BUSI 352 Final exam complete solutions correct answers key

Liberty University BUSI 352 Final exam complete solutions correct answers key

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Question 1 Based on the CAPM, what return should Jordan expect from a security that last year returned 9% with a standard deviation of 12%, a beta of 1.2, when the overall market return has been 10.2%, and the risk free rate of return is 3%?

Question 2 The supply of coffee has been drastically reduced due to drought resulting in substantially higher prices. Which of the following statements is/are correct? 1: The demand curve for coffee will shift to the right. 2: The demand curve for creamer will shift to the left. 3: The demand for orange juice will increase.

Question 3 Reed just found out that his dad, Red, has terminal cancer. Terminal illness can be devastating for a family. The financial planner working with Red will likely have to deal with which of the following? 1: Estate documents 2: Beneficiary designation forms 3: Emotional issues

Question 4 An investment policy statement is created to: 1: Outline the general rules for the advisor. 2: Lists the client’s objectives and constraints. 3: Assists with future investment advisors understanding the past investment positions. 4: Risk is part of the list of objectives.

Question 5 Joe would like to know which portfolios performed the best, on a risk adjusted basis. Given the portfolios below and assuming a risk free rate of return of 3%, which portfolio returned the most per unit of risk, (from highest to lowest), using the Sharpe ratio? Stock A: 8% Actual Return; 5% Standard Deviation Stock B: 12% Actual Return; 8% Standard Deviation Stock C: 10% Actual Return; 6% Standard Deviation Stock D: 6% Actual Return; 4.25% Standard Deviation

Question 6 Which of the following is a good benchmark for savings for retirement as a percent of gross income for someone who is between age 25 and 30?

Question 7 Lori, a self­employed pediatrician, currently earns $200,000 annually. Lori has been able to save 15% of her annual Schedule C net income. Assume that Lori paid $19,000 in social security taxes, and that she plans to pay off her mortgage at retirement, thereby relieving her of her only debt. Lori presently pays $4,333.33 per month toward the mortgage. Based on the information provided herein, what do you expect Lori’s wage replacement ratio to be at retirement?

Question 8 All of the following are advantages to investing in open end investment companies except:

Question 9 Elin wants to retire in 20 years when she turns 60. Elin wants to have enough money to replace 120% of her current income less what she expects to receive from Social Security. She expects to receive $20,000 per year from Social Security in today’s dollars. Elin is conservative and wants to assume a 6% annual investment rate of return and assumes that inflation will be 3% per year. Based on her family history, Elin expects that she will live to be 95 years old. If Elin currently earns $100,000 per year and expects her raises to equal the inflation rate, approximately how much does she need at retirement to fulfill her retirement goals?

Question 10 Sonny is a lawyer, who practices as a sole practitioner and files a Schedule C. He has been successful in commercial litigation and had gross income of $350,000. His expenses include salaries of $125,000, rent of $50,000, utilities and other expenses of $75,000, and self­employment taxes of $20,000 (assumed). What is the most that Sonny could contribute to a SEP for the current year?

Question 11 Saben is 40 and wants to retire in 20 years. His family has a history of living well into their 90s. Therefore, he would like to plan on living until age 100, just in case. He currently needs $100,000 and expects that he will need about 80% of that if he were retired. He can earn 9 percent in his portfolio and expects inflation to be 3 percent annually. Some years ago, he purchased an annuity that is expected to pay him $30,000 per year beginning at age 60. It includes an inflation rate cost of living adjustment. In addition, he received $500,000 from his uncle BJ when he died. Saben has spent $200,000 on his home, but is investing $300,000 for his retirement. His Social Security benefit in today’s dollars is $20,000. Which of the following statements is true?

Question 12 The P/E ratio of the S&P 500 should be 20 based on historical analysis and your projection of the future. If the earnings of the S&P 500 are currently $50 then the S&P 500 should be at:

Question 13 A client comes to you with a portfolio of securities that he has put together. Based on your analysis the beta of the portfolio is +1. What does this mean?

