CFP Certified Financial Planner MCQ 2 — Questions and Answers
Question 1: A client aged 55 wants to withdraw from their 401(k) early. Which exception allows penalty-free withdrawals before age 59½?
- Substantially Equal Periodic Payments (SEPP) under Rule 72(t) (Correct answer)
- Direct rollover to a Roth IRA
- Hardship withdrawal for any personal expense
- Transfer to a taxable brokerage account
Correct answer: Substantially Equal Periodic Payments (SEPP) under Rule 72(t)
Rule 72(t) SEPP allows penalty-free early withdrawals from retirement accounts as long as payments continue for at least 5 years or until age 59½, whichever is longer.
Question 2: Under the CFP Code of Ethics, which duty requires a CFP® professional to place the client's interests above their own?
- Confidentiality
- Diligence
- Loyalty (Correct answer)
- Competence
Correct answer: Loyalty
The duty of Loyalty requires CFP® professionals to place the interests of the client above those of the CFP® professional and the firm.
Question 3: A married couple filing jointly in 2024 has a combined AGI of $250,000. What is their Medicare surtax exposure on net investment income?
- No surtax; they are below the threshold
- 3.8% on net investment income above $250,000
- 0.9% on earned income above $250,000
- Both 3.8% NII surtax and 0.9% Additional Medicare Tax apply (Correct answer)
Correct answer: Both 3.8% NII surtax and 0.9% Additional Medicare Tax apply
At $250,000 AGI for MFJ, the couple hits the threshold for both the 3.8% Net Investment Income Tax on investment income and the 0.9% Additional Medicare Tax on earned income.
Question 4: Which Social Security claiming strategy is generally most beneficial for a healthy single individual who expects to live past age 80?
- Claim at age 62 to maximize total payments received
- Claim at full retirement age (FRA) for the standard benefit
- Delay claiming until age 70 to maximize the monthly benefit (Correct answer)
- Claim at 65 to align with Medicare eligibility
Correct answer: Delay claiming until age 70 to maximize the monthly benefit
Delaying Social Security until age 70 increases the monthly benefit by 8% per year beyond FRA, making it optimal for individuals with above-average life expectancy.
Question 5: A client holds a bond with a 6% coupon, 10 years to maturity, and a current price of $1,080. If market rates rise to 7%, what happens to the bond's price?
- The price rises above $1,080 due to increased coupon attractiveness
- The price falls below $1,080 because the bond is now less competitive (Correct answer)
- The price stays at $1,080 regardless of market rates
- The price rises to $1,000 par value
Correct answer: The price falls below $1,080 because the bond is now less competitive
Bond prices move inversely with interest rates; when market rates rise above the coupon rate, the bond's price falls to make its yield competitive with new issues.
Question 6: Which type of life insurance provides permanent coverage, builds cash value, and allows the policyholder to adjust premiums and death benefits?
- Term life insurance
- Whole life insurance
- Universal life insurance (Correct answer)
- Variable term insurance
Correct answer: Universal life insurance
Universal life insurance is a flexible permanent policy that allows adjustments to premium payments and death benefit amounts, while accumulating cash value at a current interest rate.
Question 7: A client's portfolio has a beta of 1.3. If the market returns 10% and the risk-free rate is 2%, what is the expected portfolio return using CAPM?
- 13.0%
- 10.4%
- 12.4% (Correct answer)
- 14.0%
Correct answer: 12.4%
CAPM: Expected Return = 2% + 1.3 × (10% − 2%) = 2% + 10.4% = 12.4%.
CFP Certified Financial Planner MCQ 2
A client aged 55 wants to withdraw from their 401(k) early.
Which exception allows penalty-free withdrawals before age 59½?