CFP FUNDAMENTALS PRACTICE EXAM
QUESTIONS WITH 100% CORRECT
ANSWERS | LATEST VERSION 2025/2026.
Which of the following is NOT a primary tool that the Federal Reserve (Fed) uses to implement
monetary policy?
A. Deficit Management
B. Open Market Operations
C. Excess Reserve Requirements
D. Discount Rate / Federal Funds Rate
A. Deficit Management
All of the following statements regarding NPV are true EXCEPT:
A.A positive NPV indicates the present value of the cash flows exceeds the initial investment.
B.A negative NPV indicates the present value of the cash flows is less than the initial
investment.
C.An NPV equal to zero indicates that the investment is generating a stream of cash flows with
a rate of return equal to the required rate of return.
D.An investor should consider moving forward with any projects that have a negative NPV or
NPV equal to zero.
D. An investor should consider moving forward with any projects that have a negative NPV or
NPV equal to zero.
Which of the following is exempt from bankruptcy court and creditors?
A.Traditional and Roth IRAs up to the lifetime credit amount
B.Rollover IRAs up to $1 million value
C.Qualified Retirement Plans
D.State homestead exemption amount for equity on homes purchased within 24 months of
bankruptcy
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, C.Qualified Retirement Plans
-Traditional and Roth IRAs are not exempted to the lifetime exclusion amount; they have their
index which adjusts every 3 years.
-Rollover IRAs do not have a limit.
-State homestead exemption amount applies for equity on homes purchased and residing in
the state longer than 40 months of bankruptcy.
Which of the following statements concerning financial aid programs for education funding is
correct?
A.Qualified education expenses for the purpose of tax-free scholarships and fellowships include
tuition and fees, room & board and course related expenses.
B.If a scholarship or fellowship is intended to compensate the recipient for teaching or
research, then a portion may be included in taxable income.
C.Federal Pell Grants may be allocated towards living expenses.
D.Campus based aid is available to all students that meet the eligibility criteria.
C.Federal Pell Grants may be allocated towards living expenses.
-Qualified expenses do not include room and board.
-If a scholarship or fellowship is intended for compensation, it is considered taxable income.
-Campus based aid is allocated until it runs out; even if the student is eligible, they may not
receive it.
All of the following statements concerning educational funding are correct EXCEPT:
A.Distributions from a Coverdell ESA in excess of qualified education expenses will be included
in ordinary income.
B.Prepaid Tuition Plans are plans where prepayment of college tuition is allowed at a fixed price
for enrollment in the future.
C.Employer provided education assistance is not taxable to the employee as long as it directly
relates to the current job responsibilities.
D.The owner / contributor of a QTP has control of the account; the beneficiary is not entitled to
make decisions.
C.Employer provided education assistance is not taxable to the employee as long as it directly
relates to the current job responsibilities.
The education expenses may or may not be directly related to the employee's current job
duties; it depends on the employer's policy. The reimbursement must also be less than the
federal limit established and must only cover tuition, fees, books, supplies, and equipment.
Which of the following statements concerning educational funding is true?
A.The American Opportunity Tax Credit is a tax credit available for qualified tuition and
enrollment fees incurred in the first four years of post-secondary education for the taxpayer,
spouse, or dependent.
B.The Lifetime Learning Credit is a tax credit available for expenses paid for tuition and
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
QUESTIONS WITH 100% CORRECT
ANSWERS | LATEST VERSION 2025/2026.
Which of the following is NOT a primary tool that the Federal Reserve (Fed) uses to implement
monetary policy?
A. Deficit Management
B. Open Market Operations
C. Excess Reserve Requirements
D. Discount Rate / Federal Funds Rate
A. Deficit Management
All of the following statements regarding NPV are true EXCEPT:
A.A positive NPV indicates the present value of the cash flows exceeds the initial investment.
B.A negative NPV indicates the present value of the cash flows is less than the initial
investment.
C.An NPV equal to zero indicates that the investment is generating a stream of cash flows with
a rate of return equal to the required rate of return.
D.An investor should consider moving forward with any projects that have a negative NPV or
NPV equal to zero.
D. An investor should consider moving forward with any projects that have a negative NPV or
NPV equal to zero.
Which of the following is exempt from bankruptcy court and creditors?
A.Traditional and Roth IRAs up to the lifetime credit amount
B.Rollover IRAs up to $1 million value
C.Qualified Retirement Plans
D.State homestead exemption amount for equity on homes purchased within 24 months of
bankruptcy
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, C.Qualified Retirement Plans
-Traditional and Roth IRAs are not exempted to the lifetime exclusion amount; they have their
index which adjusts every 3 years.
-Rollover IRAs do not have a limit.
-State homestead exemption amount applies for equity on homes purchased and residing in
the state longer than 40 months of bankruptcy.
Which of the following statements concerning financial aid programs for education funding is
correct?
A.Qualified education expenses for the purpose of tax-free scholarships and fellowships include
tuition and fees, room & board and course related expenses.
B.If a scholarship or fellowship is intended to compensate the recipient for teaching or
research, then a portion may be included in taxable income.
C.Federal Pell Grants may be allocated towards living expenses.
D.Campus based aid is available to all students that meet the eligibility criteria.
C.Federal Pell Grants may be allocated towards living expenses.
-Qualified expenses do not include room and board.
-If a scholarship or fellowship is intended for compensation, it is considered taxable income.
-Campus based aid is allocated until it runs out; even if the student is eligible, they may not
receive it.
All of the following statements concerning educational funding are correct EXCEPT:
A.Distributions from a Coverdell ESA in excess of qualified education expenses will be included
in ordinary income.
B.Prepaid Tuition Plans are plans where prepayment of college tuition is allowed at a fixed price
for enrollment in the future.
C.Employer provided education assistance is not taxable to the employee as long as it directly
relates to the current job responsibilities.
D.The owner / contributor of a QTP has control of the account; the beneficiary is not entitled to
make decisions.
C.Employer provided education assistance is not taxable to the employee as long as it directly
relates to the current job responsibilities.
The education expenses may or may not be directly related to the employee's current job
duties; it depends on the employer's policy. The reimbursement must also be less than the
federal limit established and must only cover tuition, fees, books, supplies, and equipment.
Which of the following statements concerning educational funding is true?
A.The American Opportunity Tax Credit is a tax credit available for qualified tuition and
enrollment fees incurred in the first four years of post-secondary education for the taxpayer,
spouse, or dependent.
B.The Lifetime Learning Credit is a tax credit available for expenses paid for tuition and
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
