Question 1

Barry is a single graduate teaching assistant at the local university. He has annual income consisting of a $10,000 salary and $12,000 from a part-time job at a local bookstore. He has a $1,500 checking account, a $2,000 coin collection, a $5,500 automobile, and personal property worth $10,000. His total monthly expenses on a very tight budget are $1,800 per month. Which of the following statements is correct?

Barry has a current ratio of .25.

Barry should not be concerned about liquidity because of his age.

Barry has a current ratio of .09.

Barry has an emergency fund ratio of .83.

For 1 points

Question 2

Gloria is ready to retire and has accumulated $550,000 in her 401(k) account. She is currently 65 and expects to live another 20 years. She believes her account will continue to earn 6%. If she takes equal annual payments at the beginning of each year, exhausting the account in 20 years, how much will she receive each year?

$41,124.79

$51,869.18

$47,951.51

$45,237.27

For 1 points

Question 3

The supply of a product in an economy could be affected by all of the following factors EXCEPT?

No exception is listed. All of the above could affect supply of a product.

Cost of capital

Availability of raw materials necessary to make a product.

Labor costs

Government regulations

For 1 points

Question 4

How long will Tammy be able to receive annual payments of $58,300 at the beginning of each year, from a $600,000 immediate annuity that earns 6% annually?

15 years

14 years

16 years

13 years

For 1 points

Question 5

Which of the following statements is FALSE?

Buying government securities by the Fed is an easy money policy.

Reducing the reserve requirement will help spur the economy.

The federal funds rate is the overnight lending rate between member banks.

Increasing the Discount Rate is expansionary.

For 1 points

Question 6

Joe invested $10,000 in a mutual fund 10 years ago. Twelve months later, he invested an additional $2,000 in the fund and has done the same every year since. The fund is now worth $32,353. What is Joe's IRR?

1.19%

9.21%

29.53%

1.05%

For 1 points

Question 7

George and Sue want to refinance their home. They still owe $200,000 on their current mortgage. There are no closing costs involved in the refinancing. The new mortgage will be a 30-year, 6.38% fixed rate loan. Their property taxes are $250 per month and the homeowners insurance is $30 per month. They also have consumer debt payments of $690 per month. If their combined monthly gross income is $6,000, do they meet the 28% test?

No

Yes

For 1 points

Question 8

Which of the following assets areliquid or Cash Equivalents?

1. An aggressive growth mutual fund
2. A money market fund
3. A U.S. government bond fund
4. A coin collection
5. A certificate ofdeposit that matures in 3 months

1, 3 and 4

2 and 5

4 and 5

All of the above

For 1 points

Question 9

Which of the following cannot be the result of an increase in inflation?

Purchasing power increases

Stock prices change

Interest rates increase

Paychecks increase

For 1 points

Question 10

On a Personal Balance Sheet, all of the following would generally be considered "personal use assets EXCEPT?

Automobiles

Artwork

Furniture

Residence

Credit Card Balance

For 1 points

Question 11

Which of the following is/are properly stated objectives?

1. To provide my wife with a lifetime income of $4,000 in today's dollars
2. To buy a houseboat in the next year
3. To pay for a law school education for my oldest son
4. To give the maximum amount without paying gift tax to my four grandchildren this year

All of the above

1 and 2

1 and 4

2 and 3

For 1 points

Question 12

Which of the following statements is FALSE?

Capital investment increases during the contraction phase.

Demand falls during the contraction phase.

Unemployment increases during the contraction phase.

Consumer income rises during an expansion.

There is high employment during the expansion phase.

For 1 points

Question 13

Which of the following assets is/are marketable but not liquid?

1. Checking Account
2. Money Market Funds
3. Certificate of Deposit
4. Baseball Card Collection
5. Corporate Bond Fund

2 and 5

1, 2 and 3

2 and 3

3 and 5

4 and 5

For 1 points

Question 14

While reviewing a client's Statement of Financial Position, a CFPpractitioner sees the following information:

1. Savings account: $2,000
2. Checking Account: $5,000
3. Universal Life Insurance: Face amount: $150,000; cash surrender value: $11,500
4. 401(k) plan: $125,000 (fully vested)
5. Residence: Cost: $200,000; FMV: $300,000; Mortgage: $125,000
6. Car: Cost: $25,000; FMV: $12,500; loan balance: $8,500
7. Credit Card Balance: $5,000

What is the client's net worth?

