FREE AFP Financial Planning Questions and Answers

Question 1

Jane works at a large financial institution.
She is a member of their DC pension plan which is invested in a balanced fund (50% dividend mutual fund and 50% global government bond fund) for a total amount of $50,000.
She also has her own self-directed RRSP that has $30,000 in mortgage-backed securities and $40,000 invested in CMHC bonds.
Finally, her TFSA has $10,000 in cash and $45,000 invested in the S&P/TSX 60 ETF.
What is Jane's current asset allocation?

Accepted Answer

6% Cash, 54% Fixed Income, 40% Equities

Answer

10% Cash, 30% Fixed Income, 60% Equities

Answer

6% Cash, 80% Fixed Income, 14% Equities

Answer

6% Cash, 24% Fixed Income, 68% Equities

Question 2

Connie is looking for income-focused investments for her portfolio as she is nearing retirement and will require this income to live off of. Which of the following investments would you recommend for her to achieve her investment objectives?
1. Mortgage-backed securities
2. Growth stocks
3. Preferred shares
4. Absolute return hedge fund

Accepted Answer

1 and 3 only

Answer

1 and 2 only

Answer

2 and 3 only

Answer

1 and 4 only

Question 3

Richard, a financial planner, has been working with his client Glenn for the last 5 years. Glenn is the CEO of a small software company Glennatical listed on the TSX. Richard is considering to purchase a large amount of common shares of Gleenatical for his own personal investment account. What should Richard do in this situation?

Accepted Answer

Communicate to Glenn that he will discontinue their professional relationship because of the future purchase of common shares in Glennatical.

Answer

Communicate this potential conflict of interest with Glenn in your next financial planning meeting.

Answer

Continue to provide services to the client without disclosing the future purchase of common shares.

Answer

Communicate your intentions immediately to the client while continuing to provide your services.

Question 4

Michelle, age 70, and her husband, Kip, age 74 were both retired for several years when Kip passed away from heart disease.  He was receiving a monthly CPP payment of $495.  Michelle is currently receiving a pension payment of $350 per month.  As Kip's surviving spouse, what would be the lump-sum death benefit to Michelle?

Accepted Answer

$2,500.00

Answer

$5,940.00

Answer

$2,970.00

Answer

$1,485.00

Question 5

Barry, age 67, is a widower and has two adult children, aged 36 and 33, who are both married. Twenty years ago, Barry purchased an investment property for $100,000 and today it is worth $200,000. He is considering transferring the property into joint tenancy with his two adult children. Which of the following is the biggest risk to consider before electing a transfer to joint tenancy?

1. With the property in joint tenancy when Barry dies, it will not go through his estate and he will not have to pay probate
2. Barry will not be able to split the income related to the investment property as attribution rules will apply to him
3. He will lose control of the property and his children could make changes or even sell their shares to someone else
4. Both Barry's children are married and if either of their marriages breakdown the investment property may be included in family assets.

Accepted Answer

3 and 4 only

Answer

1 and 2 only

Answer

2 and 3 only

Answer

1 and 4 only

Question 6

Amy is a single mother with one child, Eric, who just turned 5-years-old.  Amy has recently heard from her bank advisor that it would make sense for her to open an RESP to help her start saving for his future education. She has managed to save some money, even though she only makes $20,000, and is ready to deposit $5,000 into the account this year. Given her income and first contribution, what amount of CESG (Canadian Education Savings Grant) would she receive in this first year?

Accepted Answer

$1,100

Answer

$1,000

Answer

$500

Answer

$2,500

Question 7

Shailesh has been looking for ways to reduce probate on his estate as part of his overall estate planning review. Which of the following options below would remove probate fees that would need to be paid. Assume Shailesh is a widow with an adult daughter aged 24.
1. Transferring the cottage into joint ownership with his daughter today.
2. Designating his estate as the beneficiary of his life insurance policy and utilizing the Will to create a testamentary trust for his daughter utilizing the proceeds.
3. Naming his daughter as the beneficiary of his TFSA.
4. Transfer beneficial ownership only of his non-registered portfolio to his daughter to avoid tax on the immediate transfer.

Accepted Answer

1 and 3 only

Answer

1 and 4 only

Answer

3 and 4 only

Answer

2 and 4 only

Question 8

Mirhad wants to leave $500,000 to his favorite charity when he dies. If his net income in the year of death is $200,000, how much of this donation is eligible for a donation tax credit on his final return?

Accepted Answer

$200,000

Answer

$150,000

Answer

$375,000

Answer

$500,000

Question 9

How is the annual contribution room for a tax-free savings account (TFSA) calculated?

Accepted Answer

The current year's TFSA dollar limit, plus the amount of any withdrawals made in the preceding year, plus the amount of any unused contribution room.

Answer

The current year's TFSA dollar limit, minus the amount of any withdrawals made in the preceding year, minus the amount of any unused contribution room.

Answer

The current year's TFSA dollar limit, plus the amount of any withdrawals made in the preceding year, minus the amount of any unused contribution room.

Answer

The current year's TFSA dollar limit, plus the amount of any withdrawals made in the current year, plus the amount of any unused contribution room.

Question 10

Georgina and Hank meet with their advisor regarding income splitting as they approach retirement.  Hank, age 55, expects to retire in 10 years while Georgina is retiring in two years when she turns 60.  His annual income will be $125,000 up until he retires while she is expected to receive $27,000 from her defined benefit pension.  Hank has $380,000 in RRSPs, and $70,000 in his TFSA, and has maximized her contributions annually while Georgina has $48,000 in her RRSP and never has contributed to her TFSA.  What income-splitting strategy should the advisor recommend they use?

Accepted Answer

Hank contributes to Georgina's RRSP

Answer

Georgina defers her retirement pension to age 70

Answer

Hank transfers dividend income from his TFSA and RRSP directly to Georgina as income

Answer

Hank contributes to Georgina's TFSA