Financial Planning Workbook

Introduction to Financial Planning – Practice Book
1. Arrange the following financial planning functions into the logical order in which these functions
are required to be performed by a certified financial planner.
I. Interview clients, identify preliminary goals
II. Monitor financial plans
III. P r e p ar e f i na n ci a l p l an
IV. Implement financial strategies, plans and products
V. Collect, analyze and evaluate client data
A. 1,111,V,IV,Il
B. V,I,111,11,IV
C. I,V,IV,111,11
D. I,V III, IV,Il
2. A comprehensive financial plans include:
A. Wealth accumulation
B. Wealth Distribution
C. Risk Management
D. All of the above
3. While review of a financial plan, what are the factors to be considered:
A. Change in the client's objective

B. Change in client's earning
C. Change in the economy
D. All of the above
4. ______________is the process of meeting the goals of your life through the proper
management of your financial resources.
A. Financial planning
B. Budget i ng
C. Cash inflow/outflows
D. S a vi n gs
5. Financial planning is the process of developing a personal roadmap for your financial well-
being. Which of the inputs are required for the financial planning process?
A. Your finances, i.e. your income, assets and liabilities

B. Your goals, i.e., your current and future financial needs
C. Your appetite for risk
D. All of the above
6. You receive a phone call from a person with whom you have never spoken. The caller is excited,
just having heard that a new mutual fund is positioned to deliver larger gains in the coming year.
The caller wishes to purchase shares of the fund through you. Keeping in mind stages of the overall
personal planning process, which is the following questions that address the first two stages of the
financial planning process should you ask the caller?
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I. What are your goals for this investment?

II. What other investme nts do you have?
III. W h a t i s yo u r d at e of b i r t h ?
IV . Do you want your di vi dend reinvested?
A. I and II Only
B. II and IV Only
C. I,II and III Only
D. I,II and IV Only
7. While analyzing and evaluating client's information in the financial planning process which of
the following tasks you have to take?
I. Identifying alternative investment vehicle
II. Identifying financial strengths and weaknesses
III. Recommending specific tax strategies
IV. Preparing preliminary financial statements
A. II and IV
B. I,II and III
C. II,III and IV
D. I,II,III and IV
8. Which of the following data is qualitative data?
A. Income of a person
B. Family member
C. Risk tolerance
D. Time required for achieving the goal
9. Which of the following data cannot be collected through a single direct question?
A. Income of a person
B. Family members
C. Risk tolerance
D. Term for the goal to be achieved
10. In the plan developing stage of the financial planning process what is the important thing to
be considered by the financial planner?
A. Establishing the relationship

B. Verify that all the required information is gathered
C. Collecting the data of the clients financial position
D. All of the above
11. A financial planner needs to develop appropriate strategies for the client. You as a certified Financial
Planner would work on which of the following area/s during the fourth step of financial planning
process.
I. Cash flow management
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II. In s u r a n c e p l a n ni n g
III. Investment planning
IV. Retirement planning
V. In c o me t a x p l a nn i n g
VI. Estate Planning
A. V only
B. II and III
C. V and IV
D. All of the above
12. The first step of the financial planning process involves.
A. Establishing the relationship

B. Data gathering and goal setting
C. Implementation
D. Initial consultation
13. An appropriate financial plan is influenced by one's
A. Income
B. Age
C. Liquidity
D. All of the above
14. The role of financial planner can be best defined as which of the following?
A. Develop a sound financial plan.

B. Review the financial plan
C. Inform decisions to the client
D. All of the above
15. A Certified Financial Planner obtains a new client. During the fact -finding
process, the CFP discovers that client's previous advisor, who is also a CFP, had
files several tax forms incorrectly with computational errors. The CFP initial duty to the client
should be which of the following?
A. Contacting the other financial planner

B. Contacting the CFP Board
C. Contacting the SEBI
D. Informing the client of the situation
16. "Whether a Member is employed by a financial planning firm, an investment institution, or serves as an
agent for such an organization, or is self-employed, all Members shall adhere to the same standards of
disclosure and service" as per the rules contained under the Code of _____________
A. Diligence
B. Competence
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C. Fai r ness
D. Obj ectivity
17. Which of the following financial decisions results from one's personal planning?
A. Personal financial plan

B. Personal financial objective
C. Personal budget
D. None of the above
18. You have a two year old daughter named gamma. You want to have enough money so that you can pay
for her college in sixteen years.
A. A short term financial goal

B. An intermediate term financial goal
C. A long term financial goal
D. A personal goal
19. Which of the following are most commonly cited reasons that people give for why they sought out a financial
planner?
I. To assist with the time and effort of managing their finances
II. To get timely advice on markets and investment opportunities
III. To seek advice on tax reduction
IV. Budget planning in order to optimize their investable income
A. I,III and II
B. 1,11,111and IV
C. 1,111 and IV
D. I and II
20. After determining your goals what is the next step in the financial planning process.
A. Review and revision of plan

B. Establishing the client planner relationship
C. Analyzing information
D. Gathering data
21. Which of the following is the basic characteristic of a client goal?
A. It must be defined in terms of money

B. It must be quantified
C. It must not be vague
D. All of the above
22. Which of the following information is difficult to obtain from the client?
Quantitative Information Qualitative Information
A. No Yes
B. Yes Yes
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C. No No
D. Yes No
23. _________ and __________ regulate Scheduled Banks and Plantation companies
respectively.
A. RBI, SEBI
B. RBI, Forward Markets Commission
C. SEBI, Multi Commodities Exchange
D. RBI and the Food Ministry
24. Which of the following is a step in developing the financial plan?
A. Evaluating one's financial plan

B. Identifying alternatives plans that could achieve one's goal
C. Establishing one's financial goals.
D. All of the above
25. Re arrange the following six steps of financial planning process from start to end.
I. Find a professional Investment Services Wealth Coach
II. Data Gathering
III. Identification
IV. Written alternatives and Recommendations
V. Implementation
VI. Review and service
A. I,11,111,IV,V,V1
B. II,IV,VI,V,111,1
C. I,V,VI,IV,I1,111
D. I,VI,V,11,111,1V
26. You want to make sure to get enough sleep every night so that you can make sure you stay
healthy. This is an example of:
A. A consumable products financial goal

B. A durable goods financial goal
C. An intangible goal
D. A long term financial goal
27. Creating a current cash flow statement and balance sheet help with step of the financial planning
process?
A. Determining your current financial position.

