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A practice exam for financial planning, focusing on retirement planning and investment strategies. It includes questions related to net worth calculation, cash flow analysis, income replacement percentages, and lump sum determination for retirement income. The exam also covers asset allocation, risk management, and social security benefits, offering a comprehensive review of key financial concepts. It is designed to help students and professionals prepare for certification exams and enhance their understanding of financial planning principles. Multiple-choice questions with correct answers, making it a useful tool for self-assessment and study. It also addresses investment policy attributes, diversification, and the impact of market conditions on investment returns. The questions are designed to test the understanding of financial concepts and their application in real-world scenarios.
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Mary Goodwin's financial situation is as follows: Cash/cash equivalents $15, Short-term debts $8, Long-term debts $133, Tax expense $7, Auto note payments $4, Invested assets $60, Use assets $188, What is her net worth? A)$111, B)$137, C)$122, D)$263,000 - ANSWER: C
At the end of last year, Bill Greer has the following financial information: Salaries$70,000Auto payments$5,000Insurance payments$3,800Food$8,000Credit card balance$10,000Dividends$1,100Utilities$3,500Mortgage payments$14,000Taxes$13,000Clothing$9,000Interest income$2,100Checking account$4,000Vacations$8,400Donations$5, What is the cash flow surplus or (deficit) for Bill? A) $2,
inflation each year), what level annual end-of-year savings amount will they need to deposit each year, assuming their savings earn 7% annually? A) $55, B) $31, C) $29, D) $54,130 - ANSWER: B Bill and Lisa Hahn have determined that they will need a monthly income of $6,000 during retirement. They expect to receive Social Security retirement benefits amounting to $3,500 per month at the beginning of each month. Over the 12 remaining years of their preretirement period, they expect to generate an average annual after-tax investment return of 8%; during their 25-year retirement period, they want to assume a 6% annual after-tax investment return compounded monthly. They want to start their monthly retirement withdrawals on the first day they retire. What is the lump sum needed at the beginning of retirement to fund this income stream? A) $931, B) $388, C) $389, D)
Chris and Eve Bronson have analyzed their current living expenses and estimated their retirement income need, net of expected Social Security benefits, to be $90,000 in today's dollars. They are confident that they can earn a 7% after-tax return on their investments, and they expect inflation to average 4% over the long term. Determine the lump sum amount the Bronsons will need at the beginning of retirement to fund their retirement income needs, using the worksheet below. (1) Adjust income deficit for inflation over the preretirement period:$ 90,000present value of retirement income deficit25number of periods until retirement4%% inflation rateFuture value of income deficit in first retirement year$239,925(2) Determine retirement fund needed to meet income deficit:$239,925payment (future value of income deficit in first retirement year)30number of periods in retirement The lump sum needed at the beginning of the Br - ANSWER: D Assume a client and investment professional have worked together for several years. Recently, the client's personal and financial circumstances have changed. According to the course materials, what is the next asset management step that the investment professional should take? A) make and implement recommendations B) gather data C) monitor performance D)
Which one of the following best exemplifies the impact of diversification on long- term government bonds? A) Large stocks provide more diversification than small stocks. B) Small stocks provide more diversification than Treasury bills. C) Gold provides more diversification than large stocks. D) Treasury bills provide more diversification than gold. - ANSWER: C The two major risks associated with individual common stocks are A) interest rate risk and purchasing power risk. B) market risk and business risk. C) default risk and business risk. D) interest rate risk and exchange rate risk. - ANSWER: B What is the price of a bond with a 7% coupon, a $1,000 par value, and a maturity of 20 years if the market interest rate for similar bonds is 6%? A) $1,115. B)
This year, your 63 - year-old client had $17,025 of earned income and $30,000 of investment income. He was also drawing Social Security benefits. Which one of the following correctly describes the impact on his Social Security benefits? A) He loses $1 of benefits for every $3 above the "allowable limit." B) He loses $1 of benefits for every $1 above the "allowable limit." C) There is no reduction to his benefits. D) He loses $1 of benefits for every $2 above the "allowable limit." - ANSWER: C Which one of the following is a correct statement about the amount of Social Security retirement benefits available when a fully insured worker's retirement benefit begins at full retirement age (FRA)? A) If the spouse is at or above his or her full retirement age when commencing Social Security benefits, the spouse will receive at least 50% of the worker's PIA. B) The worker will receive 80% of his or her primary insurance amount (PIA). C)
She should delay beyond FRA regardless of her life expectancy in order to maximize her lifetime benefit. C) She should begin at FRA if she expects to live beyond the next three years. D) She should begin her benefits at FRA regardless of her life expectancy in order to maximize her lifetime benefit. - ANSWER: A Sam, age 62, begins receiving his Social Security income. His PIA is $1,5 00 per month. Because he has filed at age 62, his payment will be reduced by 25% to $1,125. His wife Linda, age 67, would like to begin spousal benefits. Her monthly income would be A) $562.50. B) $1,500.00. C) $1,125.00. D) $750.00. - ANSWER: D Unsystematic risk A) can be effectively eliminated. B) increases during periods of volatile interest rates.