Question 14 The following set of newly issued debt instruments was purchased for a portfolio. Treasury bond Zero­coupon bond Corporate bond Municipal bond The respective maturities of these investments are approximately equivalent. Which one of the investments in the portfolio would be subject to the greatest relative amount of price volatility if interest rates were to change quickly?

Question 15 Which of the following best describes the investment characteristics of a high­quality longterm municipal bond?

Question 16 Olessa, single and age 60, sold her home for $540,000 after living there for 20 years. Her selling expenses were $10,000 and her adjusted basis in that home was $220,000. What is the maximum gain that Olessa must report in connection with the sale of her principal residence?

Question 17 Mr. and Mrs. Meyer own 800 acres of farmland titles as “joint tenants with rights of survivorship, not as tenants in common.” Currently the land is appraised at $5,000 per acre. In addition, Mr. Meyer holds a $200,000 CD in his name only, and Mrs. Meyer holds a $200,000 CD in her name only. Mr. and Mrs. Meyer have no debts. Mrs. Meyer’s last will and testament provides that “all of my assets at my death shall be divided in three equal portions among my two children and my husband.” Mrs. Meyer dies unexpectedly, leaving her husband and two children as her sole heirs. Which of the following statements is true?

Question 18 Which of the following is not a method used to measure investment returns?

Question 19 Which of the following is not an example of a special needs situation?

Question 20 Which, if any, of the following is not a principle from the Board of Standards Code of Ethics and Professional Responsibility? 1: Integrity 2: Diligence 3: Professionalism 4: Candidness

Question 21 XYZ has a current market price of $30 per share with earnings last year of $2.50 per share, a beta of 1.1 and a dividend of $1.25. Using the price/earnings multiplier, what price do you expect the stock to trade at if earnings per share next year are $3?

Question 22 Cindy and Sandy are a same sex couple who got married in Vermont. Their marriage entitles them to the same benefits under federal law as a heterosexual couple.

Question 23 Some studies have suggested that up to 70% of lottery winners lose their winnings within as short of a period as seven years. Which of the following statements are correct regarding advice for a lottery winner? 1: Principal protection is the most important issue. 2: It is extremely important to invest lottery winnings quickly to take advantage of opportunities to grow the principal.

Question 24 All of the following federal income tax penalties are correct except:

Question 25 Billy is a frugal old coot who refuses to spend any money creating an estate plan even though he has substantial assets. He has heard that he can just write his own will and sign it and it will be effective. What is he referring to?

Question 26 A spendthrift clause in a trust does which of the following?

Question 27 Winning the lottery is hard, but managing and preserving the assets after winning is relatively easy and history shows that most lottery winners make a successful transition to being wealthy that lasts for a long time.

Question 28 Which of the following debts are dischargeable in bankruptcy?

Question 29 Which of the following statements concerning supply and/or demand is/are true?

Question 30 Which of the following statements concerning a CFP designee’s disclosure of confidential client data is generally correct? 1: Disclosure may be made to any state agency without subpoena. 2: Disclosure may be made to any party on consent of the client. 3: Disclosure may be made to comply with an IRS audit request.

Question 31 Which of the following statements is correct regarding Social Security?

Question 32 Ashley began saving $5,000 per year from age 25 to age 35 (ten years) and then invested the funds for another 30 years. Teeto began saving at age 35 and saved $5,000 each year until he retired at age 65 (30 years). Which of the following statements is correct assuming they invested their funds at 8 percent?

Question 33 During the years from 2000 to 2009, the average percentage of young adults who were married was between 65% and 80% and has been slightly increasing over time.

Question 34 Which of the following statements is/are correct? 1: Some tax credits are refundable. Some tax credits are nonrefundable.

Question 35 Which, if any, of the following statements is (are) correct? 1: In order to form a partnership, there must be two individuals. 2: In order to form an LLC, there must be two individuals.

