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CFP EXAM QUESTION AND SOLUTION PAPER 2024/2025
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CFP EXAM QUESTION AND SOLUTION PAPER 2024/2025
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CFP EXAM QUESTION AND SOLUTIONPAPER 2024/2025
Financial Planning Answer: A collaborative process that helps maximize a Client's potential for
meeting life goals through Financial Advice that integrates relevant elements of the Client's personal and
financial circumstances.
Automatic Bars from CFP Board Answer:
Suspensions (not Bars) from CFP Board Answer:
Who sets Monetary Policy? Answer: Federal Reserve
Who sets Fiscal Policy? Answer: Congress and the President
Explain the purpose and powers of the Federal Reserve. Answer:
Explain the purpose and powers of Congress in regards to Fiscal Policy. Answer:
Name all of the student loan types. Answer:
Dividend Payout Ratio Answer: Common Stock Dividend / EPS
Return on Equity (ROE) Answer: EPS / Stockholder's Equity per Share
,Dividend Yield Formula Answer: Dividend / Stock Price
Price-Earnings Ratio Answer: Price per Share / EPS
Price to Earnings Growth Ratio Answer: Stocks P/E Ratio / 3-5 Year Growth in Earnings
Dividend Discount Model Answer: V = Next period's dividend / (req. rate of return - dividend growth
rate)
(on formula sheet)
next div = current div(1+growth rate)
Expected Rate of Return Answer: Rate of Return = (Next period's dividend / market price) + dividend
growth rate
Net Present Value NPV Answer: PV of CF - Initial Cost
positive = invest
0 = invest
negative = do not invest
Holding Period Return HPR Answer: (Selling Price - Purchase Price +/- CF) / Purchase price or Equity
invested
List all Systematic Risks Answer: PRIME
Purchasing power risk
Reinvestment rate risk
Interest rate risk
Market risk
, Exchange rate risk
List all Unsystematic Risks Answer: ABCDEFG
Accounting Risk
Business Risk
Country Risk
Default Risk
Executive Risk
Financial Risk
Government/Regulation Risk
Beta Answer: measures volatility of a security relative to market
1 = market
>1 = more volatile than market
<1 = less volatile than market
only use when R-squared is less than 0.7
Coefficient of Variation Answer: SD / Average Return
useful in determining which investment has more risk.
tells us the probability of actually experiencing a return close to the average return
Four basis premises of Traditional Finance Answer: - markets are efficient
- investors are rational
- the mean-variance portfolio theory governs
- returns are determined by risk
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