B. Developing financial goals.
C. Identifying alternative courses of action.
D. Evaluating alternatives
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28. Which one of the following statements regarding the second step of the process, Gathering client data
and determining goals and expectations, is correct?
A. General goals, such as "adequate retirement income" provide appropriate guidance in developing
the plan.
B. Quantitative information and qualitative information are equally important.
C. This step provides the greatest time-saving potential since most of the information required can
be estimated and reasonable accuracy is not affected.
D. Most clients will be able to completely implement their financial plans in a relatively short period of
time, so prioritization is merely a formality and not particularly important
29. What is the first step in the financial planning process?

A. Recommending a plan
D. Gathering data
30._______________ is a tool used for communicating between, the client, and the financial
Planner, that sets down, in writing, information about any agreements or understandings obtained at
meetings including the plan of action for developing a financial plan.
A. Client data Questionnaire

B. Engagement Letter
C. Financial planning software
D. Authorization Letter
31. Which of the following statements is correct if services are provided without any consideration of the client?
A. Client can take action against you.
B. He can file litigation in the civil court
C. He has no options and has to bear the entire loss because services are provided free of cost.
D. He can file case under consumer protection act
32. During the financial planning process questionnaire is used with the objective:
A. To get the accurate information from the client
B. It may be used as the evidence for future
C. Both A and B
D. Only A
33. ______________is a rise in the general levels of prices. Your purchasing power
decreases and it will cost more money to buy the same goods.
A. Uncertainty
B. Inflation
C. Interest
D. Risk
34. You need a place to live. You have determined that you can continue to rent an apartment, move in
with your parents, look at buying a condominium or look at buying a house. This is an example of which
step in the financial planning process?
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A. Determining your current financial position.

B. Developing financial goals.
C. Identifying alternative courses of action.
D. Evaluating alternatives
35. You feel very strongly that going into debt is wrong. This is an example of the influence of
____________on your financial planning decisions.
A. Your values
B. Your stage in the adult life cycle
C. Market forces
D. General economic forces
36. Which of the following is not qualitative information?
A. Liquidity preference
B. Assets and liabilities
C. Personal Details
D. All of the above
37. Which of the following explains the financial desires that contain time and measurement attributes,
making them more specific than financial goals?
A. A net worth statement

B. A budget
C. Income statement
D. Financial objectives
38. Investments made by the financial planner should be influenced according to:
A. Market volatility
B. Commission earned
C. Clients requirement
D. What are the other planners are doing
39. An example of a personal opportunity cost would be:
A. The time it takes you to drive to work.

B. Sleeping only four hours a night
C. The time spent shopping that reduces the time available for studying
D. The fact that you work forty hours a week.
40. A letter of engagement is:
A. Essentials for establishing the client-planner relationship

B. It's a legal contract among the parties
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C. Document essential in the financial planning process

D. A and C
41. "A Member shall have reasonable and appropriate standards for the appointment of Representatives"
as per the rules contained under the Code of
A. Diligence
B. Competence
C. Integrity
D. Professionalism
42. You are a financial planner, during the last two months equity market does not move as per your
expectations and hence your client suffers loss, which of the following action you will take.
A. Withdraw his investment from the equities

B. Explain your client the logic of his asset allocation
C. Refer him to some other financial planner
D. Start ignoring him
43. Which of the following is the last step in the financial planning process?
A. Review and revision of plan

D. Gathering data
44. The client behavior is influenced by which of the following motivators in order to regulate his needs
and wants.
A. Social needs
B. Self-requirements needs
C. Psychological needs
D. All of the above
45. Which of the following is true in regard to a financial planner's liability?
A. A disclaimer removes all liability

B. A principal advices is liable for actions of representative)
C. Advice is distinguishable from a recommendation.
D. An adviser may be held liable for failure to predict economic changes.
46. Which of the following are not a license/ certificate according to present licensing / certification
regulations?
A. Stock broker
B. Sub-broker
C. Insurance agent
D. All of the above are licenses/ certificates
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47. Which of the following tests apply to reasonable basis for recommendations?
I. .K
I now your client
II. Obey Trade Practices Acts
III. K n o w r e l e va n t r u l es an d r e gu l at i o n s
IV. Know your products
A. I and II
B. II and III
C. III and IV
D. I and IV
48. Which of the following is true; a professional financial planner provides.