$317,500

$321,000

$456,000

$230,000

$217,500

For 1 points

Question 15

Pat and Patricia refinanced the mortgage on their home last year and made their first payment on October 30 of last year. They have a $200,000, 15-year, fixed rate mortgage at 6%. If they make all the payments as called for, what is their loan balance on December 31 of this year?

$189,445.70

$197,951.83

$197,926.54

$189,315.30

For 1 points

Question 16

Lucky comes to you for advice as a CFPpractitioner. He has a winning lottery ticket and can take the $10,000,000 grand prize as a $6,000,000 lump sum payment now or take equal annual payments of $500,000 at the beginning of each year for the next 20 years. He thinks he can earn a 4% return on his investments over the next 20 years and wants to know which option he should take based purely on mathematical analysis. What is your answer?

$500,000 per year for 20 years

$6,000,000 lump sum now

For 1 points

Question 17

Carol and Chuck qualify for a $200,000, 30-year fixed rate mortgage at 6.6%. If their first mortgage payment was made on April 12th of this year, what is their loan balance at the end of this year?

$198,369

$198,433

$200,000

$197,807

For 1 points

Question 18

Sally and Harry have a gross annual income of $108,000. They want to buy a $350,000 home and have saved $70,000 for a down payment. They can obtain a 30-year, fixed rate mortgage at 6.7%, on which the monthly payment will be $1,807, plus property taxes of $3,600 per year. They will also have to pay an annual premium of $300 for homeowners insurance. Do they pass the 28% test for the mortgage?

More information is needed

No

Yes

For 1 points

Question 19

Which of the following transactions would cause an increase or decrease in your client's net worth?

1. Paying off credit card debt from a savings account
2. Selling an appreciated oil painting and putting the proceeds into a mutual fund with a 5% load
3. Selling a no-load fund and putting the proceeds in a savings account
4. Borrowing money to pay for a child's tuition

1 and 3 only

1 and 2 only

2 and 4 only

2 only

For 1 points

Question 20

Carol and Chuck qualify for a $200,000, 30-year fixed rate mortgage at 6.6%. If their first mortgage payment was made on April 12th of this year, what is amount of interest they will pay next year?

$9,864.44

$13,030.41

$13,023.45

$13,036.05

For 1 points

Question 21

Pierre's sister, Marie, has asked Pierre to lend her $6,000. She offers to repay the loan using the following schedule: $1,500 at the end of the first year and $2,000 payable at the end of the next 3 years. Pierre thinks the loan is risky and feels he needs to earn 15% interest to offset the risk. If Marie makes the payments as she proposed, what is the NPV of this transaction and should Pierre make the loan?

$1,500 Yes

$725 Yes

- $1,500 No

-$725 No

For 1 points

Question 22

Which of the following is/are liquid?

1. Municipal Bond Fund
2. Growth Mutual Fund
3. Money Market Fund
4. Passbook Savings Account
5. Stamp Collection

1, 3 and 4

3 and 4

All of the above

3, 4 and 5

1 and 3

For 1 points

Question 23

Which of the following objectives is stated in a manner that would allow a CFPpractitioner to prepare a financial analysis?

1. I want to provide a college education for my 5-year-old son.
2. I want to make the largest allowable deductible contribution to my retirement plan this year.
3. I want to have a comfortable retirement when I retire at age 65.
4. I want to buy a new home in 5 years.
5. I want to make sure my wife has sufficient funds if I die before she does.

2 only

None of the above

2, 3, and 4

3 and 4

1 and 5

For 1 points

Question 24

J. Fred invested $5,000 in an established company. It paid no dividends the first year. In the second year, he received $25 in dividends. He sold the stock in the third year for $10,500 after he received a $50 dividend. What is J. Fred's internal rate of return?

20.66

28.19

40.56

28.39

For 1 points

Question 25

William and Mary will be attending their 25th college reunion in 8 years. They are both very successful and would like to make a donation to the college at the reunion. If they are able to save $5,000 at the end of each quarter until the reunion, and they can receive a return of 10% on an investment you recommend to them, how much will they be able to contribute to the college?

$109,246

$43,681

$240,751

$246,770