Financial Planning: Process and Environment
Practice Test 1 Questions with Answers (100%
Correct Answers)
Which of the following financial planning domains is where the
advisoridentifies the strengths and weaknesses in the client's present financial
condition?
(A) Establish and define the advisor-client relationship.
(B) Determine goals and gather data.
(C) Develop and present a plan.
(D) Analyze and evaluate the data. Answer: (D) Analyze and evaluate the data.
Which of the following types of questions is likely to be the most effective in
client counseling?
(A) Open-ended
(B) Close-ended
(C) Leading
(D) Either/or Answer: (A) Open-ended
Which of the following statements concerning ethics in business is correct?
(A) It is good public relations for a business.
(B) It is about creating a good image for a business.
,2
(C) It is a luxury to indulge in after meeting the bottom line.
(D) It is about how people conduct business every day. Answer: (D) It is about
how people conduct business every day.
If $100 is deposited today in an account paying 9 percent compoundannual
interest, how much will be in the account at the end of 4 years?
(A) $70.84
(B) $141.16
(C) $323.97
(D) $457.31 Answer: (B) $141.16
If Bob deposits $8,000 today in an account that pays 3 percent compound
annual interest, how long will it take for the account to reach $10,000?
(A) 3.77 years
(B) 4.58 years
(C) 6.12 years
(D) 7.55 years Answer: (D) 7.55 years
For SEC registration purposes, which of the following acts sets the limit for
assets under management?
(A) Sarbanes-Oxley Act
(B) Investment Advisers Supervision Coordination Act
,3
(C) Investment Advisers Act
(D) Securities Exchange Act Answer: (B) Investment Advisers Supervision
Coordination Act
Which of the following is an appropriate investment for an emergency fund?
(A) A money market mutual fund
(B) Bonds
(C) Real estate
(D) Life insurance Answer: (A) A money market mutual fund
Assume that payments of $1,000 are to be received at the end of each of the
next 5 years. On the basis of a 9 percent compound annual interest assumption,
what is the series of payments worth today?
(A) $649.93
(B) $1,538.58
(C) $3,889.65
(D) $5,984.71 Answer: (C) $3,889.65
How much money do you need to deposit today in a savings account earning 9
percent compound annual interest if your goal is to accumulate $10,000 at the
end of 4 years?
(A) $3,086.71
(B) $7,084.25
, 4
(C) $7,721.83
(D) $14,115.82 Answer: (B) $7,084.25
Jim needs to accumulate $25,000 in a savings account over the next 5 years. He
can make five annual deposits of $4,000 starting today. What compound
annual rate of return must the account earn in order for Jim to meet his goal?
(A) 5.00%
(B) 6.12%
(C) 6.67%
(D) 7.53% Answer: (D) 7.53%
Bill expects to receive $10,000 each year for 4 years beginning one year from
today. If Bill can earn 6 percent compound annual interest on these funds, what
is the present value of this series of payments?
(A) $34,651.06
(B) $36,298.95
(C) $49,173.24
(D) $52,421.37 Answer: (A) $34,651.06
If $1,000 is deposited into a savings account at the beginning of each of the next
4 years starting today, how much money will be in the account 4 years from
now if no withdrawals are made and the account earns 9 percent compound
annual interest?
Practice Test 1 Questions with Answers (100%
Correct Answers)
Which of the following financial planning domains is where the
advisoridentifies the strengths and weaknesses in the client's present financial
condition?
(A) Establish and define the advisor-client relationship.
(B) Determine goals and gather data.
(C) Develop and present a plan.
(D) Analyze and evaluate the data. Answer: (D) Analyze and evaluate the data.
Which of the following types of questions is likely to be the most effective in
client counseling?
(A) Open-ended
(B) Close-ended
(C) Leading
(D) Either/or Answer: (A) Open-ended
Which of the following statements concerning ethics in business is correct?
(A) It is good public relations for a business.
(B) It is about creating a good image for a business.
,2
(C) It is a luxury to indulge in after meeting the bottom line.
(D) It is about how people conduct business every day. Answer: (D) It is about
how people conduct business every day.
If $100 is deposited today in an account paying 9 percent compoundannual
interest, how much will be in the account at the end of 4 years?
(A) $70.84
(B) $141.16
(C) $323.97
(D) $457.31 Answer: (B) $141.16
If Bob deposits $8,000 today in an account that pays 3 percent compound
annual interest, how long will it take for the account to reach $10,000?
(A) 3.77 years
(B) 4.58 years
(C) 6.12 years
(D) 7.55 years Answer: (D) 7.55 years
For SEC registration purposes, which of the following acts sets the limit for
assets under management?
(A) Sarbanes-Oxley Act
(B) Investment Advisers Supervision Coordination Act
,3
(C) Investment Advisers Act
(D) Securities Exchange Act Answer: (B) Investment Advisers Supervision
Coordination Act
Which of the following is an appropriate investment for an emergency fund?
(A) A money market mutual fund
(B) Bonds
(C) Real estate
(D) Life insurance Answer: (A) A money market mutual fund
Assume that payments of $1,000 are to be received at the end of each of the
next 5 years. On the basis of a 9 percent compound annual interest assumption,
what is the series of payments worth today?
(A) $649.93
(B) $1,538.58
(C) $3,889.65
(D) $5,984.71 Answer: (C) $3,889.65
How much money do you need to deposit today in a savings account earning 9
percent compound annual interest if your goal is to accumulate $10,000 at the
end of 4 years?
(A) $3,086.71
(B) $7,084.25
, 4
(C) $7,721.83
(D) $14,115.82 Answer: (B) $7,084.25
Jim needs to accumulate $25,000 in a savings account over the next 5 years. He
can make five annual deposits of $4,000 starting today. What compound
annual rate of return must the account earn in order for Jim to meet his goal?
(A) 5.00%
(B) 6.12%
(C) 6.67%
(D) 7.53% Answer: (D) 7.53%
Bill expects to receive $10,000 each year for 4 years beginning one year from
today. If Bill can earn 6 percent compound annual interest on these funds, what
is the present value of this series of payments?
(A) $34,651.06
(B) $36,298.95
(C) $49,173.24
(D) $52,421.37 Answer: (A) $34,651.06
If $1,000 is deposited into a savings account at the beginning of each of the next
4 years starting today, how much money will be in the account 4 years from
now if no withdrawals are made and the account earns 9 percent compound
annual interest?