A. Only comprehensive financial advice to clients encompassing, estate planning. insurance risk
management, income and expenditure (cash flow).
Retirement benefits, investment planning and taxation.
B. A professional financial planner may provide limited advice, if the discloses the fact at the outset
to the client.
A. Both I and II are false

B. I is true but II is false
C. I is false but II is true
D. I is true provided, the financial planner is a CFP CM certificant
49. A financial planner who receives commission from companies on sale of investment / insurance
products to a client is being unprofessional.
A. The above statement is true

B. The above statement is false
C. The above statement is false, provided the financial planner discloses the fact to the client at the
beginning of the relationship.
D. The above statement is true, provided he also charges service fees from the client.
50. A professional financial planner is one who
A. Takes pride in his/her work

B. Is committed to quality
C. Is dedicated to the interest of the client
D. All of the above
51. In India, formalized/ written complaints handling procedures for financial planning businesses are a
must. This is a requirement of
A. The law
B. The FPSB
C. It is not a requirement
D. It is expected to be introduced shortly in the law
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52. Under the rules of professional conduct of the FPSB, a planner may charge
A. Any amount of fees

B. Only service fees
C. Only investment placement fee
D. Any fees provided it is fair and reasonable
53. According to the FPSB rules of professional conduct, disclosure regarding compensation needs to be
made only at the time of establishing the relationship with a new client.
A. True
B. False
C. Sources of compensation need not be disclosed
D. Need to be disclosed whenever there is a change in status.
54. Telling a client about research capabilities or the use of computers in your financial planning firm
amount to
A. Unprofessionalism
B. Advertising
C. Smart thinking
D. Waste of time
55. Any personal information about the client may not be used by the financial planner except
A. To comply with legal requirements

B. If it causes harm to the client
C. To carry out the client engagement
D. A and C
56. A CFPCM certificant shall act in a_____________capacity regards clients' funds
A. Trustee
B. Beneficiary
C. Fiduciary
D. Professional
57. A FPSB member is required to keep all office/ client records for a period of years
A. Four
B. Seven
C. Eight
D. Five
58. A broker or sub-broker shall take adequate steps for redressal of grievances within
A. One week
B. Two month
C. One month
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59. Under the rules of the IRDA, no insurance agent shall
A. disclose his commission to the prospect

B. disclosure his commission, if asked for by the prospect
C. strive of maximum business for his/ her insurance company
60. Under the rules of the IRDA, no insurance agent shall
A. Sell life insurance on the telephone

B. Work for two insurance companies simultaneously
C. Behave in a discourteous manner with the prospect
D. All of the above
61. Professional responsibility is based on
A. Contractual obligation
B. A duty of care to the client
C. Fiduciary relationship
D. All of the above
62. If an employee acts in breach of instructions of the employer under professional responsibility the
employer is
A. Not held responsible

B. Held responsible
C. Not held responsible,
D. If he suspends the employee
63. If a service is provided free of change or under a contract of personal service and the consumer suffers
harm,
A. He can still take action under the Consumer Protection Act.

B. He cannot take action under the Consumer Protection Act
C. He may take action but no penalty is payable.
D. He can only approach the National Commission to decide the matter of law
64. A contract with a minor
A. Is voidable at the option of either party

B. Is absolutely void
C. May be admissible in special cases
65. A contract may be discharged by
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A. Performance
B. Impossibility of performance
C. Breach
D. All of the above.
66. Tort does not cover.
A. Civil wrong
B. Breach of contract
C. Defamation
67. The first requirement of an agency is
A. An agent should have authority to act on behalf of the principal

B. A principal should be competent to contract
C. A commission should be payable to the agent
D. That there should be one principal for every agent
68. Fiduciary relationship requires
A. The use of the word trust

B. A written agreement
C. A constructive trusteeship
69. If a planner does not receive sufficient and relevant information from a client he / she should:
A. Terminate the relationship

B. Give restricted ( limited) advice
C. Go head but given a disclaimer disclaiming all responsibility
D. Either a or b
70. A financial planner should
A. Confine himself strictly to the client's brief

B. Point out al flaws in a client's financial position that he may notice
C. Not agree to providing limited or restricted advice
D. Always provide comprehensive financial planning advice
71. As part their job, financial planners have to predict future economic indicators which impact clients.
A. The above statement is true.

B. The statement is false
C. It is true in cases of economic turmoil
D. The statement is true for CFPTM certificant
72. A contract may be discharged by
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A. Supervising impossibility
B. Breach of contract
C. Performance
D. All of these
73. A CFP Certificate will cooperate with AFP in all respects of an investigation is a requirement of code
of ethics
A. Professionalism
B. Diligence
C. Compliance
D. Confidentiality
74. Which of the following is most likely to give a raise to liability for a financial planner?
A. A failure to advise a client about an investment risk

B. A matter covered by a disclaimer
C. A failure to advise on the effects of a remote part of law
D. A particular estimated result of client not occurring because of unpredicted rate change
75. Ruchi, CFP licensee has proof that Isha another CFP licensee in her office has utilized client’s funds
under management to cover gambling debts. Isha returned the funds to the client's accounts and made
them whole, including the earnings that would have accrued during the time the funds were withdrawn.
Under the code of ethics and professional rules Jasmine is obliged to
A. Report Isha's action to the local FPSB organization for proper processing
B. Report to FPSB Board of examiners
C. Report to FPSB as the code of ethics require so
D. Not report as it would be violation of confidentiality clause/principle
E. Not report as the financial matter was resolved without loss to client
76. As a CFP certificant, you have been appointed by a hospital trust and you have access to the financial
details of the company, which runs with the help of donations and contributions. One person who
purports to be a major contributor to the hospital trust wishes to have the financial position before making
donations. In this circumstances you will
A. Provide him all the help including the information requested

B. Politely inform that you would convey the request to the Trustees and revert
C. Refuse bluntly and report him to the police
D. Report the matter to FPSB
77. You have chosen an investment product which meets your client's requirements perfectly but the
client does not understand the product. You should
A. Make the investment in that product as it is good for the client

B. Report the matter to client's spouse and take approval
C. Give up advising the client
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D. Not make the investment but keep educating the client
78. The code of ethic of integrity details conduct rules relating to
A. Member's compensation
B. Promotional activities
C. Client's funds
D. B and C
79. In the interest of your clients, for tax advice
A. Refer them to a tax consultant

