Basic Need To Know

Question 1

The 7 practice standards of CFP PROCESS

Answer 1

1) understand Clients
2) identify and select goals
3) Analyze course of action and alt action
4) develop recommendations
5) present recommendations
6) implement recommendations
7) monitor plan

Question 2

Who must register as investment advisor

Answer 2

ABC
A: give advice
B: business
C: compensation

Question 3

Expansion (market cycle)

Answer 3

Low inflation
Low interest rates
Low unemployment
WILL LEAD TO
Increase in interest and inflation

Question 4

Peak (market cycle)

Answer 4

Highest GDP
Low unemployment
WILL LEAD TO
Increased unemployment

Question 5

Monetary policy

Answer 5

Federal reserve controls money supply and influences interest rates

Question 6

Ease monetary policy

Answer 6

Increase money supply, decrease interest rates

Question 7

Tighten monetary policy

Answer 7

Decrease money supply, increase interest rates

Question 8

4 tools of Fed Reserve for Monetary policy

Answer 8

1) reserve requirement
2) discount rate
3) open market operations
4) excess reserve requirement

Question 9

Monetary policy: Reserve Requirement

Answer 9

Percent of deposits a bank is requested to maintain in cash

Question 10

Monetary policy: discount rate

Answer 10

Overnight interest rate banks can borrow from federal reserve

Question 11

Monetary Policy: open market discount operations

Answer 11

Buying and selling gov bond securities

Question 12

Monetary Policy: excess reserve rate

Answer 12

Money banks hold at federal reserve in excess of reserve requirement
Ex: higher rate encourages more cash to be held

Question 13

fiscal Policy

Answer 13

Congress controls spending, taxation and influences money supply and interest rates

Question 14

3 tools for Fiscal policy

Answer 14

1) taxation
2) spending
3) debt management

Question 15

FDIC insurance amount

Answer 15

$250k of insurance per ownership per institution

Question 16

Current Ratio

Answer 16

Ability to meet short term obligations
= current assets / current liabilities

Question 17

Emergency Fund

Answer 17

Should have 3-6 months saved of non discretionary expenses
= current assets / monthly non discretionary expenses

Question 18

Housing Ratio: 28%

Answer 18

Monthly housing costs / monthly gross income
Should be less than 28%

Question 19

Housing ratio: 36%

Answer 19

Monthly housing costs + ALL other reoccurring debt / monthly gross income
Should be less than 36%

Question 20

PLUS loan

Answer 20

Loan for parents for undergrad students
Needs to relayed in 10 years

Question 21

Pell Grant

Answer 21

Need based grant, depends on expected family contribution
Undergrad only

Question 22

Coverdell Education savings account

Answer 22

$2k max contribution per beneficiary
Funds must be distributed by age 30
Income phase outs

Question 23

Systematic risk

Answer 23

Risk to broader market
Cannot be diversified

Question 24

Unsystematic risk

Answer 24

Diversifiable risk
Risk tied to company or industry

Question 25

Types of Systematic risk

Answer 25

Market risk
Interest rate risk
Purchasing power risk
Exchange rate risk

Question 26

Types of unsystematic Risk

Answer 26

Business risk
Financial risk
Operational risk

Question 27

ExCeption to Register as Advisor

Answer 27

The Publisher was Broke bc he was LATE to a US Bank
- publishers,
- broker dealers
- L: Lawyers
- A: Accoutants
- T : Teachers
- E : engineers
- banks and bank holding companies
- advisors whose service is strictly US securities guaranteed by US

Question 28

Structured Communication (Types)

Answer 28

1) Interviewing
2) Advising
3) Counseling