Questions and Answers of Personal Financial Planning

According to the Statement on Standards in Personal Financial Planning Services (SSPFPS) No. 1, which of the following words are used to describe actions and procedures that are recommended but not
Which of the following is not a PFP service?A. Designing financial strategies.B. Identifying personal financial goals and resources.C. Making personalized recommendations.D. Preparing individual tax
The member should disclose, in writing, the compensation the member, the member’s firm, or affiliates will receive for services rendered or products sold. The disclosure should include:I. Amount of
Which of the following is not true when referring another service provider to a client?A. Communicate, in writing, the extent to which the member will, or will not, evaluate the work performed by the
A member lists CPA/PFS credentials on business cards and the company website. Which of the following activities is not covered by SSPFPS No. 1?A. Advising a client regarding income tax matters that
The coordination of, or the review of, the delivery of services or products by other service providers is part of:A. Implementation engagement.B. Monitoring engagement.C. PFP engagement.D. Updating
With regards to a PFP engagement, if a member determines that a conflict of interest exists, which of the following is correct?A. The member can engage the prospective client if objectivity is not
Which of the following circumstances creates a fiduciary status?I. Being named as a fiduciary in a trust document.II. Preparing an income tax return.III. Providing personalized advice about
The development and communication of recommendations is the goal of:A. An implementation engagement.B. Quantitative data.C. Qualitative data.D. The PFP process.
The member’s evaluation of progress toward achieving the client’s PFP goals is an element of which type of engagement?A. PFP engagement.B. Implementation engagement.C. Monitoring engagement.D.
Download the Statement on Standards in Personal Financial Planning Services (SSPFPS) No.1.Which activities are not covered by the
“Prudent Practices for Investment Advisors” outlines the best practices for fiduciaries who provide comprehensive investment advice. How is this material applicable to the activities of the CPA /
The Government Accountability Office Report “Regulatory Coverage Generally Exists for Financial Planners, but Consumer Protection Issues Remain” provides the most current overview licensing
Visit the SEC’s website. What resources are available for consumers?https://www.sec.gov/
Visit the Financial Industry Regulatory Authority’s website.What resources are available for consumers?www.finra.org/
Visit the National Association of Insurance Commissioners’website. What resources are available for consumers?www.naic.org/
Visit the Federal Trade Commission’s Bureau of Consumer Protection. Follow the links to obtain a free credit report https://www.ftc.gov/about-ftc/bureaus-offices/bureauconsumer-protection.
Compare the AICPA’s Code of Professional Conduct with SSPFPS No. 1.www.aicpa.org/RESEARCH/STANDARDS/CODEOFCONDUCT/Pages/default.aspx
“The CPA’s Guide to Investment Advisory Business Models” is available online. What are the available business models and which one would you select and
If a prospective client hoped to accumulate $150,000 in 10 years, how much must he or she deposit today in an account that earns an annual return of 4 percent?A. -100,614.91 B. 100,614.91 C.
What will $250,000 grow to be in 13 years if it is in a 401(k) account with an average annual growth rate of 9 percent?A. 766,451.15 B. 785,169.75 C. 795,119.63 D. 801,989.27
In meeting with a prospective client, you are presented with the following facts and circumstances: Twenty-five years ago, the client began an investment program. Today the investment is worth
A prospective client has won the lottery. They have a choice of a lump sum payment of $$10$ million, or 20 annual installments of $$600,000.$ The first payment will occur immediately. What is the
A prospective client’s current standard of living is $100,000 per year. This person plans to retire in 15 years.What will the client’s future standard of living be if the average annual inflation
A securities portfolio has the following characteristics:Based on the portfolio characteristics, what is the rate of return for the securities portfolio?A. 4.57 percent.B. 4.67 percent.C. 7.11
Perry and Susan Williams just retired, moved to the lake and purchased fishing equipment and a bass boat for Perry’s new fishing business. The total investment in this business is $$25,200—the$
Robin and Christopher Bird want to purchase an intermediate term bond. How much should the Birds pay for a bond ($1,000 par value) with a 2 percent annual coupon that matures in five years if
Joan Salt won $$250,000$ from the lottery. She will receive $$50,000$ at the end of each year for the next five years.Her investment portfolio has an average annual return of 7 percent. What is
In the personal statement of financial position, which value is used for the client’s residence?A. Client’s basis in the home.B. Insured replacement value.C. Personal financial planning
Susan and Tom have annual fixed and variable expenses of $$100,000.$ They each earn $$80,000$ for a combined earned income of $$160,000.$ Susan has a small trust fund which provides minimal
Which of the following investment vehicles are most appropriate for an emergency fund for a family with discretionary income of $12,000 a year?I. Balanced index ETF.II. CD ladder with maturities
What is the primary advantage of buying an automobile versus leasing?A. Income tax deduction.B. Insurance costs.C. Ownership.D. Size of down payment.