Question 36 Randy has ten shares of stock that he bought on March 1, 2012, for $5 each. On March 1, 2013, he sells all of the shares for $200. What is the income tax consequence of the sale?

Question 37 Which, if any, of the following statements is (are) correct? 1: C corporations offer limited liability. 2: Sole proprietorships offer limited liability.

Question 38 Dennis and Rhonda are married with two boys, Blake and Chase. They have the following accounts with the following balances at their local bank. Dennis (single account) $300,000 Rhonda (single account) $100,000 Dennis & Rhonda (joint account) $400,000 Rhonda & Blake (joint account) $100,000 How much of all of their accounts will be insured by the FDIC?

Question 39 Sydney has a portfolio with 50 shares of AAA with a current value of $20 per share, a return of 12%, and a beta of 1.30. She also has 25 shares of BBB with a return of 10%, a 0.80 beta, and currently priced at $60 per share. Finally she owns 75 shares of CCC priced at $50 per share, with a 1.1 beta and a 14% return. What is the weighted average portfolio return of Sydney’s portfolio?

Question 40 Betty wants to know what the probability is that her investment in HighFlier, Inc. will generate a return less than zero. The investment has a mean return of 6% and a standard deviation of 3%. Based on a normal distribution curve you correctly inform her that:

Question 41 The four stages of a business cycle would not include:

Question 42 The recent bird flu caused the chicken mortality rate to increase significantly. As a result, what can you expect?

Question 43 Walter has come to you asking about investments that will produce steady income, provide relative safety of principal, and give him a tax advantage. What will you recommend that he consider adding to his portfolio?

Question 44 Each of the following is a characteristic of a sole proprietorship EXCEPT:

Question 45 Which of the following is not a primary responsibility of the Federal Reserve (Fed)?

Question 46 Families with special needs children have more complicated lives than traditional families. Which of the following is correct?

Question 47 James, age 30, is planning to retire at age 65. Based on the results of James’ risk tolerance questionnaire, he is an aggressive investor, with a primary objective of growth in his retirement assets. Generally, which of the following asset allocation strategies is most appropriate for James’ retirement investments?

Question 48 All of the following are excluded from the gross income of the recipient except:

Question 49 The statement, “Harry is a very pleasant young man who is interested in politics and is generally skilled with woodworking equipment” might be found in what document?

Question 50 Which of the following is/are not a principle of the Board of Standards Code of Ethics and Professional Responsibility? 1: Integrity 2: Disclosure 3: Objectivity 4: Competence

Question 51 Which of the following statements is/are correct? 1: A general power of appointment may cause inclusion of the assets under the power in the gross estate of the power holder without having had the power holder exercise the power. 2: A medical durable power of attorney permits the power holder to direct the withholding of artificial life sustaining methods are procedures.

Question 52 Bob wants to accumulate wealth, but he has told you that he is risk­averse. Which of the following is the most crucial action he should take first to achieve his goal of accumulating wealth?

Question 53 Unsystematic risk can be reduced by buying:

Question 54 The type of risk that CANNOT be eliminated through diversification is:

Question 55 When analyzing and advising clients about funding their retirements, qualitative factors are of much less significance than quantitative or financial factors.

Question 56 Jason purchased a mutual fund at NAV of $40 and it was redeemed 8 months later at $42. During the time he owned the fund, he received a capital gains distribution of $2/share. What is his holding period return?

Question 57 Your client, Alex, has only two assets in his portfolio: assets A and B. Asset A had a standard deviation of 40%, and Asset B has a standard deviation of 20%. 50% of his portfolio is invested in Asset A, and 50% is invested in Asset B. The correlation for assets A and B is 0.90. What is the standard deviation of Alex’s portfolio?

