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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. Which of the following describes how much a donor is permitted to deduct for a contribution of his or her time or services to a qualified charity?
2. A plan is considered to be informally funded if which of the following conditions apply?
(1) The employee has no rights or secured interest in the benefit.
(2) The benefit is always subject to the claims of the company’s creditors.
(3) The benefit consists of life insurance, mutual funds, or other securities.
(4) A promise to pay is the employee’s only security of future benefits.
3. The three categories of hazards are __________, __________, and __________.
4. Which of the following is/are correct regarding liquidity and marketability?
(1) Liquidity is the ability to sell or redeem an investment quickly and at a known price without incurring a significant loss of principal.
(2) Marketability is the speed and ease with which a security may be bought or sold.
5. Which of the following is/are correct regarding loan provisions in a SIMPLE plan?
(1) Loans from a SIMPLE IRA are not permitted.
(2) Loans from a SIMPLE 401k are permitted.
6. If a wash sale occurs, which of the following will result?
7. Which of the following are correct regarding Roth IRAs?
(1) Contributions to a Roth IRA can be made at any age.
(2) Contributions to a Roth IRA must be made before age 70 ½.
(3) A Roth IRA owner is not required to take a minimum distribution during his or her lifetime.
(4) Roth IRA contributions may be deducted in limited circumstances.
8. For a reverse gift, a step-up in basis is not allowed if the donee/decedent dies within __________ of receiving a gift and then transfers the property back to the original donor.
9. 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.
10. Which of the following is/are correct regarding dividends paid by growth stocks and value stocks?
(1) Because they are growing and expanding, growth stocks typically do not pay large dividends.
(2) Most of the earnings generated from value stocks are reinvested back into the company.
11. If a qualified disclaimer is made, the beneficiary that disclaims is considered to have __________ the property and __________ a subsequent gift.
12. A variable life insurance policy has which of the following characteristics?
13. Incentive stock options (ISOs) may by granted to which of the following?
14. A group term life insurance policy can be converted to an individual life policy within __________ of an employee terminating employment.
15. If an investment is held for more than one year, the holding period return __________ the true return on an annual basis. If an investment is held for less than one year, the holding period return __________ the true investment return.
16. 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?
17. The annual payout rate for a CRUT must be at least __________ of the current fair market value of trust assets.
18. To qualify for the Section 2032A “special use valuation”, qualifying real property must have been owned by the decedent or a member of his or her family for a period of at least __________ out of the prior __________ ending on the date of the decedent’s death.
19. If property that could otherwise be valued with use of the alternate valuation date is sold prior to the six-month valuation date, how is the value of the property determined for estate tax purposes?
20. 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.
21. Book value is calculated through which of the following methods?
22. Security A has an expected return of 9% and a standard deviation of 10%. Security B has an expected return of 5% and a standard deviation of 8%. Which security is more suitable for a risk-averse investor?
23. Which of the following are permitted investments in an IRA?
(1) Real estate
(2) Money market funds
(3) Common stock
(4) Bond funds
24. In which of the following circumstances will a standard power of attorney lapse?
25. 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

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