FFC Personal Financial Planning 2

Question 1

A client has $10,000 in credit card debt at 22% APR and $5,000 in savings earning 1.5%. What is the most financially optimal action?

Accepted Answer

Transfer the balance to a 0% introductory APR card and keep savings

Answer

A 0% balance transfer eliminates the 22% interest while preserving liquid savings, making it the most cost-effective strategy.

Question 2

Which financial planning principle states that a dollar received today is worth more than a dollar received in the future?

Accepted Answer

Time value of money

Answer

The time value of money recognizes that money available now can be invested to earn returns, making it worth more than the same amount received later.

Question 3

A couple has a combined gross income of $120,000 and wants to buy a home. Using the 28/36 rule, what is the maximum monthly housing payment they should target?

Accepted Answer

$2,800

Answer

The 28% front-end ratio applied to $120,000 annual income ($10,000/month) yields a maximum housing payment of $2,800.

Question 4

What is the primary purpose of a personal net worth statement?

Accepted Answer

To measure total financial position by comparing assets to liabilities

Answer

A net worth statement is a financial snapshot that subtracts total liabilities from total assets to reveal overall financial health.

Question 5

Which type of insurance is specifically designed to replace lost income if a client becomes disabled and cannot work?

Accepted Answer

Disability income insurance

Answer

Disability income insurance provides a portion of pre-disability income if the insured becomes unable to work due to illness or injury.

(FFC) Financial Fitness Coach Certification Practice Test

(FFC) Financial Fitness Coach Certification Practice Test

FFC Personal Financial Planning 2