Question 58 A new client owns a U.S. Treasury bond that matures in 26 years. She purchased the bond because she was told that Treasury bonds are risk free. Which of the following statements about Treasury security risks should you communicate to your client? 1: Treasury securities do not have interest rate risk because their coupons are fixed at the time of issue. 2: Treasury securities with long maturities have purchasing power risk because their coupon returns are fixed, even if interest rates rise substantially over the holding period. 3: Treasury securities do not have default risk because the federal government has the powers to tax and create money.

Question 59 Which of the following persons, if any, is (are) not a party to a trust? 1: Trustee 2: Beneficiary

Question 60 Which, if any, of the following statements is (are) correct? 1: Deflation is a decrease in the overall price levels of goods and services. 2: Disinflation is a slowdown in the rate of inflation.

Question 61 Which of the following is/are forms of discipline? 1: Private Censure 2: Revocation 3: Suspension 4: Public Letter of Admonition

Question 62 You are a CFP designee who has been approached by the general partner of Silky Industries (SI) to provide financial planning services to the top executives at SI. Your sister has a fifteen percent limited partnership interest in SI. Can you accept this engagement?

Question 63 Which of the following debts are discharged in bankruptcy?

Question 64 Which of the following is the most common range for wage replacement ratios?

Question 65 Which of the following types of investment risk cannot be eliminated through diversification? Selected Answer: Systematic risk Question 66 Considering employment and production, which two of the following industries are typically more affected by recession? 1: Capital goods 2: Consumer durable goods 3: Consumer non­durable goods 4: Services

Question 67 Which, if any, of the following statements is (are) correct? 1: Financial risk has to do with the amount of leveraging or the use of borrowed funds that a firm utilizes to structure its investment and finance its asset. 2: Debenture bonds are backed by the income from a specific project.

Question 68 Which of the following statements regarding close­end investment companies, if any, is correct? 1: Close­end funds continually create new shares as new monies are obtained. 2: Close­end funds offer price guarantees.

Question 69 Which of the following is/are true regarding revocation? 1: Revocation is permanent. 2: A CFP designee may petition CFP Board for reinstatement after revocation if the designee proves that he or she has been rehabilitated by clear and convincing evidence. 3: Revocation is not always permanent.

Question 70 Which of the following are advantages to being a shareholder? 1: The expected returns for equities are higher than debt securities. 2: Equities have prices listed on major exchanges and are marketable. 3: Equities typically earn their expected return. 4: Equities that do not pay a dividend are tax efficient.

Question 71 DWI has just paid an annual dividend of $2 per share, which is expected to grow at 5% indefinitely. If your client’s required rate of return to meet her retirement goals is 12%, what is the intrinsic value of the stock using the constant growth dividend discount model?

Question 72 Which, if any, of the following statements is (are) correct? 1: The revocation of the right to use the CFP mark may last up to five years. 2: It is standard to publish revocations through a press release.

Question 73 Which of the following statements about retirement planning trends is correct? 1: The ratio of the work life expectancy to the retirement life expectancy has been increasing. 2: The change in the number of defined benefit plans has resulted in a shift in risk from employers to employees. 3: The increased life expectancy, combined with reduced annuitized benefits has increased the risk of superannuation for retirees.

Question 74 CFP designee agrees to be bound by Continuing Education (CE) Requirements established by Certified Financial Planner Board of Standards. The CE Requirements for a regular continuing designee (not a new designee or a designee who has been inactive) are as follows.

Question 75 Which of the following convictions, if any, will always bar a candidate from becoming a CFP? 1: Conviction for tax fraud 2: Conviction for passing a bad check

Question 1 An automobile in a state with an automobile titling law will pass from a decedent to his heir/legatee according to:

Question 2 Jason purchased a mutual fund at NAV of $40 and it was redeemed 8 months later at $42. During the time he owned the fund, he received a capital gains distribution of $2/share. What is his holding period return?