B. Refer them to a CFPCM certificant
C. Seek expert advice yourself before recommending strategies
80. Which of the following applies at the time alternatives and recommendations are made?
A. The plan should be flexible enough to cope with the client's situation onshould it change in any
way
B. The main focus should be on the performance of recommended investments
C. The client should be asked to think about plans for the future
D. All of the above
81. Which of the following are steps used in preparing a financial plan?
I. Goal setting
II. Identification of financial problems
III. Preparation of alternatives/ recommendations
IV. Implementation of the agreed recommendations
A. I, II and III
B. I, II and IV
C. III and IV
D. I, II, Ill and IV
82. 1) Investment experience, 2) investment time horizon 3) concern for liquidity/flexibility are all
examples of qualitative information of a client
A. True
B. False
C. Only 1 and 3 are correct examples
D. None of them are correct examples
83. It is best to start a data gathering client interview with
A. Qualitative details
B. Client's finances
C. Planner's fee details
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D. Quantitative information
84. The first step in the strategy development process is to

A. Check you have all the information
B. Secure the client's current financial position
C. Establish client's goals and concerns
85. The following is not an essential component of financial plan
A. Executive summary
B. Financial planning strategy
C. Letter of engagement
D. Summary of services provided
86. A strategic review of client's situation is required in case of
A. Macro level change

B. Micro level changes
C. Neither
D. Both
87. The most appropriate criterion for deciding the frequency of portfolio reviews of a client is
A. Client profile
B. Funds under management
C. Fees received from a client
D. Planner's discretion
88. A letter of engagement is
A. legal document
B. A requirement of the FPSB code of conduct
C. Essential for client-planner relationship
D. Like a memorandum of understanding
89. Arrange the following financial planning functions in logical order.
I. Interview clients, identify preliminary goals

II. Monitor financial plans
III. Prepare financial plans
IV. Implement financial strategies
V. Collect, analyze and evaluate client's data
A. V,11,1V,111,1
B. 1,111, IV,V, I I
C. I,V,IV,111,11
D. 1,V,Ill,IV,Il
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90. Members shall ensure their conduct does not bring discredit to the financial planning profession,
relates to the FPSB Code of Ethics of
A. Integrity
B. Fairness
C. Compliance
D. Professionalism
91. Which of the following acts committed by a CFP Certificant violates the Principal of Integrity?
I. Having been requested, the certificant refuses to turn over client funds.
II. The certificant commingles client's funds with other client's funds.
III. The certificant commingles client's funds with the certificant funds.
IV. The certificant keeps incomplete records on clients.
A. 1,11,111 &IV
B. III Only
C. I & III Only
D. 1,111 & IV Only
92. A member shall disclose to all the prospective clients the capacity in which they are able to provide
Financial Planning services. This pertains to the Code of Ethics of
A. Compliance
B. Fairness
C. Competence
D. Integrity
93. Gopesh is a Financial Planner in a large firm. His wife has some large investments in shares of a few
companies. Gopesh is required to offer views on almost all of these holdings to clients. Under the Code of
Ethics and Rules of Professional Conduct
A. Gopesh will not violate the Code and the Rules if he does not disclose his wife's holdings
B. Gopesh has to disclose the fact to his client(s) so as to make them aware of any potential conflict
of interest
C. Gopesh needs to disclose the holdings only if he himself has a beneficial " interest in those
shares so as to avoid potential conflict of interest
D. Gopesh has to disclose these holdings only to his employers, if required by the firm's internal
compliance rules
94. Before providing Financial Planning to a prospective client it is mandatory that the planner discloses
A. His credentials and educational background

B. The number of clients he presently advises
C. The size of his client's portfolio
D. How he will earn for the services he is providing
95. Mahesh a Certified Financial Planner, is preparing a letter to circulate among prospective clients and
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the letter contains information on services provided by his firm. According to the Code of Ethics and
Rules of Professional Conduct all of the following information should appear in the letter except
A. The fees and commission sources of the firm ,

B. Details of firm's portfolio size and composition
C. Any significant financial relationships or connections with product providers
D. Identity of the firm providing the service and the nature of services offered.
96. Which of the following is not a correct interpretation of the Rules of Conduct pertaining to the Ethic
of Diligence for CFP Certificant?
A. The Certificant shall enter into an engagement only after securing sufficient information to satisfy
the Certificant that the individual's needs and objectives warrant the relationship.
B. A significant recommendation may be given orally if it is not practicable to give it in writing.
C. A Certificant is considered to be more knowledgeable than the client and hence may not need to
explain the recommendation and basis in a manner that the client comprehends.
D. A Certificant shall confirm in writing to the client where a subsequent instruction given by the
client alters the financial strategy of a portfolio under the Certificant supervision. ,
97. A Financial Planner does not violate his fiduciary duty to different constituents when he
A. Recommends a particular equity share based on his gut feeling.

B. Works for two different organizations at the same time without disclosing the same to either of
his employers.
C. Reveals confidential client data to the media.
D. Discloses conflicts of interest in an upfront manner.
98. If a CFP Certificant solicits clients through false or misleading communications or advertisements, he
violates the
A. Code of Ethics of Diligence

B. Code of Ethics of Integrity
C. Code of Ethics of Professionalism
99. Sakshi a CFP certificant, recently took Suresh as a client. After receiving an excessive number of
questions from Suresh regarding his plan, Sakshi became desperate and changed her business phone
number to an unlisted number. She notified Suresh that he could not have her new phone number, and that
he must communicate with her via e-mail or fax. Which principle, if any, embodies Rules that require
Sakshi to provide Suresh with her new number?
A. Integrity
B. Fairness.
C. Objectivity
D. Professionalism.
100. All of the following Rules relate to the Principle of Fairness except:
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A. A CFP certificant shall disclose sources of compensation to ongoing clients annually

