BUSI 352 quiz 1 Financial Planning Process, Profession, and Client Relations solutions answers

BUSI 352 quiz 1 Financial Planning Process, Profession, and Client Relations solutions complete answers 

 

All of the following are true regarding financial advisers EXCEPT:

 

Which of the following is most likely to take place in the Analyzing the Client's Current Course of Action and Potential Alternative Courses of Action step?

 

During their meeting with you, Johnny and June call the benefits office to adjust their tax withholding to better suit their financial needs.  Identify the stage of the financial planning process in which the planner is engaged.

 

Which of the following stated goals of a client is the most workable for financial planning purposes?

 

All of the following are examples of qualitative information that should be collected by the financial planner EXCEPT:

 

Maria Chen has been a client of yours for many years. In your quarterly meeting with Maria, you evaluate her retirement portfolio performance and ensure that progress is being made as expected. Which part of the financial planning process are you engaged in?

 

Which of the following is usually included in an engagement letter?

 

Your client, Donald, provides you with his tax returns from the previous year.  Identify the stage of the financial planning process in which the planner is engaged.

 

An example of internal data is…

 

Which of the following is most likely to affect a rational investor, as described in Traditional Finance?

 

Which of the following best describes Behavioral Finance?

 

The benefits that accrue to a client from using a financial planner to prepare a financial plan include all the following except:

 

Financial planners earn compensation in the form of:

 

Which of the following is incorrect regarding the Humanistic Paradigm?

 

This school of thought suggests that humans are subject to the same learning principles that were established in animal research.

 

Which of the following is most likely the beginning of a closed question?

 

In what order should the steps in the financial planning process occur? ONE: Gathering client data. TWO: Presenting financial planning recommendations. THREE: Developing financial planning recommendations. FOUR: Analyzing and evaluating client’s financial status. FIVE: Monitoring the plan. SIX: Implementing financial planning recommendations. SEVEN: Identifying and selecting goals.

 

During your meeting with Jeff, you provide him with three education saving plans to choose from.  Identify the stage of the financial planning process in which the planner is engaged.

 

This school of thought defines mental health as having congruent and aligned thoughts, feelings, and behavior.

 

Which of the following best describes the cognitive bias herding?

 

Which of the following is not considered to be in line with the Developmental paradigm or school of thought?

 

All of the following are principles of Modern Portfolio Theory EXCEPT:

 

Which of the following is incorrect with respect to heuristics in the realm of financial advice?

 

In this school of thought, the counselor must identify behavioral excesses and inadequacies and try to manipulate these forces to change the client’s behavior and thought process.

 

1.
According to the cash flow approach, all of the following recommendations will have a positive impact to cash flow except:
a. Raise insurance deductibles.
b. Reduce the amount of insurance coverage.
c. Payoff existing debts with non-cash balance sheet assets.
d. Purchase new insurance to cover an existing risk.
 
 
2.
According to the cash flow approach, each of the following recommendations will have a positive cash flow impact except:
a. Raise insurance deductibles.
b. Reduce insurance coverage.
c. Increase insurance coverage.
d. Cancel insurance coverage.
 
 
3.
The benefits that accrue to a client from using a financial planner to prepare a financial plan include all of the following except:
A. The financial planner is subjective and knowledgeable
B. A professional planner will include metrics
C. A financial planner will identify risks in the process
D. Increased awareness on client’s part as to opportunity costs
 
 
4.
Beth earns $100,000 working as a part time lawyer in New Orleans. The company provides a matching contribution to the 401(k) plan of 50% of her contribution up to a maximum contribution of 4% of compensation. Her 401(k) plan account had $60,000 in it at the beginning of the year. She contributed $15,000 to the plan this year and the employer made the matching contribution before year-end. The ending balance of the account is $100,000. What is her savings rate this year?
A. 15%
B. 19%
C. 22.5%
D. 35%
 