Question 3 Mr. and Mrs. Meyer own 800 acres of farmland titles as “joint tenants with rights of survivorship, not as tenants in common.” Currently the land is appraised at $5,000 per acre. In addition, Mr. Meyer holds a $200,000 CD in his name only, and Mrs. Meyer holds a $200,000 CD in her name only. Mr. and Mrs. Meyer have no debts. Mrs. Meyer’s last will and testament provides that “all of my assets at my death shall be divided in three equal portions among my two children and my husband.” Mrs. Meyer dies unexpectedly, leaving her husband and two children as her sole heirs. Which of the following statements is true?

Question 4 An analysis of the monthly returns for the past year of a mutual fund portfolio consisting of two funds revealed the following statistics. Fund A total return = 18% Fund A Standard deviation = 23% Fund A Percentage of portfolio = 35% Fund B total return = 11% Fund B Standard deviation = 16% Fund B Percentage of portfolio = 65% The Correlation Coefficient (r) between the two funds equals 0.25. What is the standard deviation of the portfolio?

Question 5 DWI has just paid an annual dividend of $2 per share, which is expected to grow at 5% indefinitely. If your client’s required rate of return to meet her retirement goals is 12%, what is the intrinsic value of the stock using the constant growth dividend discount model?

Question 6 Which of the following is not correct regarding the Federal Reserve?

Question 7 The supply of coffee has been drastically reduced due to drought resulting in substantially higher prices. Which of the following statements is/are correct? 1: The demand curve for coffee will shift to the right. 2: The demand curve for creamer will shift to the left. 3: The demand for orange juice will increase.

Question 8 Which of the following statements concerning supply and/or demand is/are correct? 1: If demand increases and supply simultaneously decreases, equilibrium price will rise. 2: There is an inverse relationship between price and quantity demanded. 3: If demand decreases and supply simultaneously increases, equilibrium price will fall. 4: If demand decreases and supply remains constant, equilibrium price will rise.

Question 9 Which of the following is not a method used to measure investment returns?

Question 10 Each of the following is a characteristic of a sole proprietorship EXCEPT:

Question 11 Cindy and Sandy are a same sex couple who got married in Vermont. Their marriage entitles them to the same benefits under federal law as a heterosexual couple.

Question 12 Walter has come to you asking about investments that will produce steady income, provide relative safety of principal, and give him a tax advantage. What will you recommend that he consider adding to his portfolio?

Question 13 Which, if any, of the following statements is (are) correct? 1: C corporations offer limited liability. 2: Sole proprietorships offer limited liability.

Question 14 Elin wants to retire in 20 years when she turns 60. Elin wants to have enough money to replace 120% of her current income less what she expects to receive from Social Security. She expects to receive $20,000 per year from Social Security in today’s dollars. Elin is conservative and wants to assume a 6% annual investment rate of return and assumes that inflation will be 3% per year. Based on her family history, Elin expects that she will live to be 95 years old. If Elin currently earns $100,000 per year and expects her raises to equal the inflation rate, approximately how much does she need at retirement to fulfill her retirement goals?

Question 15 Your client, Alex, has only two assets in his portfolio: assets A and B. Asset A had a standard deviation of 40%, and Asset B has a standard deviation of 20%. 50% of his portfolio is invested in Asset A, and 50% is invested in Asset B. The correlation for assets A and B is 0.90. What is the standard deviation of Alex’s portfolio?

Question 16 XYZ has a current market price of $30 per share with earnings last year of $2.50 per share, a beta of 1.1 and a dividend of $1.25. Using the price/earnings multiplier, what price do you expect the stock to trade at if earnings per share next year are $3?

Question 17 Which, if any, of the following statements is (are) correct? 1: The average income or standard of living is a key determinant of demand. 2: Downward sloping demand indicates that if the price is decreased, demand will increase.

Question 18 Which of the following statements concerning supply and/or demand is/are true?

Question 19 Randy has ten shares of stock that he bought on March 1, 2012, for $5 each. On March 1, 2013, he sells all of the shares for $200. What is the income tax consequence of the sale?

