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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. An employee is an active participant in a defined benefit plan if he or she meets which of the following requirements?
(1) The employee actively participates in the plan.
(2) The employee meets the eligibility requirements at any time during the plan year.
(3) The employee is eligible to participate in the plan but declines to participate.
(4) The employee receives plan forfeitures only.
2. Book value is calculated through which of the following methods?
3. Assume an investor’s portfolio has an actual realized return of 16%. The realized return of the S&P 500 for the same time period is 18% and the risk-free rate is 6%. The beta of the portfolio is 0.75. What is the portfolio’s alpha?
4. The three categories of hazards are __________, __________, and __________.
5. A loss on the sale of securities is not deductible if a taxpayer purchases identical securities within __________ prior to or after the date of sale.
6. Which of the following plans require immediate vesting?
(1) Money purchase plan
(2) SEP
(3) 403b plan
(4) SARSEP
7. All but which of the following are characteristics of a defined benefit plan?
8. Assume that stock A has a standard deviation of 6.5% and stock B has a standard deviation of 12.4%. The correlation coefficient between the two stocks is +0.30. What is the covariance of the two stocks?
9. The category or risk in which loss is the only possible outcome is known as __________.
10. If a company has three owners, how many life insurance policies will be purchased if a cross-purchase agreement is used?
11. Assume that Portfolio X has a return of 15%, a standard deviation of 7%, and a beta of 2.0. The risk-free rate of return is 4%. What is the Sharpe ratio for Portfolio X?
12. Which of the following is preferred by a risk-averse investor?
13. By adding a __________ provision to a trust, a grantor is allowing for certain future financial circumstances among beneficiaries that he or she cannot foresee at the present time.
14. A skip person for GSTT purposes is a related individual __________ below that of the transferor.
15. Which of the following is/are correct regarding profit sharing plans?
(1) Profit sharing plans are a type of defined contribution pension plan.
(2) The minimum funding standard requires the employer to make an annual contribution.
16. How are the death benefits of a MEC taxed?
17. All but which of the following are characteristics of American Depository Receipts (ADRs)?
18. A group term life insurance policy can be converted to an individual life policy within __________ of an employee terminating employment.
19. In which of the following circumstances will a standard power of attorney lapse?
20. According to the Principle of __________, a CFP® Board designee shall exercise reasonable and prudent professional judgment in providing professional services to clients. (This question is subject to change after October 1, 2019, when the CFP® Board adopts its new Code of Ethics and Standards of Conduct.)
21. The EAFE Index is a __________ weighted index of the __________ performance of major foreign markets.
22. Which of the following are permitted investments in an IRA?
(1) Real estate
(2) Money market funds
(3) Common stock
(4) Bond funds
23. A __________ provides the decedent/grantor’s estate with the unlimited marital deduction while, at the same time, ensuring the decedent retains control over the ultimate disposition of his or her property.
24. If a qualified disclaimer is made, the beneficiary that disclaims is considered to have __________ the property and __________ a subsequent gift.
25. A QDOT is not necessary if a __________ spouse dies first and leaves all of his or her property to a __________ spouse.

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