CFP® Exam MCQs | General Principals of Financial Planning
Engaging in practice questions is an invaluable method for self-assessment in gauging your progress during your preparation for the CERTIFIED FINANCIAL PLANNER™ exam. By actively solving CFP® exam questions, you can evaluate your current performance and identify areas where improvement is needed. Careful analysis of your weaker areas and maintaining a record of your previous attempts will help you comprehend both the areas where you excel and where more focus is needed.
In this blog, CFP® Exam Prep App by Achieve offers essential practice questions related to the subject – General Principles of Financial Planning. These sample MCQs on the Financial Certification Examination will help you assess your comprehension and proficiency in this area of study.
Q 1. Assume your customer has a $60 million net worth. He has four college-aged grandkids. What would be a non-viable alternative for your client to help his grandkids pay for their education?
A. Purchase municipal bonds due to the income tax-free nature of the capital appreciation
B. Directly pay tuition costs not covered by financial aid
C. Use a Prepaid 529 Plan to pay the college costs for the next few years at a locked in price today
D. Open 529 Plans for each grandchild, superannuate to take advantage of the state tax deduction, and then use the 529 Plans to pay for college expenditures while avoiding inheritance taxes.
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Q 2. Increased taxation and reduced government borrowing, and public spending describe which of the following?
A. Liberalism
B. Contractionary policy
C. Expansionary policy
D. Independent policy
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Q 3. Which of the following must occur if a taxpayer wishes to change accounting techniques, such as converting from the cash to accrual method of reporting revenue and expenses?
A. The taxpayer must receive approval from a CPA.
B. The taxpayer must receive approval from the IRS.
C. The taxpayer is not required to receive approval and can make the change at will.
D. The taxpayer is not permitted to change the accounting method used.
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Q 4. Luna wants to put money aside now that will last for the next six years. She will need to take $1,400 at the start of each 6-month period, and her investments will yield her 12% compounded semiannually. How much does Luna need to deposit today to achieve her goal?
A. $10,673.59
B. $11,737.38
C. $12,441.62
D. $13,889.23
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Q 5. Wade, Dave, and Seth are all interested in contributing to their nephew’s Coverdell Education Savings Account (ESA). Which of the following statements about the maximum contribution the nephew may make is correct?
A. Wade, Dave, and Seth are permitted to contribute a combined amount not to exceed $2,000 into their nephew’s ESA in the current year.
B. Wade, Dave, and Seth are permitted to each contribute $2,000 into their nephew’s ESA in the current year, for a total annual contribution of $6,000.
C. Wade, Dave, and Seth may each contribute up to the annual gift tax exclusion amount into their nephew’s ESA in the current year.
D. Wade, Dave, and Seth may “front-load” contributions into their nephew’s ESA, so each may contribute up to five times the annual gift tax exclusion amount in the current year.
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Q 6. Which of the following are characteristics of Pell Grants? (1) Only full-time students are eligible (2) Distributed on the basis of financial need and availability of federal funds (3) Receipt of other grants and loans is contingent upon applying for or receiving Pell funds (4) Available to undergraduate and graduate students.
A. (l) and (4) only
B. (2) and (3) only
C. (l), (2), and (3) only
D. All of the above
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Q 7. Nicole owns a warehouse with a current value of $185,000. Justin owns a building with a current value of $350,000 and a $40,000 loan balance. If Nicole assumes the loan, a fair trade would require:
A. Nicole to pay $125,000 cash.
B. Nicole to pay $225,000 cash.
C. Justin to pay $125,000 cash.
D. Justin to pay $225,000 cash.
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Q 8. Jerry is getting a mortgage with 1.75 discount points as closing charges. How much will Jerry spend in closing expenses if the property is worth $220,000 and the mortgage is 85% of the property’s value?
A. $3,080.90
B. $3,120.40
C. $3,190.25
D. $3,272.50
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Q 9. Your client, who is 88 years old, contributed $75,000 to a 529 plan for his recent great-grandson Jacob. Steve dies three days after making the donation. Which of the following is untrue?
A. On Steve’s final Form 1040 tax return, the executor or executrix may deduct any eligible state tax advantages for the 529 plan contribution.
B. According to the annual gift tax exclusion and annual generation-skipping transfer (GST) exemption, $15,000 of the $75,000 contribution will be disregarded.
C. Form 709 will not be required for the client contributing $75,000 to the great-grandchild’s 529 accounts.
D. The client will include $60,000 in his gross estate for the remaining four years of front-loaded 529 contributions to the great-grandchild’s 529 accounts.
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Q 10. Jessica is attempting to come up with a plan on how to pay for her daughter’s college. She is weighing several possibilities. She’s thinking of borrowing money from either her retirement account or her cash-value life insurance policy. Which one of the following is a benefit regarding these two options?
A. The loan on the cash value from the life insurance policy is a low-cost option for financing.
B. A loan on a retirement plan has flexible repayment rules
C. The loan on the retirement plan will continue even when changing jobs.
D. Even if the policy expires, a loan against the cash worth of life insurance is considered positively.
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Monitoring your performance and progress on a regular basis is key to effective preparation for the CFP® exam. Our dedicated CERTIFIED FINANCIAL PLANNER™ Exam Prep App enables you to track your scores and assess your daily progress as you tackle exam questions. It not only highlights your weaknesses but also provides valuable insights into the amount of effort required to overcome them. By utilizing practice questions from CFP® Exam Prep App, you can effectively track your preparation and focus on improving the specific areas where you need to enhance your skills. Subscribe to CFP® Exam Prep by Achieve to optimize your chances of achieving a high score.