Question 20 On June 2, 2011, Ashley purchased 100 shares of stock for $10,000. When it was worth $20,000, on December 25, 2011, she gifted all the stock to her nephew, Richard. Richard sold the stock on October 15, 2012, for its fair market value of $25,000. What is Richard’s tax consequence?

Question 21 Bob wants to accumulate wealth, but he has told you that he is risk-averse. Which of the following is the most crucial action he should take first to achieve his goal of accumulating wealth?

Question 22 Which of the following statements about retirement planning trends is correct? 1: The ratio of the work life expectancy to the retirement life expectancy has been increasing. 2: The change in the number of defined benefit plans has resulted in a shift in risk from employers to employees. 3: The increased life expectancy, combined with reduced annuitized benefits has increased the risk of superannuation for retirees.

Question 23 Which of the following statements regarding retirement trends is correct?

Question 24 Which, if any, of the following statements is (are) correct? 1: The revocation of the right to use the CFP mark may last up to five years. 2: It is standard to publish revocations through a press release.

Question 25 Beth and Scott have been married for 15 years but are now getting divorced. They were married young and have one child, who is age 9. This is a very emotional time for both of them. If you were their advisor, which of the following would you recommend?

Question 26 Dennis and Rhonda are married with two boys, Blake and Chase. They have the following accounts with the following balances at their local bank. Dennis (single account) $300,000 Rhonda (single account) $100,000 Dennis & Rhonda (joint account) $400,000 Rhonda & Blake (joint account) $100,000 How much of all of their accounts will be insured by the FDIC?

Question 27 Which of the following is not one of the four stages of a business cycle?

Question 28 Which of the following statements regarding investment risk is correct? 1: Beta is a measure of systematic, non-diversifiable risk. 2: Rational investors will form portfolios and eliminate systematic risk. 3: Rational investors will form portfolios and eliminate unsystematic risk. 4: Systematic risk is the relevant risk for a well-diversified portfolio. 5: Beta captures all the risk inherent in an individual security.

Question 29 Approximately how any families are raising one or more children with a disability?

Question 30 Unsystematic risk can be reduced by buying:

Question 31 Which of the following situations would cause a shift in the demand curve, as opposed to a change in the quantity demanded?

Question 32 Based on the CAPM, what return should Jordan expect from a security that last year returned 9% with a standard deviation of 12%, a beta of 1.2, when the overall market return has been 10.2%, and the risk free rate of return is 3%?

Question 33 Joe would like to know which portfolios performed the best, on a risk adjusted basis. Given the portfolios below and assuming a risk free rate of return of 3%, which portfolio returned the most per unit of risk, (from highest to lowest), using the Sharpe ratio? Stock A: 8% Actual Return; 5% Standard Deviation Stock B: 12% Actual Return; 8% Standard Deviation Stock C: 10% Actual Return; 6% Standard Deviation Stock D: 6% Actual Return; 4.25% Standard Deviation

Question 34 Lori, a self-employed pediatrician, currently earns $200,000 annually. Lori has been able to save 15% of her annual Schedule C net income. Assume that Lori paid $19,000 in social security taxes, and that she plans to pay off her mortgage at retirement, thereby relieving her of her only debt. Lori presently pays $4,333.33 per month toward the mortgage. Based on the information provided herein, what do you expect Lori’s wage replacement ratio to be at retirement?

Question 35 When dealing with a client who is terminally ill, it is important to consider viatical settlement options and accelerated benefit provisions in life insurance policies.

Question 36 Inflation refers to:

Question 37 Which of the following is a good benchmark for savings for retirement as a percent of gross income for someone who is between age 25 and 30?

Question 38 Trusts can be very beneficial in many financial planning situations. Many trust benefits, such as asset protection and control, are appropriate considerations for a family with a special needs person. Which of the following types of trusts would generally be used to protect an award from winning a lawsuit on behalf of a special needs child?

Question 39 There is only one type of special needs trust that planners can use to preserve assets and make use of government benefits for a special needs child.