Claudia and Albert increased their net worth from $$250,000$ to $$270,000$ during the current year. Their combined income was $$60,000$ and the only changes to their assets was an increase in
Elizabeth and Rick would like to purchase a new home.Their mortgage broker has pre-qualified them for two mortgages: a 30-year fixed at 4 percent or a 5-year ARM at 3 percent. Which of the following
Mary Ann bought a new home for $$100,000.$ Her mortgage is $$65,000$ and she has a 30-year ARM. The lender used the one-year Treasury index (4 percent) and a 2 percent margin. The ARM has an
The_______________ gives consumers the right to see their credit reports and challenge incorrect information.A. Electronic Fund Transfer Act.B. Fair Credit Reporting Act.C. Gramm-Leach-Bliley Act.D.
An ARM payment is an example of A. Fixed expense.B. Front-end ratio.C. PITI ratio.D. Variable expense.
Alice was out of town on spring break. Upon her return, she discovered that sometime over the past seven days she had lost her debit card. She did not know what to do, and waited until she received
Thomas and Joyce Williams live in San Francisco, California—a community property state. They consider themselves native San Franciscans, having lived their entire lives in the city. This is a
George and Alice Center are married. George has one brother, Monroe. George has become incompetent and unable to update his will. Alice and George’s residence is held as a joint tenancy with rights
A tenancy by the entirety may be terminated in which of the following ways?I. Creditor of a spouse.II. Death of either spouse.III. Divorce settlement.IV. Mutual agreement by both spouses.A. I, II,
Nate Bowman owns a one-third interest in nine acres of mountain property in Idaho as a tenant in common. Which of the following can Nate do with the interest?A. Gift three acres.B. Gift nine acres.C.
Which of the following is included in a decedent’s gross estate?I. Cash values of life insurance contracts that the decedent owned on the spouses life.II. Decedent’s life insurance proceeds
Which of the choices on the following list of expenses and losses are allowed as a deduction against the gross estate of a decedent?I. Funeral and burial expenses of the decedent, including
Mrs. Helen Johnson, a wealthy entrepreneur and business owner, has just died. Which of the following assets will be included in her gross estate?I. A life insurance policy on the life of Mrs. Johnson
Which of the following gifts are qualifying transfers and are not treated as taxable gifts?I. Gift to a political organization for its sole and exclusive use.II. Gift to a spouse.III. Gift to any
A Crummey power is a provision in a/an trust that permits specified trust beneficiaries to gifts made to the trust on their behalf, for a limited period of time.A. Irrevocable/make.B.
Joint tenancy with right of survivorship (JTWROS) is a form of property ownership in which:A. At a tenant’s death the property passes to the surviving heirs.B. Income-producing property is not
Jim Tolbert was married on January 15, 2007. His wife, Kay, is a full-time student at the university and earns $425 a month working in the library. How many personal exemptions will Jim and Kay be
Differentiate between tax evasion and tax avoidance.