 
5.
Betty earns $100,000 working as a part time lawyer in New Orleans. The company provides a matching contribution in the 401(k) plan of 50% up to a maximum contribution of 4% of compensation. Her 401(k) plan account had $60,000 in it at the beginning of the year. She contributed $15,000 to the plan this year and the employer made the matching contribution before year-end. The ending balance of the account is $100,000. What is her return on investments this year?
a. 6.675%
b. 26.6%
c. 29.2%
d. 35%
 
 
6.
A client in the asset accumulation phase is characterized by:
a. Low cash flow and low debt to net worth.
b. High cash flow and high debt to net worth.
c. High cash flow and low debt to net worth.
d. Low cash flow and high debt to net worth
 
 
7.
An engagement letter is a quasi-legal agreement between a professional or professional organization and a client.
A. True
B. False
 
 
8.
An example of internal data is....
A. The current tax rates
B. The expected inflation
C. The client’s goals
D. The planner’s education
 
 
9.
External data collected in phase 2 of the financial planning process includes all of the following except:
A. Information about the business cycle
B. Current and prospective interest rates
C. Education goals of the family
D. Expected rate of increases in the prices of education and medical care
 
 
10.
External data might include interest rates, housing trends, equity market outlook.
A. True
B. False
 
 
11.
Financial counselors or advisers must establish and maintain the adviser-client relationship based on their ability to:
A. Calculate Earnings
B. Understand Financial statements
C. Communicate effectively
D. Bring in business
 
 
12.
The first two steps in the financial planning process are:
A. Establish and define client planner realtionship and gather client data
B. Establish and define client planner relationship and analyze client data
C. Establish and define client planner relationship and analyze client data
D. Establish and define client planner relationship and develop and present recommendations
 
 
13.
If your financial planning client talks about situations, expresses emotions verbally, enjoys listening (but cannot wait to talk), and tends to move lips or sub-vocalize when reading, then their learning style is most likely....
A. auditory
B. visual
C. auditory and visual
D. neither auditory or visual
 
 
14.
If your financial planning client uses phrases like: “see what I mean” or “imagine that”, your client’s learning style is most likely....
A. Auditory
B. Visual
C. Both auditory and visual
D. Neither auditory or visual
 
 
15.
Once the implementation of the financial plan is completed, the engagement is over and there are no further steps.
A. True
B. False
 
 
16.
One of the advantages of a professional financial planner is his or her expertise and their objectivity.
A. True
B. False
 
 
17.
One of the most reported interruptions or disruptions in passive listening is when:
A. seminar moderator interrupts the presentation
B. A friend asks you questions about a presenter’s speech
C. The listener is thinking about what he or she may say in response to what is being discussed while the listener should instead be listening
D. The speaker takes too many breaks
 
 
 
 
 
 
 
 
 
 
 
 
 

18.
Pat and Marie have the following expenses and account balances:
Pat’s annual 401(k) plan contribution $16,500
Pat’s annual salary $100,000
Current liabilities $24,000
Housing costs (P&I&T&I) monthly $2,167
Cash & Cash equivalents $18,000
Monthly nondiscretionary cash flows $6,000
Monthly debt payments other than housing $500
* Pat’s employer matches $1 for $1 up to 3% of Pat’s salary in his 401(k) plan.

Based on the information above, calculate Pat and Marie’s current ratio in numbers.

a. 0.75:1
b. 1:1
c. 1:1.3
d. 2:1
 
 
19.
Pat and Marie have the following expenses and account balances:
Pat’s annual 401(k) plan contribution $16,500
Pat’s annual salary $100,000
Current liabilities $24,000
Housing costs (P&I&T&I) monthly $2,167
Cash & Cash equivalents $18,000
Monthly nondiscretionary cash flows $6,000
Monthly debt payments other than housing $500
* Pat’s employer matches $1 for $1 up to 3% of Pat’s salary in his 401(k) plan.

