CFP Practice Questions

1. Which code of ethics rule asserts that a financial planner should not solicit clients through and false or misleading communications or advertisements? A. Rule 101 B. Rule 102 C. Rule 103 D. Rule 104 2. A ______ statement forecasts future balance sheets and cash flow statements. A. Cash flow B. Balance sheet C. Pro forma D. Finance sheet 3. The Bankruptcy Code was established by Congress in 1978 in accordance with Article I, Section _____ of the Constitution. A. 7 B. 8 C. 9 D. 10 4. When an ARM is said to have a _____ cap, this means that there is a 2 percent maximum interest rate increase every year, and 6 percent over the life of the loan. A. 6/2 B. 2/6 C. 2+6 D. 1/9 5. The _________ is a tax credit that is available for all the years of undergraduate and graduate study. A. Student Loan Credit B. Education IRA Credit C. Tuition Plan Credit D. Lifetime Learning Credit 6. A ______ allows the transferred trust property to be treated as if it were a gift if a present interest to a child. A. Section 2503(c) Minor's Trust B. Section 3200 Minor's Trust C. Section 3211 Trust D. Section 542 Trust 7. A ______ is a graph that shows the relationship between term to maturity and yield to maturity. A. Yield Curve B. Balance Curve C. Sloped Curve D. Cash Curve

8. According to the _______, financial planners are not subject to the control of the act if they are: a bank or holding company that is not an investment company; a lawyer, accountant, engineer, or teacher who provides investment advice incidentally; a broker, dealer, or registered representative whose advice is incidental; the publisher of a magazine or journal that discusses financial planning; a person whose advice is limited to those securities guaranteed by the federal government; any other person not within the law as specified by the SEC. A. Advisor Decision 1932 B. Advisor Decision 1935 C. Investment Advisors Act of 1948 D. Investment Advisors Act of 1940 9. A ___________ is a multiple-employer trust that can be used to prefund employee benefits. A. voluntary employee beneficiary association (VEBA) B. voluntary employee care association (VECA) C. involuntary employee beneficiary association (IEBA) D. involuntary employee care association (IECA) 10. A ______ is the right of an employee to receive cash and/or stock equal to the increase in the value of the company's stock after the date of purchase. A. stock appreciation duty B. stock appreciation right C. stock appreciation purchase D. stock appreciation option Answer Key 1. A 2. C 3. B 4. B 5. D 6. A 7. A 8. D 9. A 10. B