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CFP Certification Exam: Practice Questions 2
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The CFP® certification exam is a 6-hour, 170-question, multiple-choice test in the US assessing financial planning proficiency. It includes standalone questions, scenarios, and case studies, focusing on application over recall. Key areas include tax, retirement, estate, and investment planning, designed to test critical thinking and practical application.  Key Aspects of the CFP® Exam Structure: The exam is broken into two 3-hour sessions with a 40-minute break. Content: Questions cover 8 main domains: Financial Planning Process, Risk Management/Insurance, Investment Planning, Tax... Show more
CFP Certification Exam: Practice Questions 2
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25 Questions

1. For incentive stock options (ISOs), if the fair market value of the stock exceeds $100,000 at the time of grant, which of the following will result?
2. According to the anomaly known as the P/E effect, __________ P/E stocks appear to outperform __________ P/E stocks over annual periods after being adjusted for risk and size.
3. For incentive stock options (ISOs), an employee must be employed by the same company without interruption from the time the option is granted until __________ or less before the date of exercise.
4. The S&P index has __________ risk.
5. How is the adjusted basis of an asset calculated? Assume the asset was originally acquired at an arm’s length transaction from a non-related party.
6. If a qualified disclaimer is made, the beneficiary that disclaims is considered to have __________ the property and __________ a subsequent gift.
7. Which of the following is/are correct regarding rabbi trusts?
(1) A rabbi trust may contain an insolvency trigger. Therefore it can be used to protect executives in the event of employer bankruptcy.
(2) A rabbi trust can protect executives in the event of a hostile takeover or merger.
8. Under the social security system, a fully insured worker is one that has paid into the system for at least __________ during his or her employment career.
9. For married couples, each spouse is entitled to receive a social security benefit based on the greater of his or her own retirement benefit, or __________ of the spouse’s benefit.
10. An HO-4 insurance policy has which of the following characteristics?
11. For an employee that is covered by her large employer’s health insurance plan, how long must she work to ensure she maintains health coverage? Assume the employee will not qualify for health insurance through a private insurer.
12. Which of the following are permitted investments in a 403b plan?
(1) Mutual funds
(2) Individual bonds
(3) Treasury bills
(4) Life insurance if it is incidental to an annuity contract
13. Employees pay a social security payroll tax of __________ on all wages up to the social security wage base. An additional tax of __________ is paid by each employee to fund Medicare, for a combined payroll tax of __________ for each employee.
14. Which of the following will result if an insured of a life insurance policy dies during the grace period and the premium has not yet been paid?
15. A group term life insurance policy can be converted to an individual life policy within __________ of an employee terminating employment.
16. Which of the following describes the taxation of an annuity owned by a decedent?
17. In order for group term life insurance to be excluded from an employee’s incomes it must satisfy which of the following requirements?
(1) Must provide a general death benefit which is includible in income
(2) Must be provided to a group of employees
(3) Must be provided under a policy carried directly or indirectly by the employer
(4) Amount of insurance provided to each employee cannot be based on age, years of service, compensation, or position
18. Jane dies owning XYZ stock, which is thinly traded. The nearest trading dates for XYZ stock were two days before the valuation date and four days after the valuation date. The mean price of the stock two days before the valuation date was $8, and the mean price four days after the valuation date was $10. What is the reportable value of XYZ stock in Jane’s gross estate?
19. Which of the following is/are correct regarding a bond’s interest rate and term to maturity?
(1) The lower a bond’s interest rate, the lower its relative price fluctuation.
(2) The longer a bond’s term to maturity, the greater its relative price fluctuation.
20. Which of the following is/are correct regarding use of the marital deduction?
(1) There may be a requirement that the surviving spouse survive the decedent by a period not to exceed six months.
(2) If the decedent was not a US citizen, a QDOT is required in order to qualify property for the marital deduction.
21. Which of the following is/are correct regarding open-end mutual funds?
(1) Open-end mutual funds sell at their net asset value (NAV).
(2) Open-end mutual funds have a fixed capital structure.
22. Which of the following types of property are eligible for a like-kind exchange?
(1) Common stock
(2) Inventory
(3) Rental property
(4) Raw material
23. A benefit plan is considered to be __________ if assets are set aside in a general reserve fund to meet the benefit obligations of the plan.
24. If a company has three owners, how many life insurance policies will be purchased if a cross-purchase agreement is used?
25. Which of the following describes the difference between a 401k plan and a 403b plan?

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