Question 40 Which of the following is/are forms of discipline? 1: Private Censure 2: Revocation 3: Suspension 4: Public Letter of Admonition

Question 41 Which of the following is/are not a principle of the Board of Standards Code of Ethics and Professional Responsibility? 1: Integrity 2: Disclosure 3: Objectivity 4: Competence

Question 42 Which of the following is the most common range for wage replacement ratios?

Question 43 Which of the following statements is/are correct? 1: A general power of appointment may cause inclusion of the assets under the power in the gross estate of the power holder without having had the power holder exercise the power. 2: A medical durable power of attorney permits the power holder to direct the withholding of artificial life sustaining methods are procedures.

Question 44 A new client owns a U.S. Treasury bond that matures in 26 years. She purchased the bond because she was told that Treasury bonds are risk free. Which of the following statements about Treasury security risks should you communicate to your client? 1: Treasury securities do not have interest rate risk because their coupons are fixed at the time of issue. 2: Treasury securities with long maturities have purchasing power risk because their coupon returns are fixed, even if interest rates rise substantially over the holding period. 3: Treasury securities do not have default risk because the federal government has the powers to tax and create money.

Question 45 Ashley began saving $5,000 per year from age 25 to age 35 (ten years) and then invested the funds for another 30 years. Teeto began saving at age 35 and saved $5,000 each year until he retired at age 65 (30 years). Which of the following statements is correct assuming they invested their funds at 8 percent?

Question 46 Colin is considering the purchase of a preferred stock that pays a fixed dividend of $6 per year. If his required rate of return is 9%, what is the maximum that Colin will pay for this stock using the zero growth dividend model?

Question 47 Which of the following types of investment risk cannot be eliminated through diversification?

Question 48 Saben is 40 and wants to retire in 20 years. His family has a history of living well into their 90s. Therefore, he would like to plan on living until age 100, just in case. He currently needs $100,000 and expects that he will need about 80% of that if he were retired. He can earn 9 percent in his portfolio and expects inflation to be 3 percent annually. Some years ago, he purchased an annuity that is expected to pay him $30,000 per year beginning at age 60. It includes an inflation rate cost of living adjustment. In addition, he received $500,000 from his uncle BJ when he died. Saben has spent $200,000 on his home, but is investing $300,000 for his retirement. His Social Security benefit in today’s dollars is $20,000. Which of the following statements is true?

Question 49 Considering employment and production, which two of the following industries are typically more affected by recession? 1: Capital goods 2: Consumer durable goods 3: Consumer non-durable goods 4: Services

Question 50 Sydney has a portfolio with 50 shares of AAA with a current value of $20 per share, a return of 12%, and a beta of 1.30. She also has 25 shares of BBB with a return of 10%, a 0.80 beta, and currently priced at $60 per share. Finally she owns 75 shares of CCC priced at $50 per share, with a 1.1 beta and a 14% return. What is the weighted average portfolio return of Sydney’s portfolio?

Question 51 Which of the following is not a primary responsibility of the Federal Reserve (Fed)?

Question 52 The type of risk that CANNOT be eliminated through diversification is:

Question 53 Which of the following statements, if any, represents a benefit of the probate process? 1: The cost of probate is generally not very high, depending on the jurisdiction. 2: The probate process results in clear title passing to the legatees.

Question 54 What is the geometric rate of return for a stock that has experienced the following prices? Year 1 = $25 Year 2 = $32 Year 3 = $35 Year 4 = $37

Question 55 Trusts can be very beneficial in many financial planning situations. Many trust benefits, such as asset protection and control, are appropriate considerations for a family with a special needs person. Which of the following is true?

Question 56 Reed just found out that his dad, Red, has terminal cancer. Terminal illness can be devastating for a family. The financial planner working with Red will likely have to deal with which of the following? 1: Estate documents 2: Beneficiary designation forms 3: Emotional issues

Question 57 Which, if any, of the following statements is (are) correct? 1: The value of a gift for gift tax purposes is equal to the fair market of the gifted property on the date of the gift or date of death. 2: The value of a publicly traded security for estates and gift tax purposes is equal to the average of the high and low trading price on the date of the gift or date of death.

