General Principles and Conduct Flashcards
1
Q
Real GDP Excludes:
1)
2)
3)
4)
5)
A
1) imports
2) inflation
3) transactions where money changes hands, but no new goods or services are produced
4) income of U.S. citizens working abroad
5) profits earned by U.S. companies in foreign countries
2
Q
Real GDP Includes:
1)
2)
3)
A
1) market value of all final goods and services produced within an economy
2) income of foreigners working in the U.S.
3) profits that foreign companies earn in the U.S.
3
Q
When investors consider the past, they will tend to suffer from:
1)
2)
3)
A
1) house-money effect (take more risk)
2) snakebite effect (take less risk)
3) break-evenitis (take more risk)
4
Q
The percentage of deposits that must be held on reserve
A
reserve requirement
5
Q
The rate at which member banks borrow from the government
A
discount rate
6
Q
What are the Fed’s 3 primary tools?
A
1) discount rate
2) reserve requirement
3) open market activities
7
Q
Who controls Fiscal Policy?
A
Congress
8
Q
Who controls Monetary Policy?
A
The Fed
9
Q
When a good’s quantity demanded responds little to price changes
A
inelastic
10
Q
When a good’s quantity demanded responds greatly to price changes
A
elastic
11
Q
What is the GDP formula?
A
C + I + G + (X-M)
C = consumer spending
I = investment made by industry
G = government spending
X = exports
M = imports
12
Q
The market value of goods and services produced by labor and property in the U.S.
A
GDP
13
Q
A recession is defined as:
A
2 consecutive quarters of negative (year-over-year) GDP growth
14
Q
Contraction in the business cycle is characterized by:
A
decreasing GDP and increasing unemployment rate
15
Q
Expansion in the business cycle is characterized by:
A
increasing GDP and decreasing unemployment rate
16
Q
A written reproach of the respondent’s behavior published in a press release
A
public letter of admonition
17
Q
Prohibition of using CFP marks, stating or suggesting they are a CFP for a minimum of 90 days and a maximum of 5 years
A
suspension
18
Q
The termination of a respondent’s right to use the CFP marks. A permanent bar from using or obtaining CFP certification
A
revocation
19
Q
An unpublished written reproach mailed by the DEC to a censured respondent
A
private censure
20
Q
An appeal to the Board of Directors’ Appeals Committee must be filed within how many days of issuance of DEC final order?
A
30
21
Q
Hearing documents, written statements, and stipulations are due within how many days after delivery of a written complaint?
A
45
22
Q
Consists of at least 3 people, most of whom must be a CFP professional, and the Chair must be a DEC member
A
hearing panel
23
Q
Has the authority to issue a final order that finds facts, determines whether a violation has occurred, and, where appropriate, imposes discipline in the form of a sanction
A
Disciplinary and Ethics Committee (DEC)
24
Q
What are the 3 levels of Fiduciary Duty?
A
1) duty of care
2) duty of loyalty
3) duty to follow client instructions
25
Written notice must be delivered to the CFP board how many days after adverse conduct?
30 calendar days
26
What is the "signal" to Fiduciary Duty?
financial advice
27
How many days must a CFP disclose material changes (such as fees) to a client?
90
28
What are the 3 ladders under the Duty of Loyalty?
1) above my own interests
2) above my firm's interests
3) avoid material conflicts of interest
29
The witness list is due within how many days after receiving a complaint?
30
30
Has the authority to investigate and file a complaint against a respondent for alleged violations
CFP Board Counsel
31
The rate at which banks borrow from each other
fed funds rate
32
The rate at which banks lend to their customers
prime rate
33
What is the ideal GDP %?
3-3.5%
34
What is the ideal unemployment rate?
4%
35
What is the target inflation rate?
2-2.5%
36
This theory happens when people suffer more greatly from losses than they benefit from gains
prospect theory
37
What effect lends to people seeking pride and avoiding regret?
disposition effect
38
What bias can lead to single stock concentrations?
familiarity
39
Under SEC Rule 415, how long do issuing firms have to issue shares from their IPO filing?
2 years
40
When a new issue is released to the public for the first time, who is the issue registered with?
the SEC
41
Items on a personal balance sheet are listed at what value?
FMV
42
Items on a corporate balance sheet are reported at what value?
the lower of cost or FMV
43
The purpose of a balance sheet is to look at what?
financial position
44
The purpose of a statement of cash flows is to look at what?
cash movements
45
What are the 4 types of financial ratios?