Based on the information above, calculate Pat and Marie’s emergency fund ratio in months.
a. 0.25 months
b. 1 month
c. 2 months
d. 3 months
 
 
20.
Pat and Marie have the following expenses and account balances:
Pat’s annual 401(k) plan contribution $16,500
Pat’s annual salary $100,000
Current liabilities $24,000
Housing costs (P&I&T&I) monthly $2,167
Cash & Cash equivalents $18,000
Monthly nondiscretionary cash flows $6,000
Monthly debt payments other than housing $500
* Pat’s employer matches $1 for $1 up to 3% of Pat’s salary in his 401(k) plan.

Based on the information above, calculate Pat and Marie’s housing ratio 1 in numbers

a. 20%
b. 22%
c. 24%
d. 26%
 
 
21.
Pat and Marie have the following expenses and account balances:
Pat’s annual 401(k) plan contribution $16,500
Pat’s annual salary $100,000
Current liabilities $24,000
Housing costs (P&I&T&I) monthly $2,167
Cash & Cash equivalents $18,000
Monthly nondiscretionary cash flows $6,000
Monthly debt payments other than housing $500
* Pat’s employer matches $1 for $1 up to 3% of Pat’s salary in his 401(k) plan..

Their savings rate:
a. 16.5
b. 17.5
c. 18.5
d. 19.5
 
 
22.
Proper and practical communication skills and techniques in financial counseling can aid the financial planning adviser to understand:
A. Their clients
B. What their client’s perceptions of their own needs are
C. What their clients objectives are
D. All of the above
 
 
23.
Quantitative information that is gathered in the data process might include banking and investment information, tax information, financial statements and attitudes regarding risk tolerance and charitable funding.
A. True
B. False
 
 
 

24.
The three panel approach includes all of the following except: 
a. An identification of short-term liability and debt goals.
b. An identification of risk management issues and goals.
c. An evaluation of investment performance and goals.
d. An identification and evaluation of long-term goals.
 
 
25.
Which of the following approaches provides the planner and client with a methodology in order to reach goals? The methodology is expressed as cover the risk and save and invest.
A. The Pie Chart Approach
B. Ratio Analysis
C. Three Panel Approach
D. Strategic Approach
 
 
26.
Which of the following are consistent with the Cognitive-Behavioral school of thought?
A. Humans are beings that are subject to the same learning principles that were established in animal research
B. Self-talk, which refers to that ongoing internal conversation one has with oneself that can influence feelings, and behavior can reinforced and persist
C. The counselor’s challenge lies in performing a sound evaluation of how reinforces are maintaining problematic self talk and behaviors
D. The counselor is the expert in the Cognititive-Behavioral Paradigm, but the counselor and client have a working allience where the client must be actively engaged
E. All of the above
 
 
27.
Which of the following are heuristics or cognitive bias about which an adviser should be knowledgeable?
A. The affect heuristic
B. Overreaction bias
C. Overconfidence bias
D. Anchoring
E. All of the above
 
 
28.
Which of the following are NOT consistent with the Humanistic Paradigm?
A. Dominated by theorists whose models have their origins from a shared philosophical approach
B. Was not influenced by Freudian analytic theory
C. For a client to grow, the relationship requires a transparent and genuine counselor
D. All of the above are consistent
 
 
29.
Which of the following are premises in Traditional Finance?
A. Markets are inefficient
B. Investors are irrational
C. Markets are efficent
D. Investors are rational
E. Both C and D
 
 
31.
Which of the following does not describe “anchoring”?
A. Attaching one’s thoughts to a reference point even though there may be no logical relevance or is not pertinent to the issue in question
B. Conservatism or belief perseverance
C. Anchoring is fairly common in situations where decisions are being made that are repetitive and customary
D. Anchoring is fairly common in situations where decisions are being made that are novel or new to the decision maker
 
 
 
 
 
 
 
 
 

32.
Which of the following do NOT apply to the use of questionnaires?
A. They provide quick and easy information
B. They ensure that subject areas are not left out or forgotten by the adviser
C. They can be very through and cover many areas that must be covered during the acquisition of quantitative information from the client
D. Long questionnaires are most desireable
 
 
33.
Which of the following is/are incorrect regarding the Humanistic Paradigm
A. The adviser needs a philosophical stance that humankind is basically bad and that people do not have the inherent capability of self-direction and growth under the right set of circumstances
B. A humanistic counselor would define mental health as having congruent and aligned thoughts, feelings, and behavior
C. Goals in treatment are centered on establishing congruence and acceptance of personal responsibility
D. The majority of the Humanistic theories view clients as experts on themselves
 
 
34.
Which of the following is consistent with the Disposition Effect?
A. Investors create mental accounts when they purchase stocks and continue to mark their value to the purchase price even after market prices have changed
B. Investors acknowledge loss in value, referred to as the paper loss
C. The normal investor considers the stock a loser if it dips in value
D. The sale of stock is irrelevant
 
 
36.
Which of the following is incorrect with respect to the gambler’s fallacy?
A. The gambler’s fallacy has nothing to do with probabilities
B. When watching successive coin flips, if heads is the result successively, the belief is that the odds of that continuing to happen are lesser, and therefore it is a better probability to bet on tails.
C. Because each coin flip is a separate action, the probability of a coin toss, using the gamblers fallacy, changes drastically from 50% 
D. None of the above
 
 
 
 
 
 
 
 
 

37.
Which of the following is not considered a critical element of an engagement letter?
A. The scope of work agreed upon
B. The time horizon for that work
C. A description of the fees and costs
D. All of the above are considered elements
 
 
38.
Which of the following is not necessary to identify a client’s life cycle position?
a. Attitudes and/or beliefs.
b. Marital status.
c. Dependents.
d. Income level.
e. Net worth.
 
 
39.
Which of the following is not one of the five general categories that make up a client’s internal data?
a. Life cycle position.
b. Age.
c. Special needs.
d. Financial position.
e. Perception of their financial situation.
 
 
40.
Which of the following is probably the start of a close ended question?
A. How....
B. Isn’t it true that...
C. Why...
D. Please explain whether...
 
 
41.
Which of the following options best completes this sentence: “In the event that a client is trying to communicate a message that is not clear, then the adviser will want to...”
A. Take a break
B. Reschedule the meeting on another day
C. Move on
D. Clarify what the client is trying to communicate with a clarifying statement
 
 
42.
Which step in the financial planning process comes before monitoring?
A. Presenting the plan
B. Analyzing the client’s financial status
C. Gathering data
D. Implementing the plan
 
 
 

 

1.
Allen is a graphic designer and contributes 10% of his salary to his 401(k). His employer makes a 3% matching contribution. Last year, Allen earned $60,000, but he received a raise and will earn $65,000 this year. Also, Allen contributes $2,000 to an IRA at the end of each year. What is his total savings rate this year?

a. 13.00%.

b. 14.08%.

c. 16.08%.

d. 17.42%.
 
 
2.
All of the following are acceptable forms of compensation for a CFP® Professional EXCEPT:

a. Fee-Only.

b. Salary.

c. Commission.

d. All of the above are acceptable forms of compensation.
 
 
5.
All of the following are true regarding financial advisors EXCEPT:

a. Advisors should strive to be active listeners throughout their sessions with clients.

b. Advisors should only use open questions during their client meetings.

c. It is important for the advisor to understand the client’s values and attitudes.

d. Nonverbal cues, or body language, can communicate feelings and attitudes between the client and the advisor.
 
 
6.
All of the following statements are true EXCEPT:

a. The duty of care of a fiduciary involves acting in the best interest of the organization.

b. Rule 1.4 of the Rules of Conduct provides that a certificant has the duty of care of a fiduciary as defined by the CFP Board.

c. A certificant who is an employee/agent shall advise his or her current employer of any certification suspension or revocation received from the CFP Board.

d. All of the above are correct.
 