B. A CFP certificant shall exercise reasonable and prudent professional judgment in providing
services.
C. In rendering professional services, a CFP certificant shall disclose to the client material
information relevant to the professional relationship, as well as information required by all laws
applicable to the relationship in a manner complying with such laws.
D. A Financial Planning practitioner shall make timely written disclosure of all material information
relative to the professional relationship including, but limited to, conflicts of interests and sources
of compensation.
101. Which of the following is not a correct interpretation of the Rules of Conduct pertaining to
the Ethic of Diligence for CFP Certificant?
A. The Certificant shall enter into an engagement only after securing sufficient information to satisfy
the Certificant that the individual's needs and objectives warrant the relationship.
B. A significant recommendation may be given orally if it is not practicable to give it in writing.
C. A Certificant is considered to be more knowledgeable than the client and hence may not need to
explain the recommendation and basis in a manner that the client comprehends.
D. A Certificant shall confirm in writing to the client where a subsequent instruction given by the
client alters the financial strategy of a portfolio under the certificant supervision)
102. "Member should act with care and skill in providing Financial Planning Services". This Forms part
of in the code of Ethics
A. Integrity
B. Diligence
C. Fairness
D. Competence
103. While making an investment in a Debt fund for your client you make the following remarks:
I. Rate of return by the instrument in the past is 8.5% and is expected to continue in future.
II. The investment would have low risk. In view of the CFP code of Ethics, which of the above
statement is voilative?
A. I Only
B. II Only
C. Both I and II
104. Gopesh, a Certified Financial Planner, is preparing a letter to circulate among prospective clients and
the letter contains information on services provided by his firm. According to the Code of Ethics and
Rules of Professional Conduct, all of the following information should appear in the letter except
A. The fees and commission sources of the firm

B. Details of firm's portfolio size and composition
C. Any significant financial relationships or connections with product providers
D. Identity of the firm providing the service and the nature of services offered
105. The Nifty has doubled since the last time you advised your client to reduce his equity exposure. The
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client is annoyed. What might be the most appropriate action to take immediately?
A. Apologize for wrongly forecasting the market

B. Change his asset allocation by increasing his equity exposure
C. Help the client understand the logic of his asset allocation
D. Rebalance his asset allocation by reducing equity investments
106. A devotee cannot insure the life of his favourite temple priest because
A. There is a lack of Insurable Interest

B. Legally recognised relationship
C. The temple has already insured the priest under a Group Insurance policy
107. An individual has decided to purchase life insurance and comes to you as his Financial Planner. You
also hold an Insurance Agency License. In order to program a system of life insurance to meet the
individual's needs, which among the following would be the first step?
A. Analyzing the individual's needs and determining the amount of life insurance coverage needed.
B. Selecting an insurance company.
C. Selecting the type of policy that the individual wants to purchase.
D. Determining the rate of return that the individual would like to receive.
108. Which of the following is a reasonable assumption to make about the understanding of a client, on
the Financial Planning process?
A. He would understand the financial products being recommended
B. He would be able to identify his financial goals
C. He would have some knowledge of the assumptions on which Financial Plans are made
D. Client would have identified a desirable asset allocation
109. Which of the following is inferential data i.e. data that may not be correctly obtained by simply
asking a direct question?
A. Time horizon
B. Risk appetite
C. Current income
D. Future income requirement
110. What is the first step in the financial planning Process?

A. Recommending a plan
C. Analyzing Client Data
D. Gathering Data
111. Which of the following is true in regard to a financial planner's liability?
A. A disclaimer removes all liability

B. A Principle adviser is liable for actions of representative.
C. Advice is distinguishable from a recommendation.
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D. An adviser may be held liable for failure to predict economic changes.
112. Which are the qualities of a good Financial Planner?
A. Technical Skills
B. Communication Skills
C. Convincing attitude
D. All of the above
113. Which of the following is appropriate behavior regarding a client's debts?

I. plans should be made to reduce and eliminate high interest non - deductible loans
II. a non - deductible 6 percent home loan should be paid out before a 10 percent deductible
Investment loan
III. sources and cost of finance should be identified
IV. the after tax cost of a deductible loan should be compared to the cost of a non-deductible loan
before a decision is made on which debt should be reduced first
A. I, II and III
B. Ill and IV
C. II, Wand IV
D. I, II, III and IV
114. Which of the following applies at the time alternatives and recommendations are made?
A. The plan should be flexible enough to cope with the client's situation should it change in any way
B. The main focus should be on the performance of recommended investments
C. The client should be asked to think about plans for the future
D. All of the above
115. A Credit Card is a secured loan. This statement is
A. True
B. False
C. True if issued against a fixed deposit placed with the bank
D. True if bank securities all its receivables against credit cards
116. A statement of advice is not needed in providing limited financial planning advice
A. There is no such thing known as a statement of advice

B. The above statement is true
C. The above statement is false
D. There is no such thing as limited financial planning advice, by definition financial planning is
Comprehensive
117. Which of the following is true?

I. A professional financial planner provides only comprehensive financial advice to clients
encompassing, estate planning, insurance risk management, income and expenditure (cash flow),
retirement benefits, investment planning and taxation.
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II. A Professional financial planner may provide limited advice, if he discloses the fact at the outset
to the client.
A. Both I and II are false

B. I is true but II is false
C. I is false but II is true
D. I is true provided, the financial planner is a CFPCM certificant
118. A professional financial planner is one who
A. Takes pride in his/her work

B. Is committed to quality
C. Is dedicated to the interest of the client
D. All of the above
119. In India, formalized/written complaints handling procedures for financial planning businesses are a
must. This is requirement of
A. The law
B. The FPSB
C. It is not a requirement
D. It is expected to be introduced shortly in the law.
120. Under the rules of profession conduct of the FPSB, a planner may charge
A. Any amount of fees