1) liquidity ratio
2) activity ratio
3) profitability ratio
4) debt ratio
46
What is the current ratio?
current assets / current liabilities
47
What is the quick ratio?
(current assets - inventories) / current liabilities
48
What is the working capital ratio?
current assets - current liabilities
49
What is the debt to equity ratio?
total long-term debt / equity
50
What is the times interest earned ratio?
EBIT / interest expense
51
What is the debt ratio?
total debt / total assets
52
What is PITI?
principal, interest, taxes, and insurance
53
What is the front-end housing ratio?
PITI / gross income
54
What is the back-end housing ratio?
PITI + other debts / gross income
55
What is the front-end housing percentage limit?
28%
56
What is the back-end housing percentage limit?
36%
57
For a household with 2 earners, or 1 earner and the other having "substantial income," what is the emergency fund requirement?
3 months of expenses
58
For a household with only 1 source of income, what is the emergency fund requirement?
6 months of expenses
59
If both spouses work at the same company, thus having a double income, what is the rule of thumb for emergency funding?
6 months, in case the business goes under and they both lose their job
60
How do you calculate the adjusted basis to a donee when gift taxes have been paid?
1) find the appreciation factor:
FMV - basis / FMV- annual exclusion
2) multiply the appreciation factor by gift taxes paid
3) add step 2 to the original basis
61
Below what number is a credit score considered "poor?"
below 580 is a poor credit score
62
At the commencement of an investigation, a Respondent must deliver to CFP Board Counsel a document acknowledging receipt of the Notice of Investigation within ____________from delivery to Respondent of the Notice of Investigation.
14 days
63
Who reviews and decides all appeals?
the appeals committee of the board of directors
64
What are the 3 main types of assets listed on a statement of financial position?
1. cash and cash equivalents
2. investment assets
3. personal use assets
65
A Respondent must deliver a written Answer to an Amended Complaint no later than the later of ____________ of delivery of the Amended Complaint or the date an Answer to the original Complaint was due.
14 days
66
If CFP Board Counsel finds probable cause to believe that Respondent violated the Code and Standards or the Pathway to CFP® Certification Agreement, then CFP Board Counsel must take one or more of the following actions:
1. letter of dismissal
2. settlement offer
3. complaint
67
A liquidation type bankruptcy procedure. This eliminates a consumer's debt by having a trustee sell some of the debtor's personal property to repay creditors
chapter 7
68
What debts cannot be ignored after 115 days of Ch 7 filing?
child support, alimony, income tax less than 3 years past due, student loans, and secured debt
69
This type of bankruptcy allows debtors to keep their personal assets, but are required to pay their debt in full over a period
chapter 13
70
What is the most common type of bankruptcy for businesses?
chapter 11
71
The right to know costs and terms of credit
consumer credit protection act
72
The right to a fair opportunity to obtain credit
equal credit opportunity act
73
The right to know what's in your credit file
fair credit reporting act
74
The right to have billing mistakes resolved
fair credit billing act
75
The right to be protected from collection agencies
fair debt collection practices act
76
The ultimate overseer of all things debt
consumer financial protection bureau (CFPB)
77
In Ch. 13 bankruptcy, an individual must have no more than $_______ in unsecured debt (credit cards, personal loans)
$419,275
78
In Ch. 13 bankruptcy, an individual must have no more than $_______ in secured debt (mortgage, car loans)
$1,257,850
79
The standard for credit scoring
FICO
80
The 3 main credit bureaus that maintain a consumer's credit report:
1. Experian
2. Equifax
3. TransUnion
81
Payment history accounts for what percent of a credit score?
35%
82
Amounts owed accounts for what percent of a credit score?
30%
83
Length of credit history accounts for what percent of a credit score?
15%
84
New credit accounts for what percent of a credit score?
10%
85
Credit mix accounts for what percent of a credit score?
10%
86
What is considered an exceptional credit score?
850
87
Between what numbers is considered a "fair" credit score?
580-670
88
Between what numbers is a "good" credit score?
740-800
89
How many years does it take for a missed payment to be removed from a credit report?
7 years
90
Mortgages under $______ are considered conventional
$766,550
91
Mortgages above $766,550 are considered _____ mortgages and require higher interest rates
jumbo
92
Borrowers who put down less than 20% on a home will be required to:
pay PMI until the 20% equity is reached, following 2 years of on-time payments
93
A mortgage in which a large portion of the borrowed principal is repaid in a single payment at the end of the period:
balloon mortgage
94
Under the provisions of the Equal Credit Opportunity Act, a potential borrower must receive a response from a creditor within _________ after an application indicating whether the request has been approved or denied.