Beverly Jones is 24 years old and single, lives in an apartment, and has no dependents. Last year she earned $45,000 as a sales assistant for Precision Business Instruments; $3,910 of her wages were
Jennifer Morris received the following items and amounts of income during 2008. Help her calculate (a) her gross income and (b) that portion (dollar amount) of her income that is tax exempt. Salary
If Barbara Guarin is single and in the 28% tax bracket, calculate the tax associated with each of the following transactions. (Use the IRS regulations for capital gains in effect in 2008.) a. She
Ralph and Betty Ingram are married and have one child. Ralph is putting together some figures so that he can prepare the Ingram’s joint 2008 tax return. He can claim three personal exemptions
Kathleen and Sean Madden have been notified that they are being audited. What should they do to prepare for the audit?
Suppose that someone stole your ATM card and withdrew $650 from your checking account. How much money could you lose according to federal legislation if you reported the stolen card to the
Determine the annual net cost of these checking accounts:a. Monthly fee $5, check-processing fee of 25 cents, average of 19 checks written per monthb. Annual interest of 2.5% paid if balance
If you put $5,000 in a savings account that pays interest at the rate of 4%, compounded annually, how much will you have in 5 years? How much interest will you earn during the 5 years? If you put
Tim and Eilene Smithson together earn approximately $62,000 a year after taxes. Through an inheritance and some wise investing, they also have an investment portfolio with a value of almost
What are mortgage points? How much would a home buyer have to pay if the lender wanted to charge 2.5 points on a $125,000 mortgage? When would this amount have to be paid? What effect do points have
What factors should you consider when deciding whether to refinance your mortgage to reduce the monthly payment? How can the refinancing decision be made?
Beverly Cooper has just graduated from college and needs to buy a car to commute to work. She estimates that she can afford to pay about $450 per month for a loan or lease and has about $2,000 in
Use Worksheet 5.1. Art Winkler is trying to decide whether to lease or purchase a new car costing $18,000. If he leases, he’ll have to pay a $600 security deposit and monthly payments of $425 over
How much might a home buyer expect to pay in closing costs on a $220,000 house with a 10% down payment? How much would the home buyer have to pay at the time of closing, taking into account closing
Use Worksheet 5.2. Rosa Ramirez is currently renting an apartment for $725 per month and paying $275 annually for renter’s insurance. She just found a small townhouse she can buy for $185,000. She
What would the monthly payments be on a $150,000 loan if the mortgage were set up as:a. A 15-year, 6% fixed-rate loan?b. A 30-year adjustable-rate mortgage in which the lender adds a margin of 2.5
Use Worksheet 5.4. Lin Wong purchased a condominium 4 years ago for $180,000, paying $1,250 per month on her $162,000, 8%, 25-year mortgage. The current loan balance is $152,401. Recently, interest
Karl and Amber Merritt, a dual-income couple in their late 20s, want to replace their 7-year-old car, which has 90,000 miles on it and needs some expensive repairs. After reviewing their budget, the
After graduating from college last fall, Arlene Dukes took a job as a consumer credit analyst at a local bank. From her work reviewing credit applications, she realizes that she should begin
Brian Southard has a monthly take-home pay of $1,685; he makes payments of $410 a month on his outstanding consumer credit (excluding the mortgage on his home). How would you characterize Brian’s
Use Worksheet 6.1. Beverly Smitham is evaluating her debt safety ratio. Her monthly take-home pay is $3,320. Each month, she pays $380 for an auto loan, $120 on a personal line of credit, $60 on a
Carla Esposito has an overdraft protection line. Assume that her October 2010 statement showed a latest (new) balance of $862. If the line had a minimum monthly payment requirement of 5% of the
Bill and Ethel Patterson have a home with an appraised value of $180,000 and a mortgage balance of only $90,000. Given that an S&L is willing to lend money at a loan-to-value ratio of 75%, how big a
Mary Rossi, a student at State College, has a balance of $380 on her retail charge card; if the store levies a finance charge of 21% per year, how much monthly interest will be added to her account?
Parviz Sayyad recently graduated from college and is evaluating two credit cards. Card A has an annual fee of $75 and an interest rate of 9%. Card B has no annual fee and an interest rate of 16%.
