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CFP Flashcards

(46 cards)

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1
Q

Housing ratio / front end ratio

A

Monthly housing costs (includes principal, interest, insurance, taxes) ÷ monthly gross income

Shouldn’t exceed 28% of gross income

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2
Q

What type of property is depreciated using the 3 year useful life in the MACRS table?

A

Tractor units for over the road use, racehorses

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3
Q

What type of property is depreciated using the 5 year useful life in the MACRS table?

A

Automobile, taxis, buses, trucks, computers, cattle

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4
Q

What type of property is depreciated using the 7 year useful life in the MACRS table?

A

Office furniture and fixtures (desks, files, safes)

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5
Q

What type of property is depreciated using the 27.5 year useful life in the MACRS table?

A

Residential rental property

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6
Q

What type of property is depreciated using the 39 year useful life in the MACRS table?

A

Nonresidential real property (section 1250 property - office building, store, warehouse)

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7
Q

Current ratio

A

Current assets ÷ current (short term) liabilities

A good ratio is between 1.5 and 2. Less than 1 suggests inability to pay current debts. Over 2 suggests too much capital is tied up

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8
Q

Emergency fund ratio

A

Current assets ÷ monthly nondiscretionary expenses

Nondiscretionary expenses can be debt, utilities, food

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9
Q

Savings ratio

A

(Gross income - net savings) ÷ annual gross income

Should save 10% - 12% of gross income

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10
Q

Replacement cost formula

A

(amount of coverage purchased ÷ coinsurance) x loss - deductible

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11
Q

P/E ratio

A

EPS x P/E multiplier or stock price ÷ EPS

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12
Q

Dividend payout ratio

A

Common stock dividend ÷ EPS

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13
Q

Return on equity ratio

A

EPS ÷ stockholder’s equity per share

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14
Q

Dividend yield ratio

A

Dividend per share ÷ stock price

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15
Q

After tax yield formula

A

Corporate rate x (1 - marginal tax rate)

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16
Q

Current yield ratio

A

Coupon ÷ price

Price = coupon ÷ current yield

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17
Q

What are the 4 pension plans?

A

Defined benefit pension plan, cash balance pension plan, money purchase pension plan, target benefit pension plan

Also are qualified plans

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18
Q

What are the nonqualified plans?

A

457, ISO, ESPP, NQSO, deferred compensation plan such as top hat plan

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19
Q

What are the tax advantaged plans?

Study These Flashcards
A

Traditional IRA, roth IRA, simple IRA, SEP, 403(b) aka TSA, SARSEP, SEP IRA

Also are qualified plans

20
Q

What are the DC plans?

Study These Flashcards
A

Traditional profit sharing plan, 401(k), simple 401(k), stock bonus plan, ESOP, age based/weighted, new comparability/cross test, thrift plan

Also are qualified plans and are profit sharing plans

21
Q

Which pension plans are DC plans?

Study These Flashcards
A

Money purchase pension plan and target benefit pension plan

22
Q

Which pension plans are DB plans?

Study These Flashcards
A

Traditional defined benefit pension plan and cash balance pension plan

23
Q

Real rate of return formula

Study These Flashcards
A

[(1 + investment return) ÷ (1 + inflation)] - 1 × 100

24
Q

Conversion value of bond formula

Study These Flashcards
A

(Par value ÷ coupon price) × price of stock

25
Price to receive margin call formula
Loan ÷ (1 - maintenance margin)
26
What is anchoring bias?
The tendency to overly rely on a specific piece of information
27
What is hindsight bias?
Belief that a past event was predictable, when in fact it could not have been predicted
28
What is overconfidence bias?
Overestimating one's ability to perform a specific task, such as picking stocks
29
What is illusion of control bias?
The tendency to overestimate one's ability to control events
30
What is excluded from coverage on all HO policies?
* Movement of ground (earthquakes and landslides * Ordinance or law (loss resulting from regulations regarding construction or demolition * Damage from water (flood, water from underground & sewer backup) * War or nuclear hazard (including nuclear power plant) * Power failure (power plant failure that causes a loss) * Intentional act (burning down your house) * Neglect (must take reasonable means to save property & mitigate loss)
31
Coefficient of variation formula
Standard deviation ÷ average rate of return
32
What does the HO-2 policy cover?
Buildings and personal property (named perils)
33
What does the HO-3 policy cover?
Personal property (open perils)
34
What does the HO-4 policy cover?
Renters and tenants (broad form)
35
What does the HO-5 policy cover?
Open perils - comprehensive form coverage
36
What does the HO-6 policy cover?
Condo owners
37
What does the HO-8 policy cover?
Older or historic homes
38
What are the 12 basic perils covered?
Remember HARVEST WFLV Hail, aircraft, riot, vandalism, vehicles, explosion, smoke, theft, wind, fire, lightning, volcanic eruption
39
What are the 6 broad coverage?
In addition to the 12 basic perils: it will include artificial electricity, falling objects, freezing, weight of ice, accidental discharge or water overflow, accidental damage of household appliances
40
What's open perils coverage?
Protection from all perils except those excluded
41
What percentage should total debt payments not exceed?
36% of gross monthly income
42
What percentage of consumer debt payments you shouldn't exceed?
20% of monthly net income
43
What are the vesting schedules available for a DB plan that isn't top heavy?
5 year cliff or 3-7 year graded
44
What are the vesting schedules available for a DC plans that isn't top heavy?
3 year cliff or 2-6 year graded
45
What are the available vesting schedules for top heavy plans?
3 year cliff or 2-6 year graded
46
PEG Ratio
(Price / EPS) ÷ EPS Growth Above 1 is overvalued and under 1 is undervalued

CFP (1 decks)

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