B. Only service fees
C. Only investment placement fee
D. Any fees provided it is fair and reasonable
121. According to the FPSB rules of professional conduct, disclosure regarding compensation needs to be
made only at the time of establishing the relationship with a new client.
A. True
B. False
C. Need to be disclosed whenever there is a change in status
D. Both b and d
122. To whom the principles of risk management are applicable?
A. Individuals
B. Small enterprises
C. Huge commercial enterprises
D. All the above
123. Any personal information about the client may not be used by the financial planner expert
A. To comply with legal requirements
21
B. If it causes harm to the client

C. To carry out the client engagement
D. A and C.
124. A CFPCM certificant shall act in a ____________ capacity as regards client’s funds
A. Trustee
B. Beneficiary
C. Fiduciary
D. Professional
125. A financial planner who receives commission from companies on sale of investment / insurance
products to a client is being unprofessional?
A. The above statement is true

B. The above statement is false
C. The above statement is false, provided the financial planner discloses the fact to the client at the
beginning of the relationship.
D. The above statement is true, provided he also charges service fees from the client.
126. A financial planner should
A. always suggest his own cash flow management system to the client
B. not advise on cash flow planning
C. improve upon an existing system if it is adequately effective
127. Non-resident Indian means:
A. An Indian citizen
B. Person of Indian origin who is not a resident
C. Both (a) and (b)
D. none of the above
128. What is the value of stock in a company that currently pays out Rs.1.50 per share in dividends and
expects these dividends to grow 6% a year forever? (You can assume that investors require a 13% return
on stocks of equivalent risk.
A. 12.23
B. 11.53
C. 22.71
D. 25.01
129. What is the value of 15-year corporate bonds of Rs. 100 Face Value, with a coupon rate of 9%, if
current interest rate on similar bond is 8%?
A. 108.56
B. 117.24
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C. 100.92
130. The code of ethic of fairness requires
A. that compensation of a financial planner be fair and reasonable

B. that partners in a financial planning firm should act in good faith
C. that a member may provide references of other clients to establish a relationship
D. All of the above
131. An AFP member is required to keep all office / client records for a period of years
A. Four
B. Seven
C. Eight
D. Five
132. A broker or sub-broker shall take adequate steps for redressal of grievances within
A. One Week
B. Two Months
C. One Month
33. Professional responsibility is based on
A. contractual obligation
B. a duty of care to the client
C. fiduciary relationship
D. All of the above
134. If an employee acts' breach of instructions of the employer, under professional responsibility the
employer is
A. not held responsible

B. held responsible
C. not held responsible, if he suspends the employee
D. jointly held responsible with the employee
135. If a service is provided free of charge or under a contract of personal service and the consumer
suffers harm,
A. He can still take action under the consumer Protection Act

B. He cannot take action under the Consumer Protection Act
C. He may take-action but no penalty is payable
D. He can only approach the National Commission to decide the matter of law.
136. The code of ethic of fairness requires all of the following except
23
A. The client should be informed of the nature of services offered

B. A member's compensation shall be fair and reasonable
C. A member may provide references including recommendations from former or present clients
D. A member shall show respect for other financial planning professionals and related occupational
groups.
137. The market-has doubled in. last 6 months. A retiree client with limited exposure in equities calls you
up and complains about the poor returns his bon investments (under your advice) are making. You
respond by:
A. Explaining the logic of his asset allocation.

B. Helping him increase his equity exposure)
C. Apologizing for poor performance
D. Referring him to a well-known equity portfolio manager
138. A client approaches you with a request that requires the intervention of an outside professional. You
would:
A. Refer client to the professional

B. Go ahead on your own
C. Read on the subject
D. Refer him to another professional planner
139. Inflation hedge ratio is equal to
A. Income tax liability /monthly expense

B. Liquid assets and other financial Assets/ net worth
C. Equity, tangible and personal assets/net worth
D. Income Tax liability / Total realized increases in net worth.
140. While monitoring a financial plan you would do all of the following except
A. Undertake a strategic review

B. Undertake a portfolio review
C. Provide information on new investment opportunities
D. Get the letter of engagement signed as"
141. While implementing a financial plan, you would
A. Devise an action to proceed

B. Get a letter of engagement signed
C. Define the scope of services
D. Define mutual responsibilities
142. While monitoring a financial plan, you would consider all of the following except:
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A. Changes in the economic situation

B. Changes in the portfolio of the client
C. Changes in the position of the client
D. Changes in the social milieu
143. All of the following is relevant information of a client except:
A. Residential address of the client

B. Family health history
C. Number of members in a family
D. The business expenses borne by the employer
144. Which of the following are characteristics of money market securities?
A. They are issued by the Government, municipalities and large corporations that have high-quality
ratings.
B. All have terms to maturity that are 270 days are less.
C. All tend to have large amounts of purchasing power risk.
D. Both a and b.
145. An insurance firm agrees to pay you Rs.3, 310 at the end of 20 years if you pay premiums of Rs.100
per year for 20 years. Find the internal rate of return to the nearest whole percentage point.
A. 9%
B. 7%
C. 5%
D. 3%
146. Six months ago, a client purchased a new bed for Rs. 6,500. For purposes of preparing accurate
financial statements, this purchase would appear as a an
I. Use asset on the client's net worth statement.
II. Investment asset on the client's net worth statement.
III. Variable outflow on the client's historic cash flow statement.
IV. Fixed outflow on the client's cash flow statement.
A. 1,11 and III Only

B. I and III Only
C. II and IV Only
D. IV Only
E. 1,11,111 and IV Only
147. .As an Associate Financial Planner (AFP), you have selected a 'Product' which will be most suitable
to the client's requirement, but the client/ customer is not able to comprehend the product. In the
circumstances as per the Code of Ethics:
A. You have not violated the code as the product suits the best interest of the client.
B. Violated the code as the client is not able to comprehend the product.
25
C. The policy can be cancelled and fresh policy can be issued)