Question 58 Martin began saving $5,000 per year from age 25 to age 35 (ten years) and then invested the funds for another 30 years. Bob began saving at age 35 and saved $5,000 each year until he retired at age 65 (30 years). At what rate of return will Martin and Bob have the exact same balance at age 65?

Question 59 Families with special needs children have more complicated lives than traditional families. Which of the following is correct?

Question 60 John purchased a stock that has a beta of 1.2, a standard deviation of 13%, and returned 16% this year. The market’s return was 12% with a standard deviation of 14%. If the risk free rate of return is 3%, what is the alpha of John’s stock?

Question 61 Differentiating between separate, joint, community and inherited property is not that important when going through a divorce because the court will decide on the property settlement, based on the facts and circumstances.

Question 62 If the risk/return performance of a stock lies below the Security Market Line, the stock is said to have a:

Question 63 Trusts can be very beneficial in many financial planning situations. Many trust benefits, such as asset protection and control, are appropriate considerations for a family with a special needs person. Which of the following trusts would generally be used by a parent or grandparent to provide for needs, such as medical treatments, education or travel for a special needs child?

Question 64 If the Federal Reserve wants to increase interest rates, which of the following actions might they take?

Question 65 Which of the following methods of joint ownership permits the right to partition the asset without the consent of the joint owner? 1: Community property 2: Joint tenancy with the right of survivorship 3: Tenants by the entirety 4: Tenants in common

Question 66 Michael has an investment with the following annual returns for four years. Year 1: 10% Year 2: -3% Year 3: 5% Year 4: 11% What is the Arithmetic Mean (AM) and what is the Geometric Mean (GM)?

Question 67 Bill, who is single, sells his personal residence to move from Atlanta to Chicago due to being transferred by his employer. He has owned and used the house for 18 months. The sale price is $460,000, selling expenses are $25,000 and his adjustable taxable basis is $180,000. What, if any, is Bill’s taxable gain?

Question 68 Olessa, single and age 60, sold her home for $540,000 after living there for 20 years. Her selling expenses were $10,000 and her adjusted basis in that home was $220,000. What is the maximum gain that Olessa must report in connection with the sale of her principal residence?

Question 69 You are a CFP designee who has been approached by the general partner of Silky Industries (SI) to provide financial planning services to the top executives at SI. Your sister has a fifteen percent limited partnership interest in SI. Can you accept this engagement?

Question 70 Which of the following statements concerning a CFP designee’s disclosure of confidential client data is generally correct? 1: Disclosure may be made to any state agency without subpoena. 2: Disclosure may be made to any party on consent of the client. 3: Disclosure may be made to comply with an IRS audit request.

Question 71 Which, if any, of the following statements is (are) correct? 1: Deflation is a decrease in the overall price levels of goods and services. 2: Disinflation is a slowdown in the rate of inflation.

Question 72 The following set of newly issued debt instruments was purchased for a portfolio. Treasury bond Zero-coupon bond Corporate bond Municipal bond The respective maturities of these investments are approximately equivalent. Which one of the investments in the portfolio would be subject to the greatest relative amount of price volatility if interest rates were to change quickly?

Question 73 CFP designee agrees to be bound by Continuing Education (CE) Requirements established by Certified Financial Planner Board of Standards. The CE Requirements for a regular continuing designee (not a new designee or a designee who has been inactive) are as follows.

Question 74 Edwin has a security that returned 8%, -2%, 6% and 12% over the last four periods. What is the time weighted rate of return?

Question 75 The P/E ratio of the S&P 500 should be 20 based on historical analysis and your projection of the future. If the earnings of the S&P 500 are currently $50 then the S&P 500 should be at: