1 Which of the following statements concerning the CFP Board

1. Which of the following statements concerning the CFP Board\'s Practice Standards is (are) correct?
I. They are enforceable by the CFP Board against CFP designees.
II. They are designed to be a basis for legal liability when they are breached.
      
A. I only
      
B. II only
      
C. Both I and II
      
D. Neither I nor II

2. Kevin and Christine were divorced last year. According to the terms of the divorce, Kevin paid Christine $50,000 of alimony payments and $75,000 of child support payments. Which of the following statements is correct?
I. Christine must add $125,000 of income on her tax return.
II. Christine can deduct $75,000 from her tax return.
      
A. I only
      
B. II only
      
C. Both I and II
      
D. Neither I nor II

3. Which of the following statements concerning net worth on the financial position statement is (are) correct?
I. Net worth is the key to understanding the nature of the client\'s assets and liabilities.
II. Net worth is what remains if all the client\'s assets are sold at their fair market values and all debts are paid.
      
A. I only
      
B. II only
      
C. Both I and II
      
D. Neither I nor II

4. Monetary policy tools include which of the following?
I. setting margin requirements on brokerage accounts
II. changing federal income tax rates
      
A. I only
      
B. II only
      
C. Both I and II
      
D. Neither I nor II

5. Which of the following is (are) guaranteed to keep pace with increases in college tuition costs for a state school?
I. CollegeSure CDs
II. zero coupon bonds
      
A. I only
      
B. II only
      
C. Both I and II
      
D. Neither I nor II

Solution

Answer 1. The correct choice is B. As only II is correct

With the potential for CFP Board sanctions against those who violate the regulations contained in these documents. CFP Board will follow theDisciplinary Rules set forth below when enforcing the Code of Ethics, Rules of Conductand Practice Standards for CFP professionals and enforcing the Fitness Standards.

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Answer 2.   D. is the correct choice because of the reason explained below:

Property settlements between divorced taxpayers have no income tax effects. The receiver of property does not have income and the payor does not receive a deduction. Alimony payments are taxable to the payee and deductible by the payor. Therefore, the spouse who must make a property settlement payment can benefit by having the payment disguised as deductible alimony.

Therefore Neither I nor II and hence D is the answer.

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Answer 3.     The correct choice is C.

Net worth is the amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure of how much an entity is worth. Net worth is also seen as the difference of the asset and liabilities. Hence both I and II are correct, therefore C is the correct choice.

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Answer 5.    The correct answer is A. I only

The CollegeSure CD is an FDIC-insured certificate of deposit (CD) with an interest rate that is tied to the annual increase in college costs. while the zero-coupon bond has no such provision.