Chris Ricci has several credit cards, on which she is carrying a total current balance of $12,500. She is considering transferring this balance to a new card issued by a local bank. The bank
William Douglas recently received his monthly MasterCard bill for the period June 1–30, 2010, and wants to verify the monthly finance charge calculation, which is assessed at a rate of 15% per year
Michael Sutton is trying to decide whether to apply for a credit card or a debit card. He has $7,500 in a savings account at the bank and spends his money frugally. What advice would you have for
Jennifer Zhang was reviewing her credit card statement and noticed several charges that didn’t look familiar to her. Jennifer is unsure whether she should pay the bill in full and forget about the
Sean Severs recently graduated from college and wants to borrow $50,000 to start a business, which he believes will produce a cash flow of at least $10,000 per year. As a student, Sean was active in
Ramon and Maria Lopez are a newly married couple in their mid-20s. Ramon is a senior at a state university and expects to graduate in the summer of 2011. Maria graduated last spring with a degree in
A year after declaring bankruptcy and moving with her daughter back into her parents’ home, Patricia Hunnington is about to get a degree in nursing. As she starts out in a new career, she also
Dean Rickert plans to borrow $8,000 for 5 years. The loan will be repaid with a single payment after 5 years, and the interest on the loan will be computed using the simple interest method at an
Using the simple interest method, find the monthly payments on a $3,000 installment loan if the funds are borrowed for 24 months at an annual interest rate of 8%. How much interest will be paid
Find the finance charges on a 7.5%, 18-month, single-payment loan when interest is computed using the simple interest method. Find the finance charges on the same loan when interest is computed using
Susan Mobley needs to borrow $4,000. First State Bank will lend her the money for 12 months through a single-payment loan at 8% discount; Home Savings and Loan will make her a $4,000, single-payment,
Bill Henderson is borrowing $10,000 for 5 years at 9%. Payments are made on a monthly basis, which are determined using the add-on method.a. How much total interest will Bill pay on the loan if it
After careful comparison shopping, Bruce Peters decides to buy a new Toyota Venza. With some options added, the car has a price of $29,500—including plates and taxes. Because he can’t afford to
Bob Keeley wants to buy a new high-end audio system for his car. The system is being sold by two dealers in town, both of whom sell the equipment for the same price of $2,000. Bob can buy the
Betty Hines plans to borrow $5,000 and to repay it in 36 monthly installments. This loan is being made at an annual add-on interest rate of 9.5%. a. Calculate the finance charge on this loan,
Use Worksheet 7.2. Marie Herrera wants to buy a home entertainment center. Complete with a big-screen TV, DVD, and sound system, the unit would cost $4,500. Marie has over $15,000 in a money fund, so
Because of a job change, Fred Presley has just relocated to the Pacific Northwest. He sold his furniture before he moved, so he’s now shopping for new furnishings. At a local furniture store he’s
At age 19, Linda Sayers is in the middle of her second year of studies at a community college in Phoenix. She has done well in her course work; majoring in prebusiness studies, she currently has a
Aaron Woods, a 27-year-old bachelor living in Richmond, Virginia, has been a high-school teacher for 5 years. For the past 4 months, he’s been thinking about buying a Subaru Outback, but feels he
Use Worksheet 8.1. Sharon Epstein is a 72-year-old widow who has recently been diagnosed with Alzheimer’s disease. She has limited financial assets of her own and has been living with her daughter
Use Worksheet 8.1. Brett Hardesty, 43, is a recently divorced father of two children, ages 9 and 7. He currently earns $95,000 a year as an operations manager for a utility company. The divorce
Sofia and Carlos Ramirez are a dual-career couple who just had their first child. Carlos, age 29, already has a group life insurance policy, but Sofia’s employer does not offer life insurance. A
Chunhua Zhu, a 38-year-old widowed mother of three children (ages 12, 10, and 4), works as a product analyst for Nestlé Purina PetCare Company. Although she’s covered by a group life insurance
Jacob and Emma McDonald are a two-income couple in their early 30s. They have two children, ages 6 and 3. Jacob’s monthly take-home pay is $3,600, and Emma’s is $4,200. The McDonalds feel that,
Describe these policy provisions commonly found in medical expense plans:(a) deductibles,(b) co-insurance,(c) coordination of benefits,(d) preexisting conditions.

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