 
7.
Assume the following annual financial information for Kelli (age 30):


Income (after taxes) $80,000
Savings $2,500
Rent $18,000
Dry Cleaning $200
Entertainment $2,000
Utilities $1,800
Car Payment $6,600
Auto Insurance $2,400
Student Loans $6,000
Credit Cards $1,200

Utilizing targeted benchmarks, which of the following statements is FALSE regarding Kelli’s financial situation?

a. Kelli’s Housing Ratio 1 is adequate.

b. Kelli’s emergency fund is adequate.

c. Kelli’s Housing Ratio 2 is deficient.

d. Kelli’s current ratio is less than 1.

Utilizing investment assets to gross pay benchmarks, which
 
 
8.
Damian invests $5,000 today in an account earning 6% per year. How much is the investment worth in 4 years?

a. $5,000.00.

b. $6,200.00.

c. $6,312.38.

d. $6,326.60.
 
 
9.
During their meeting with you, Johnny and June call the benefits office to adjust their tax withholding to better suit their financial needs.
 
 
 
 
 
 
 
 
 
 

11.
During your meeting with your client, Hayden Doyle, you recommended he purchase a personal liability umbrella policy (PLUP). Which part of the financial planning process were you engaged in?

a. Implement Financial Plan Recommendations.

b. Develop and Present Financial Planning Recommendations.

c. Gather Client Data.

d. Monitor Plan.
 
 
13.
For all client engagements, CFP licensees must disclose all of the following information EXCEPT:

a. A general summary of likely conflicts of interest.

b. A list of certificant’s current clients.

c. A list of contact information for the certificant.

d. An understandable description of the compensation arrangements.
 
 
14.
Jamie deposits $10,000 in an account earning 3% interest, compounded quarterly. How much will the account balance be in 7 years?

a. $10,176.32.

b. $10,724.14.

c. $12,327.12.

d. $22,879.28.
 
 
15.
Making a decision based on whatever information exists in your memory bank best describes which of the following:

a. Affect Heuristic.

b. Availability Heuristic.

c. Similarity Heuristic.

d. None of the Above.
 
 
17.
Megan purchased a new vehicle for $40,000. She put $5,000 down and financed the $35,000 balance over 5 years. What is the impact of this transaction on her net worth?

a. Her net worth increases.

b. Her net worth decreases.

c. Her net worth remains the same.

d. None of the above.
 
 
18.
Mila has an investment account with a balance of $125,000. She intends to make withdrawals each year for the next 15 years from this account. If the investment account earns 10%, compounded annually, how much can Mila receive at the end of each year?

a. $12,500.00.

b. $14,940.20.

c. $16,434.22.

d. $17.386.16.
 
 
19.
Starting today, Armand deposits $100 in a savings account at the beginning of each month. If the account earns 6% annually, what is the account value after 6 years?

a. $697.53.

b. $739.38.

c. $8,640.89.

d. $8,684.09.
 
 
 
 
 
 
 
 
 

20.
Use the following financial information for Jay (age 30) and Maria (age 30) Handberger:

¥ Cash and Cash Equivalents: $75,000

¥ Investment Assets: $220,000

¥ Personal Use Assets: $350,000

¥ Current Liabilities: $45,000

¥ Long-Term Liabilities: $300,000

Before your next meeting with the Handberger’s, you create a pie chart to visually depict their current balance sheet. Utilizing targeted benchmarks, which of the following statements are you most likely to make during your next meeting?

a. “Your investment assets make up 34% of your asset pie chart, which is too low for your age group.”

b. “Given your assets and liabilities, your net worth is appropriate for your age group.”

c. “Relative to the rest of your assets, your cash and cash equivalents are too low for your age group.”

d. “Compared to your net worth and current liabilities, your long-term liabilities are excessive for your age group.”
 
 
21.
Utilizing investment assets to gross pay benchmarks, which of the following individuals is likely on target with their investment assets?

a. Jerry age 55 earns $120,000 a year and has invested assets of $450,000.

b. Liam age 25 earns $45,000 a year and has invested assets of $5,500.

c. Sarah age 35 earns $90,000 a year and has invested assets of $325,000.

d. Alex age 45 earns $110,000 a year and has invested assets of $170,000.
 
 
22.
Which of the following activities is most likely be considered financial planning by the CFP Board?

a. Acting as an order-taker for brokerage services.

b. Analyzing a client’s retirement data and making recommendations.

c. Completing tax returns without providing any other financial services.

d. Completing paperwork to open a brokerage account.
 
 
24.
Which of the following best describes the financial approach that uses quantitative benchmarks that provide guidelines of where a client’s financial profile should be.

a. Metrics Approach.

b. Strategic Approach.

c. Cash Flow Approach.

d. Present Value of Goals Approach.
 
 
25.
Which of the following is/are forms of discipline from the CFP Board?

Private Censure.

2. 1st Strike.

3. Suspension.

4. Monetary Penalties.

a. 1 and 2.

b. 1 and 3.

c. 2, 3, and 4.

d. 1, 2, 3, and 4.
 
 
 
 
 
 
 
 
 

28.
Which of the following is most likely to take place in the Analyze & Evaluate Client’s Financial Status step?

a. After meeting with David, you prepare his current financial statements.

b. In your meeting with Rosie, you sell her a new life insurance policy.

c. During your meeting with Alexis, she provides you with several documents including her employee benefits information and bank statements.

You provide your client with a description of the fees and costs of your financial planning services
 
 
29.
Which of the following is not a principle in the CFP Board’s Code of Ethics?

a. Objectivity.

b. Fairness.

c. Honesty.

d. Diligence.
 
 
30.
Which of the following is not a valid method for determining life insurance needs?

a. The Financial Needs Method.

b. The Human Life Value Method.

c. The Dependency Method.

d. The Capitalization of Earnings Method.
 
 
31.
Which of the following is NOT true of insurable risks?

a. Risks can be insured even if they are not measurable or determinable.

b. A large number of similar exposures must exist.

c. The loss must not pose a catastrophic risk for the insurer.

d. Insured loses must be accidental.
 
 
33.
Which of the following measures is appropriate for a risk that has a low frequency of occurrence and a high severity?

a. Avoid Risk

b. Transfer/Share risk.

c. Reduce risk.

d. Retain risk.
 
 
34.
Which of the following principles from the Code of Ethics ensures that information is accessible only to those authorized to have access.

a. Fairness.

b. Competence.

c. Confidentiality.

d. Integrity.
 
 
35.
Which of the following statements is/are correct?

A new automobile loan for 60 months is an example of a long-term liability.

2. Unpaid taxes are an example of a long-term liability.

a. 1 only.

b. 2 only.

c. Both 1 and 2.

d. Neither 1 nor 2.
 
 
 
 
 
 
 
 
 

36.
Which of the following statements is/are correct?

Loss frequency refers to the potential size or financial damage of a loss.

2. Loss severity is the expected number of losses that will occur within a given period of time.

a. 1 only.

b. 2 only.

c. Both 1 and 2.

d. Neither 1 nor 2.
 
 
37.
Which of the following would NOT be considered an investment asset?

a. Cash Value in Life Insurance.

b. A Money Market Account.

c. A Brokerage Account.

d. A 401(k) Plan.
 
 
40.
After generating financial statements for your client, Doug, you list each line item on the income statement as a percentage of total income and each item on the balance sheet as a percentage of total assets. Which comparative financial statement tool are you utilizing?

a. Monte Carlo Analysis.

b. Horizontal Analysis.

c. Vertical Analysis.

d. Sensitivity Analysis.
 
 
41.
Assume $1,500 is invested for one year earning 9% and the inflation rate during that period is 3%. What is the inflation adjusted rate of return?

a. 4.36%.

b. 4.91%.

c. 5.83%.

d. 6.31%.
 
 
42.
Ella purchases a new house for $300,000. She put 20% down and will finance the rest over 15 years at 4.5%. What is her monthly payment?

a. $1,829.12.

b. $1,835.98.

c. $1,921.35.

d. $2,294.98.
 
 
43.
Five years ago today, Ron purchased a stock for $4Over the past five years, the stock has paid the following dividends: $1.25 (year 1), $2.00 (year 2), $2.50 (year 3), $3.25 (year 4), $1.75 (year 5). At the end of the fifth year, the stock is selling for $4What was Ron’s compounded rate of return (IRR)?

a. 3.85%.

b. 4.69%.

c. 5.52%.

d. 6.32%.
 
 
44.
In a disability policy, the time between the disability event and the point at which benefits, under the contract, begin is known as the:

a. Wait Room Period.

b. Discount Period.

c. Elimination Period.

d. Disabled Period.
 
 
45.
Insurance, as a contract, is adhesive, meaning:

a. The insured had no opportunities to negotiate terms.

b. The coverage is conditioned upon the payment of premiums.

c. What is paid by the insured and paid out by the insurer may not be equal amounts.

d. Only the insurer is making a promise.
 
 
 
 
 
 
 
 
 

46.
Jason is saving for a new TV. He currently has $1,200 in his account that earns 3%, compounded monthly, and the new TV costs $4,500. Assuming Jason deposits $100 in his account each month, how many months until his account has enough money to purchase the new TV?

a. 24 months.

b. 29 months.

c. 31 months.

d. 33 months.
 
 
47.
Jenny, who is married and the mother of three, is 25 years and expects to work until 70. She earns $45,000 per year. Jenny expects inflation to be 3% over her working life, and the appropriate risk-free discount rate is 5%. Her personal consumption is equal to 25% of her after-tax earnings, and her combined federal and state marginal tax bracket is 15%. What is the amount of life insurance necessary for Jenny using the Human Life Value method?

a. $509,893.63.

b. $743,672.85.

c. $855,597.84.

d. $900,000.00.
 
 
48.
Julia purchases a new piece of equipment for her business. The equipment was purchased for $65,000 and is expected to generate the following cash flows at the end of each year for the next seven years: $14,000 (year 1), $19,000 (year 2), $21,000 (year 3), $21,000 (year 4), $16,000 (year 5), $11,000 (year 6), and $9,000 (year 7). Assume the equipment can be sold for $10,000 at the end of 7 years and Julia required rate of return is 9%. What is the net present value of this investment?

a. $20,635.27.

b. $21,828.55.

c. $22,280.23.

d. $23,957.29.
 
 
49.
Slippery roads after a rainstorm are an example of a:

a. Morale Hazard.

b. Morale Peril.

c. Physical Hazard.

d. Physical Peril.
 
 
50.
Which of the following is the formula to calculate Net Discretionary Cash Flow (NDCF)?

a. Income - Savings = NDCF.

b. Income + Savings - Expenses = NDCF.

c. Income - Savings - Expenses - Taxes = NDCF.

Income + Savings - Expenses - Taxes = NDCF
 
 
51.
Which of the following statements is/are correct?

Term life insurance is considered “pure insurance.”

2. Term life insurance premiums are significantly more expensive than premiums for permanent policies.

a. 1 only.

b. 2 only.

c. Both 1 and 2.

d. Neither 1 nor 2.
 
 
52.
Which of the following transactions is most likely to appear on a statement of net worth?

a. Inheriting property from someone other than cash.

b. Employer contributions made to a retirement savings account.

c. Appreciation in value of a primary residence.

d. All of the above.
 
 
 
 
 
 
 
 
 

54.
Jason earns an annual salary of $50,000. His company matches 50% of his 401(k) contributions up to 6% of his compensation (max 3% company contribution). Jason contributed $5,000 to the plan this year and his company made the matching contribution before the end of the year. The balance of his account at year’s end was $95,000. What is his savings rate this year?

a. 10.0%.

b. 11.0%.

c. 13.0%.

d. 16.0%.
55.
Which of the following insurance recommendations will result in a positive cash flow?

a. Increasing the amount of current coverage.

b. Change name of beneficiary to someone with a better credit score.

c. Raise insurance deductibles.

d. Purchase a new life insurance policy.
56.
Which of the following is most likely to be considered a discretionary cash flow?

a. Food.

b. Tuition.

c. Netflix Subscription.

d. Auto Loan.
57.
10. Ashley deposits $1,500 into an account at the beginning of each year. If she earns 5%, compounded annually, how much will the account be worth in 17 years?

a. $38,760.55.

b. $40,698.58.

c. $41,386.96.

d. $48,078.68.
58.
10. What was the return on net worth for the year?


a.
4.11%.



b.
5.41%.



c.
9.45%.



d.
12.16%.
 
