AFC Developing Financial Plans 2

Question 1

When developing a comprehensive financial plan, which step should come first in the financial planning process?

Accepted Answer

Establishing the counselor-client relationship and gathering data

Answer

Setting specific financial goals

Answer

Analyzing the client's current financial situation

Answer

Implementing the recommended strategies

Question 2

A client wants to save $50,000 for a home down payment in 5 years. With an expected 5% annual return, approximately how much must they save monthly?

Accepted Answer

$735

Answer

$650

Answer

$833

Answer

$920

Question 3

Which financial planning document designates who will make financial and legal decisions if the client becomes incapacitated?

Accepted Answer

Durable power of attorney

Answer

Last will and testament

Answer

Living trust

Answer

Beneficiary designation

Question 4

A SMART financial goal must be Specific, Measurable, Achievable, Relevant, and:

Accepted Answer

Time-bound

Answer

Realistic

Answer

Recordable

Answer

Transferable

Question 5

When reviewing a client's financial plan, the counselor discovers their net worth decreased by $15,000 despite positive cash flow. What is the most likely explanation?

Accepted Answer

Asset depreciation exceeded savings contributions

Answer

The client's income was overstated

Answer

The client has undisclosed debts

Answer

The financial plan was calculated incorrectly

Question 6

What is the purpose of a cash flow statement in the financial planning process?

Accepted Answer

To track income received and expenses paid over a specific period

Answer

To list all assets and liabilities at a point in time

Answer

To project future investment returns

Answer

To calculate the client's tax liability