is reduced when markets fluctuate less. D) is increased through diversification. - ANSWER: A Sources of risk include which of the following? I.fluctuating exchange rates II.a firm's financing decisions III.higher interest rates IV.a loss of purchasing power A) II and III B) II and IV C) I and II D) I, II, III, and IV - ANSWER: D Investors who want to bear the least amount of risk from equity investments should acquire stocks with beta coefficients A) greater than 1.5. B) less than 1.0. C)
Mandy, a 30 - year-old highly paid executive - ANSWER: C Your client has established a balanced portfolio with various amounts allocated to different asset classes, and periodically she rebalances the portfolio to keep the same approximate percentages in the different asset classes. Her approach is A) core/satellite. B) dynamic. C) tactical. D) strategic. - ANSWER: D Harry, who is 34 years old, contributed $2,000 to a Roth IRA six years ago. By this year, the investments in his account had grown to $3,785. Finding himself in a financial bind, Harry is now compelled to withdraw $2,000 from this Roth IRA. What is the tax and penalty status of this withdrawal? A) Harry must pay tax and a $200 penalty. B) Harry does not have to pay any tax or penalty on the $2,000 distribution, even though he is only 34. C) Harry must pay the penalty but no tax. D)
Harry must pay tax on the $2,000, but there is no penalty. - ANSWER: B Norman and Brenda Walker are married taxpayers filing jointly. They are both 44 years old. Norman earned $132 this year, and Brenda earned $100,000. Brenda is an active participant in the qualified plan offered by her employer, and she contributed $1,500 to her IRA for this tax year. How much can be contributed to a spousal IRA and deducted for Norman for 2022? A) $ B) $4, C) $ D) $6,000 - ANSWER: D James and Doris Stewart, both age 40, will contribute a total of $12,000 to their IRAs for 2022. They both work outside the home, and they file a joint tax return. James is a teacher at the local high school and contributes to a TSA. Doris's employer has no retirement plan. Their adjusted gross earnings for this year will be $117,000. What amount can they deduct for their IRA contributions? A) $6, B) $9, C) $8, D)
Over a period of 10 years, Mark contributed a total of $20,000 to a nondeductible IRA. The current value of Mark's IRA is $40,000, and Mark, who is now age 45, has decided to use all of his IRA assets for the down payment on a second home. Assuming Mark's marginal tax bracket is 35%, how much does he owe in taxes and penalties? A) $2, B) $9, C) $7, D) $14,000 - ANSWER: B Richard, age 45, and his wife Betty, age 44, plan to contribute a total of $12,000 to their IRAs for 2022. They both work outside the home, and they file a joint income tax return. Richard is a teacher at the local high school and participates in a 403(b) plan. Betty's employer does not provide a retirement plan. They expect that their adjusted gross income for the year will be $150,000. What amount, if any, can they deduct for their IRA contributions? A) $6, B) $12, C) $4, D)
For purposes of determining if an individual may contribute to an IRA, A) workers' compensation or unemployment compensation are considered to be earned compensation. B) taxable alimony received from a divorce finalized prior to January 1, 2019, is considered to be earned compensation. C) inheritance money counts as earned income for IRA contribution purposes. D) passive income, such as interest or dividends, is considered to be earned compensation. - ANSWER: B Harry, a single professor who is age 36, started his Roth IRA three years ago, contributing $5,000 for his first year. He has since made a contribution of $5, in Year 2 and also in Year 3. He converted a traditional IRA of $17,000 to the Roth IRA last year. His total contributions are $16,000 plus the $17,000 conversion, and the account is now worth $36,497. Harry would like to make a complete withdrawal so that he can buy a new car. He wants to know what his options are and what the tax consequences would be. Which one of the following statements would be the correct information for Harry? A) If a withdrawal of converted IRA funds is made from the Roth account before five years has elapsed, such a withdrawal may be subject to the 10% penalty. B) If Harry's Roth IRA meets the five-year holding period, the distribution will be a qualified distribution.
I, II, III, and IV C) II and IV D) I and III - ANSWER: D Charles turns 72 this year. His IRA was worth $100,000 at the end of last year. What is his RMD for this year? (The Uniform Table factor is 27.4 at age 72.) A) $3, B) $3, C) $3, D) $5,501 - ANSWER: A A springing durable power of attorney A) gives the attorney-in-fact authority only when the principal is deemed incompetent. B) is usually created in a person's revocable trust. C) remains effective after the principal's death. D) remains effective until the principal becomes incapacitated. - ANSWER: A
A Medicare Part A patient must pay A) all costs above the hospital deductible for a 30 - day stay in a hospital. B) all costs for a hospital stay beyond 150 days. C) the annual deductible for out-of-hospital doctor's services. D) the approved costs of care in a skilled nursing facility for the first 10 days. - ANSWER: B Which one of the following U.S. citizens is currently eligible for Medicare Part A coverage at no cost? A) a self-employed truck driver, age 66 B) an unmarried heiress who has always lived on trust fund money, has never had earned income, and just turned 65 C) a professional independent corporate director, age 57 D) a federal government employee, hired in 1989 and age 64 - ANSWER: A Which of the following statements accurately describe basic provisions of Medicare Part B? I. Coverage includes benefits for physicians' services.