117.
What was the return on assets (ROA) for the year?
a.
1.67%.
b.
3.25%.
c.
6.56%.
d.
13.74%.
 
 
118.
Which of the following best describes the financial approach that provides a visual representation of how a client distributes resources?
a. Strategic Approach.
b. Two-Step/Three-Panel Approach.
c. Pie Chart Approach.
d. Life Cycle Approach.
 
 
 
 
 
 
 
 
 
 
 

 
Candice earns $85,000 working as an administrative assistant in a public company
based in New York. The company provides a matching contribution in the 401(k) plan
of 50% up to a maximum contribution of 4% of compensation. Her 401(k) plan
account had $20,000 in it at the beginning of the year. She contributed $5,000 to the
plan this year and the employer made the matching contribution before year end. The
ending balance of the account is $30,000. What is her savings rate this year?
a. 8.8%.
b. 9.9%.
c. 12.5%.
d. 25%.
 
Rachel is 30 years old and single. She is healthy, has no children or pets. Rachel works as
a human resources coordinator and earns approximately $40,000 per year. Due to her
outstanding student loans, she has a fairly low net worth. She rents an apartment but
does own her car outright. All of the following are likely insurance coverage needs,
except?
a. Life Insurance.
b. Health Insurance.
c. Disability Insurance.
d. Liability Insurance.
 
George, age 40, is married with two daughters. His primary goals include saving for retirement, paying down the mortgage on his new home, managing his risks, and education funding for his daughters. Which phase(s) of the life cycle approach is George most likely in?
a. Asset Accumulation Phase only.
b. Asset Accumulation and Conservation/Risk Management Phases.
c. Conservation/Risk Management Phase only.
d. Conservation/Risk Management and Distribution/Gifting Phases.
 
Evaluating your client’s emergency fund will fall into which of the following panels of the Three-Panel Approach?
a. Panel 1.
b. Panel 2.
c. Panel 3.
d. The emergency fund is not addressed in the Three-Panel Approach.
 
Used by financial professionals to focus attention on current and prospective inflows and outflows of cash.
 
 
 
 
 

 
Your client, David, provides you with his tax returns from a previous year.
a. Analyze and Evaluate Client’s Financial Status

b. Monitor Plan

c. Establish and Define Client Relationship

d. Gather Client Data

e. Implement Financial Plan Recommendations

f. Develop and Present Financial Planning Recommendations
 
Using Liquidity, Debt, and other types of equations to determine your clients goals and progress towards them using benchmarks
 
Collecting and Analyzing different information about clients to determine which phase of life they are in between Asset accumulation phase, Conservation/risk management Phase
 
An approach of using rules of thumbs to use to determine if the client is on a good
 
Dividing up all of their expenses and show them a visual representation to show how much they spend on each thing.
 
an approach using time value of money to interpret what the client needs to put aside to reach their goals
 
This approach uses a mission, goal, and objective approach considering the internal and external environment and may be used with other approaches.
 
Dividing Financial Planning into Risk Management, Short term savings and investments, and long term savings and investments.
 
A process that recognizes and weighs the risks, and benefits of investments
 
 
 
 
 

 
Tiffany Evans, a medical doctor and prospective client, has come to your office for the first time. Which is the most appropriate way to greet her?
“Welcome to my office.”
“Hi, Tiffany. Welcome to my office.”
“Welcome to my office, Dr. Evans.”
“Welcome to my office, Ms. Evans.”