Free CFP® exam practice MCQs – Investment Planning
Can practicing investment planning questions lead to a higher score on the CFP® exam? The answer is ‘Yes’. Engaging in the regular practice of investment planning questions plays a pivotal role in maximizing your performance on the CFP® exam. By immersing yourself in these practice questions, you can deepen your understanding of investment planning concepts, principles, and strategies. This targeted approach enables you to familiarize yourself with the types of MCQs commonly asked in the exam, allowing you to approach them with confidence and precision.
Access ten free practice MCQs for the CERTIFIED FINANCIAL PLANNER™ Exam through the CFP® Exam Prep App by Achieve to familiarize yourself with the question types asked on D-day.
Q 1. The capital asset pricing model (CAPM) determines the required rate of return for a stock based on:
A. Alpha only
B. Beta only
C. Beta and the stock market’s overall rate of return
D. Only the overall rate of the stock market’s return
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Q 2. Which of the following has a greater impact on lower coupon bonds than higher coupon bonds?
A. Put options
B. Systematic risk
C. Maturity dates
D. Interest rate changes
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Q 3. Which of the following statements about the Black-Scholes valuation model is correct?
A. It was first published in 2001
B. It assumes that the market consists of only one risky asset
C. Its purpose is to determine the value of a call option of a non-dividend-paying stock
D. It can be applied directly to bond securities
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Q 4. Which of the following words describes closed-end investment corporations that are publicly traded?
A. REITs
B. CDs
C. NAVs
D. GICs
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Q 5. Treasury inflation protected securities (TIPS) are indexed to the rate of inflation as measured by which of the following?
A. Producer Price Index (PPI)
B. Personal Consumption Expenditures Price Index (PCEPI)
C. Implicit Price Deflator (IPD)
D. Consumer Price Index (CPI)
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Q 6. Assume that the next dividend for ABC stock is $3 per share, and that investors are looking for a 12 percent return on their investment. What should the price of ABC stock be now if the dividend is increasing by 4% per year?
A. $22.50
B. $27.50
C. $32.50
D. $37.50
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Q 7. Which of the following statements about open-end mutual funds’ capital structure is/are correct? (1) Open-end mutual funds issue new shares and redeem existing shares from shareholders. (2) The price an investor pays for open-end mutual fund shares is determined by supply and demand.
A. (l) only
B. (2) only
C. None of the above
D. All of the above
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Q 8. All of the above are features of American Depository Receipts (ADRs), except for which one?
A. Traded on secondary exchanges
B. Represent ownership interest in foreign securities denominated in US dollars
C. For ADR holders, banks accept money in US dollars and then convert it into foreign currencies
D. Issued by banks in foreign countries
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Q 9. The annual dividend on Silon stock is $4 per share, and the payout is not projected to increase. What is the current value of Silon stock if the desired rate of return is 9.5 percent?
A. $38.00
B. $40.00
C. $42.11
D. $44.97
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Q 10. Which of the following is a valid comparison between the capital asset pricing model (CAPM) and the arbitrage pricing theory (APT)?
A. APT is a multi-factor model while CAPM is a single factor model.
B. CAPM captures more market complexity than the APT model.
C. CAPM is based on the idea that perfect substitutes must sell at the same time.
D. APT model is easier to use because the factors/betas have economic sources.
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To gain practical experience with various question types, solve maximum MCQs to get exposure to different kinds of questions you may encounter in the exam. Mastering theory alone is insufficient to successfully pass the CFP® exam; understanding the exam pattern and developing practical skills in answering questions is equally important. For comprehensive preparation across all subjects, practice on CFP® Exam Prep by Achieve, offering a wide range of 3500+ practice questions covering each subject.