D. All of the above
148. A company is analyzing two mutually exclusive projects S and L, whose cash flows are shown
below:
Years 0 1 2 3
Project S -1100 1000 350 50
Project L -1100 0 300 500
The company's cost of capital is 12°/0.What is the IRR of project S and project L?
A. 12.00%,11.36%
B. 11.36%,20.45%
C. 20.45%,11.36%
D. 100%,10%
149. Complete the following decision rule: A project should be accepted if it's ________exceeds the
firm's required rate of return.
A. IRR
B. NPV
C. Payback
D. Discounted payback
150. Determine the internal rate of return for a project that costs Rs.98,000 and would yield after-tax cash
flows of Rs.2,000 for the first year,Rs.4,000 for the second year,Rs.7,000 for the third year ,Rs.9,000 for
the fourth year,Rs.13,000 for the fifth year, and Rs.19,000 the sixth year.
A. 11.95%
B. 10.65%
C. 2.87%
D. 4.76%
151. Which of the following is a correct interpretation of the Rules of Conduct pertaining to the Ethic of
Confidentiality?
A. A Member must when requested by the client, provide to a person authorized by the client, all
original documents prepared or received by the Member in undertaking the advisory task.
B. A Member owes to the Member's partners or co-owners a responsibility to act in good faith
(expectations of confidentiality) only while in business together, not thereafter.
C. The Member shall maintain the same standards of confidentiality to employers as to clients.
D. Under no circumstance, will any Member divulge any information or knowledge regarding the
FPSB India or its members that they may know or be exposed to.
152. Mahesh is an accomplished Financial Planner and is also an expert on derivatives and high yielding
bonds. He understands client requirements well and is able to come up with appropriate portfolio
restructuring ideas for clients. He believes in quickly moving clients from one investment to another
26
through a dynamic process of research and recommendations. What according to the Rules relating to the
Code of Ethics is the most applicable in this case?
A. He does not violate the Rules if he explains to the client the reasons and is able to show that the
moves are appropriate to the client.
B. He does not violate the Rules since he conducts and has access to research and advises on
products relevant to clients based on an understanding of their requirements.
C. He does not violate the Rules since he is an acknowledged expert and knows what is best for his
clients.
D. He violates the Rules as it amounts to active churning of client portfolios
153. A CFPCM certificant send his/her client data to the bank for some consideration. Is there
violation of any of code of ethics? If yes, then which of the code of ethics is being violated?
A. Code of Ethic of Objectivity

B. Code of Ethic of Integrity
C. Code of Ethic of Confidentiality
D. Code of Ethic of Competence
154. A CFMCM Certificant should always act in the
A. Interest of the company he is working for

B. Interest of the client
C. In his own interest
D. All of the above
155. The code of Ethic in general standards that shall be applied to all classifications of membership
unless otherwise stated, every member shall confirm to the general standards set out in this article in their
professional activities and conduct. Which of the following is/are included?
I. Integrity
II. Objectivity
III. Competence
IV. Fairness
V. Confidentiality
VI. Professionalism
VII. Diligence
VIII. Compliance
A. I and II
B. III and IV
C. I Only
D. All of the above
156. What will be the EMI for a loan of Rs.2000, 000 taken at 12% p.a.compunded monthly? The tenor
for the loan is 20 years.
A. 276192
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B. 22723
C. 28403
D. 267192
157. Which code of ethic specifies that a CFP designee should get his membership certificate renewed
every year by paying the requisite fee and completing all post certification requirement?
A. Code of Ethic of Diligence

C. Code of Ethic of Compliance
158. Alpha, a CFP designee, during a visit to FPSB's office, comes to know about the FPSB's future plans
related to SRO status through some papers lying on the table of one of the FPSB's officer. He discussed
this information with one of his friend in a very general way. Has Alpha violated any code of Ethic, if yes
then which code of Ethic has been violated?
A. Yes, Code of Ethic of Confidentiality

B. Yes, Code of Ethic of Integrity
C. Yes, Code of Ethic of Professionalism
D. None, because his act didn't harmed any client and moreover it has discussed in a general way
with no bad intention
159. "A member shall practice any other profession or offer to provide such services unless the member is
qualified to practice in those fields and is certificated as required by law". The above statement relates to
which code of ethics?

C. Code of Ethic of Professionalism
D. Code of Ethic of compliance
160. You are a financial planner and make a comprehensive plan for your client. You told the client that
you are an expert in all the fields of the financial planning and will make the plan to meets the client's
goal. But you hide the information that you are outsourcing the services related to estate planning from
outside. Do you think there is any violation of the code of ethics? If yes which of the code of ethics is
violated?

C. Code of Ethic of Fairness
161. Your mortgage payment is Rs.2400 per month. There are exactly 180 payments remaining on the
mortgage. The interest rate is 8.0% p.a., compounded monthly. The first payment is due in exactly one
month. What will be the balance of the loan amount?
[Balance Loan Amount=PV of remaining payments]
28
A. Rs.221784
B. Rs.251137
C. Rs.263203
D. Rs.282502
162.The member shall not practice any other profession or offer to provide such services unless the
member is qualified to practice in those field and is certified as required by law relates to which code of
ethics:

B. Code of Ethic of Professionalism
D. Code of Ethic of Integrity
163. A CFPCM certificant recommends an unsuitable product to his client, because of higher commission
benefit to CFP on the recommended product" Has any code of ethic is being violated? If yes which of the
following code is violated?

