unused TFSA contribution room.
A. $16,000
B. $18,500
C. $21,000
D. $24,500
Answer: C. $21,000
General Feedback:
Feedback: Contribution room every year consists of the TFSA dollar
limit for that year plus any withdrawals made in the preceding year,
along with any unused contribution room. In this scenario,
$12,000+$5,000+$4,000 = $21,000. Reference: Module 3, Section 2.
