CFP Exam Review with Updated Questions
and Answers 2023
Eurodollar - CORRECT ANSWER a deposit in a foreign bank that is denominated in
dollars
Yankee Bond - CORRECT ANSWER dollar denominated bonds issued in the US by
foreign banks and corporations, used when market conditions in the US are ...
CFP Exam Review with Updated Questions and Answers 2023 Eurodollar - CORRECT ANSWER a deposit in a foreign bank that is denominated in dollars Yankee Bond - CORRECT ANSWER dollar denominated bonds issued in the US by foreign banks and corporations, used when market con ditions in the US are better than those overseas. OID - CORRECT ANSWER original issue discount - a bond discounted from par value as a zero coupon bond. There is no taxable phantom income from interest accretion but it must be reported. Purchasing Power Risk - CORRECT ANSWER the loss of purchasing power through inflation Reinvestment Rate Risk - CORRECT ANSWER the risk that proceeds available for reinvestment must be invested at a lower interest rate than the instrument that generated the proceeds Interest Rate Risk - CORRECT ANSWER the risk that a change in interest rates will cause the market value of the fixed income security to fall Market Risk - CORRECT ANSWER the risk of the overall market Financial Risk - CORRECT ANSWER refers to how the firm fi nances its assets Business Risk - CORRECT ANSWER refers to the nature of the firms’ operation Geometric Mean - CORRECT ANSWER also called time weighted return Dollar Weighted Return - CORRECT ANSWER also called IRR Convexity - CORRECT ANSWER the degree to which duratin changes as a bonds YTM changes, it is largest for low coupon bonds, long maturity bonds and low yield bonds. --
IT ALLOWS US TO IMPROVE THE DURATION APPROX IMATION FOR BOND PRICE CHANGES Current rati o - CORRECT ANSWER Current assets/current liabilities Target: 1.0 -2.0 Housing payment ratio - CORRECT ANSWER All monthly nondoscretionary housing costs (PITI) / monthly gross income
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