30 days
95
529s can make a qualified distribution up to $__________ per year in tuition expenses for K-12 schools
$10,000
96
You must use the funds in a Coverdell account by what age?
30
97
Is there an age limit to using a 529 account?
no
98
A Coverdell ESA can be funded with a maximum of $_________ per beneficiary, per year, combined from all sources
$2,000
99
To buy a qualifying U.S. savings bond, the bond purchaser must be at least ____ years old at the time of bond issue
24
100
529 plans are considered to be whose asset in consideration for financial aid?
parent
101
Coverdell accounts are considered to be whose asset in consideration for financial aid?
parent
102
EE/I bonds are considered to be whose asset in consideration for financial aid?
the owner of the bond
103
UTMA/UGMA accounts are considered to be whose asset in consideration for financial aid?
student
104
EE/I bonds can be used to pay for what?
tuition and fees only
105
If the owner of an EE/I bond dies before bond maturity, how is it considered in their gross estate?
the value of the bond is part of their gross estate
106
When applying for financial aid, is a Roth IRA or a traditional IRA considered in the calculation?
no
107
FDIC insurance coverage for an irrevocable trust is up to:
$250,000 for the non-contingent interest of each plan beneficiary
108
Which law indicates that supply for an economic product will vary directly with its price?
the law of supply (the law of supply states that producers will supply more of an economic good the higher the price and visa-versa)
109
If the FMV (at the time of the gift) is greater than the donor’s basis then:
- the donee will use the donor’s basis as their own
- the donee will assume the donor’s holding period
110
What % are parental assets counted in EFC?
5.64%
111
What % are student assets counted in EFC?
20%
112
What % is student income counted in EFC?
50%
113
What is the financial need formula?
Cost of Attendance (COA) - EFC = financial need
114
What is not counted towards EFC?
retirement assets and home equity
115
What is the protected amount for student's income for calculating EFC?
$9,410
116
FAFSA has a __ year look-back for reported income
2
117
As EFC increases, financial aid awards _________
decrease
118
AOTC is not available to be used for what?
room and board
119
How much is the AOTC credit refundable?
40% (up to $1,000)
120
Is the LLC a refundable credit?
no
121
What is the maximum benefit for AOTC?
up to $2,500 per eligible student
122
What is the maximum benefit for LLC?
up to $2,000 per return
123
Can you use the AOTC if you have a felony drug conviction?
no
124
The LLC qualified expenses:
tuition and fees only
125
The AOTC qualified expenses:
tuition, fees, and materials needed for the course of study
126
What years are the AOTC credit available for?
first 4 years of undergrad
127
Can you use the LLC if you are in graduate school?
yes
128
What kind of student loan is needs based?
subsidized loan
129
Who pays the interest in a subsidized loan?
the federal government
130
A PLUS loan can be used for what kind of school?
grad, undergrad, or professional student
131
The amount of a PLUS loan cannot exceed:
cost of tuition - any other financial aid
132
Subsidized loans can only be used for what kind of school?
undergraduate
133
Unsubsidized loans can be used for what kind of school?
graduate or undergraduate
134
Who pays the interest in an unsubsidized loan?
the student
135
Is blindness considered a disability that qualifies for a 529 ABLE account?
yes
136
What is the maximum you can put into an ABLE account each year?
$18,000
137
What is the age limit for ABLE accounts?
26
138
Having 2 or more personal bankruptcies is deemed:
a presumptive bar
139
What is the maximum loan amount you can take from a 401(k)?
the greater of $10,000 or 50% of your vested balance OR $50,000, whichever is less
140
Provides individuals with the right to know the terms and costs of their credit
Consumer Credit Protection Act
141
Which law indicates that demand for a product will vary inversely with its price?
the law of demand
142
What is the minimum time frame for a CFP board issued Administrative Order of Suspension?
1 year and 1 day
143
In theory, are all goods considered to be elastic in the long-term?
yes
144
What is subject to an automatic stay under Ch. 7 and Ch. 13 bankruptcy?
foreclosures, property repossessions, and sales of property while repayments are being made
145
Which law indicates that supply for an economic product will vary directly with its price?
the law of supply
