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CFP Mock Exam Practice Questions and Answers |100% Pass
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CFP Mock Exam Practice Questions and Answers |100% Pass Which of the following is correct regarding certificates of deposit (CDs)? A. CD's are short-term securities that may be bought or sold in the open market at a market- determined price. B. CD's typically invest in high-quality, short-term...

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  • October 15, 2024
  • 65
  • 2024/2025
  • Exam (elaborations)
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EMILLECT 2024/2025 ACADEMIC YEAR ©2024 EMILLECT. ALL RIGHTS RESERVED. FIRST PUBLISH OCTOBER 2024.




CFP Mock Exam Practice Questions and
Answers |100% Pass

Which of the following is correct regarding certificates of deposit (CDs)?




A. CD's are short-term securities that may be bought or sold in the open market at a market-

determined price.


B. CD's typically invest in high-quality, short-term investments, such as commercial paper, T-Bills,

and money market funds.


C. CDs are known as "time deposits"


D. The financial institution pays a variable rate of interest for the term of the CD. - Answer✔✔-C.

CDs are known as "time deposits"




[Certificates of deposit (CDs) are known as "time deposits". They are deposits made with a bank

for a specified period of time.]


All but which of the following are correct regarding Treasury bills?




A. Have maturities of one year or less

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,EMILLECT 2024/2025 ACADEMIC YEAR ©2024 EMILLECT. ALL RIGHTS RESERVED. FIRST PUBLISH OCTOBER 2024.



B. Sold in minimum denominations of $500


C. Considered to be default risk free


D. Sold at a discount to par - Answer✔✔-B. Sold in minimum denominations of $500




[Treasury bills are sold in minimum denominations of $1,000.]


Which of the following describes the relationship between total risk, systematic risk, and

unsystematic risk?




A. Total risk= systematic risk - unsystematic risk


B. Total risk - systematic risk= unsystematic risk


C. Unsystematic risk - total risk= systematic risk


D. Total risk + unsystematic risk= systematic risk - Answer✔✔-B. Total risk - systematic risk=

unsystematic risk




[Total risk = systematic risk + unsystematic risk. This formula can be rewritten as: Total risk -

systematic risk = unsystematic risk.]


Common stock is referred to as __________ because the owner of the stock is also an owner of

the corporation and may participate in its capital and income growth.


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,EMILLECT 2024/2025 ACADEMIC YEAR ©2024 EMILLECT. ALL RIGHTS RESERVED. FIRST PUBLISH OCTOBER 2024.




A. debt


B. equity


C. cumulative stock


D. preferred stock - Answer✔✔-B. equity




[Common stock is referred to as equity because the owner of the stock is also an owner of the

corporation and may participate in its capital and income growth.]


5. Which of the following are correct regarding a bond's yield to maturity (YTM)?


(1) The YTM assumes that coupon payments are reinvested at the YTM rate of return for the life

of the bond.


(2) When the market rate of interest for the same term and risk is higher than the coupon rate,

a discount will be priced into the bond.


(3) Bonds that are riskier will have lower yields to maturity.


(4) The YTM is the internal rate of return for cash flow associated with a bond, including the

purchase price, coupon payments, and maturity value.




A. (1) and (2) only


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, EMILLECT 2024/2025 ACADEMIC YEAR ©2024 EMILLECT. ALL RIGHTS RESERVED. FIRST PUBLISH OCTOBER 2024.



B. (3) and (4) only


C. (1), (2), and (4) only


D. (1), (3), and (4) only - Answer✔✔-C. (1), (2), and (4) only




[Bonds that are riskier will have higher yields to maturity.]


An investment grade bond is one that is rated __________ or higher by the Standard & Poor's

bond rating service. A high-yield bond is rated __________ or lower by Standard & Poor's.




A. BBB, BB


B. BBB+, BB


C. BBB-, BB+


D. BB, BBB - Answer✔✔-C. BBB-, BB+




[An investment grade bond is one that is rated BBB- or higher by the Standard & Poor's bond

rating service. A high- yield bond is rated BB+ or lower by Standard & Poor's.]


Which of the following describes bonds that have a legal claim to specific assets in the event of

default, insolvency, or liquidation?




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