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CFP EXAM QUESTIONS AND ANSWERS
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CFP EXAM QUESTIONS AND ANSWERS
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CFP EXAM QUESTIONS AND ANSWERSLisa purchased 500 shares of XYZ stock trading at $40 per share, with an initial margin
requirement of 60% and a maintenance margin of 30%. At What price would Lisa
receive a margin call?
A. $20
B. $22.86
C. $57.14
D. $80.00 - Answers -B. $22.86
40*(1-.60)/ 1-.30= 22.86
Lareen purchased 1000 shares of CWC stock for $80 per share with an initial margin
requirement of 65% and a maintenance margin of 40%. Assume the stock price falls to
$30 per share, how much equity must Laureen contribute?
A. $2/share
B. $8/share
C. $10/share
D. $12/share - Answers -C. $10 per a share
Required Equity Actual Equity
Price: 30 Price: 30
Main. Margin *.40 Debt: (28)
Required Equity 12 Actual: $2
Debt = $80* (1-.65) = $28
Required - Actual = contribution amount 12-2=10
MSFT declared a dividend payable to shareholders on the record date of Wed. May
15th. Which is the last possible date an investor could purchase the stock and still
receive the dividend?
A. purchased on May 13th
B. purchased on May 12th
C. purchased on May 11th
D. purchased on May 10th - Answers -D. May 10th.
Which of the following is not a value-weighted index?
A. DJIA
B. S&P 500
, C. Russell 2000
D. Wilshire 5000 - Answers -A. DJIA
The Dow is price weighted.
Your best friend Alex came to your house party for the football game. During the game
he starts telling you about his amazing portfolio performance. He tells you about several
posistions that experienced double digit returns in a matter of days. He says that he lost
on a few but not very much. Impressed you decide to invest some money with him.
What behavioral finance bias does your friend Alex portray?
A. Overconfidence
B. Anchoring
C. Cognitive Dissonance
D. Belief Perserverance - Answers -C. Cognitive Dissonance
Alex is, most likely, exaggerating his gains and minimizing or forgetting about his
losses. He doesn't want the blow to his ego or pride associated with making bad
decisions that lost money. This is an example of cognitive dissonance.
An old Wall Street saying is "Cut your losses and let your profits run." However,
investors often do the opposite. It seems that people are reluctant to admit they made a
mistake in purchasing a stock that subsequently performs poorly. This behavior is most
consistent with:
A. Anchoring
B. Herd Mentality
C. Regret Avoidance
D. Representativeness - Answers -C. Regret Avoidance
Regret avoidance, also known as the disposition effect, leads investors to take action or
to refuse to act in hopes of minimizing any regret over their actions or inactions. In
investments, it leads people to sell winners too soon and to hold on to losers too long.
Charlie has noticed that the stock she purchased tends to have a very tight distributions
around the mean but there seems to be a high probability of "outliers" (multi-deviation
returns). this is most indicative of what type of curve?
A. Positive skewness
B. Leptokurtosis
C. Normal
D. Lognormal - Answers -B. Leptokurtosis
Leptokurtic distribution reflects the tendency of observations to fall closely around the
mean creating a peaked distribution at the mean with thicker tails. If historical returns
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