164. Which of the following is a correct interpretation of the Rules of conduct pertaining to the Ethic of
Professionalism?
A. A member shall disclose in writing to the client if the member is only womb authorized to sell or
advice on a restricted range of products, and any other limitation of their capacity to serve the
client.
B. A member shall not write, speak or act in such a way as to lead another to believe that the
member is officially representing the FPSB India, unless the member has been duly informed to
do so by the officers, or the rules of the FPSB
C. The Member shall maintain the same standards of confidentiality to employers as to clients
D. The Member shall not make a false or misleading communication about the size, scope or areas
of competence of the Member's practice.
165. The code of professional conduct derives its authority from the
A. Financial planning Standards Board

B. Company Law Board
C. Constitution of India
D. Securities and Exchange Board of India
166. Beta, a CFP designee appointed an incompetent in his office and also entrusted him with the job of
advising and managing client's portfolios. Due to this incompetent person's advice a client incurred some
losses. In this case which code of Ethics is violated by Beta?
29
A. Code of Ethic of Integrity

B. Code of Ethic of Competence
167. Without the consent of the client, a CFP should not disclose confidential client information
contained in working papers as by doing so it which of the following code of ethics is violated?

168. A wealthy client comes to Gama, a CFP Designee asking for some advice. Gama after realizing that
the client has deep pockets charged more fees for the advice than he normally charges, and client also
paid that amount. Has Gama violated any of code of Ethics?
A. Yes, he has violated the code of Ethics of Fairness

B. Yes, he has violated the code of Ethics of Diligence
C. Yes, he has violated the code of Ethics of professionalism
D. No, because the client has paid the amount and the deal is closed
169. A CFP designee advertises in the local newspaper that he is an expert in investment planning and if
the people invest through him then they can get a guaranteed return of 20% per annum on their
investments. Has he violated and Code of Ethics, if yes then which one?
A. Yes, he has violated the code of Ethics of professionalism

B. Yes, he has violated the code of Ethics of Integrity
C. Yes, he has violated the code of Ethics of Diligence
D. No, he has only advertised about his capabilities and area of expertise and thus hadn't violated
any code of Ethics
170. Which of the followings is a correct interpretation of the rules of Conduct pertaining to the Ethic of
Diligence?
A. The Member shall not make a false or misleading communication about the size, scope or areas
of competence of the member's practice
B. The member shall maintain the same standards of confidentiality to employers as to clients.
C. A member shall not write, speak or act in such a way as to lead another to believe that the
member is officially representing the FPSB India, unless the member has been duly informed to
do so by the officers, or the rules of the FPSB
D. The member must ensure all significant recommendations are in writing and if any significant
recommendations are given orally, then confirmation must be given writing as soon as
practicable.
171. Code of Ethic of confidentiality is at serial number _______________ in the 8 code of Ethic
prescribed by FPSB, India to be followed by CFP practitioners.
A. 3
30
B. 2
C. 6
D. 5
172. lsha, a CFP Licensee, has proof that Ruchi, another CFP Licensee in his office, has utilized client's
funds under management to pay his gambling debts. Gopesh returned the funds to the client's accounts,
including the earnings that would have accrued during the time, for which the funds were withdrawn.
Under the code of Ethics and Professional Responsibility and Disciplinary Rules and Procedures, Isha is
obligated to
A. Report Ruchi's action to the local CFP organization for proper processing
B. Report Ruchi's action to the CFP Board of Examiners because Ruchi has violated the
Professionalism Principle
C. Report Ruchi's action to the CFP Board because Isha is bound by the CFP code of Ethics and
Professional Responsibility to do so.
D. Not report Ruchi's action to the CFP Board because lsha would violate the confidentiality
Principle
173. ____________says that a CFP designee shall not commingle his own or one client's funds with other
client's funds, unless he has obtained permission from the concerned client's and has completed client's
and completed legal formalities to do so?

B. Code of Ethic of Fairness
C. Code of Ethic of Integrity
D. Code of Ethic of Professionalism
Confidentiality?
A. A member must when requested by the client, provide to a person authorized by the client, all
original documents prepared or received by the member in undertaking the advisory task.
B. A member owes to the member's partners or co-owners a responsibility to act in good faith
(expectations of confidentiality) only while in business together, not thereafter
C. The member shall maintain the same standards of confidentiality to employers as to clients.
D. Under no circumstances, will any member divulge any information or knowledge regarding the
FPSB India or its members that they may know or be exposed to
175. Your client submits Rs. 50 lacs to manage and invest on his behalf. You combine this money with
another client's money there by making a big portfolio. By doing so is there any violation of the FPSB's
code of ethics. If yes which of the following code has been violated?

31
fairness?
A. A member shall disclose in writing to the client if the member is only authorized to sell or advice
on a restricted range of products, and any other limitation of their capacity to serve the client.
B. A member shall clearly disclose range of products and any other limitation of their capacity to
serve the client
177. A CFPCM certificant shall exercise reasonable and prudent professional judgment in providing
professional services." Which of the following code of ethic relates to the above statement?

178. Code of Ethic of fairness is at serial number in the 8 code of Ethic prescribed by FPSB, India to be
followed by CFP practitioners.
A. 2
B. 5
C. 4
D. 8
Objectivity?
A. A member shall reasonable and prudent professional judgment in providing professional services
B. A Member owes to the member's partners or co-owners a responsibility to act in good faith
The Member shall not make a false or misleading communication about the size, scope or areas of
competence of the Member’s practice.
180. The code of ethics of integrity covers which of the following area:
A. Misleading advertising
B. Promotional activities
C. Representation of authority
D. All of the above
181. If CFP designee his one's client material information with another client, through it is not harming
the client's interest, then he has breached which of the code of Ethics?
A. Code of Ethic of Confidentiality

C. Code of Ethic of Integrity
32
D. He hasn't breached any of the code of Ethic because client's interest was not harmed.
182. Which code of Ethic defines that a CFP designee should act in a Fiduciary in respect of
client's funds?

C. Code of Ethic of Diligence
183. During a meeting with one client, Alpha a CFP designee comes to conclusion that The CFP this
client was dealing earlier has recommended a strategy which hasn't worked well because of Macro level
factors in the economy. He immediately brings this fact to the knowledge of the client that the CFP with
whom he was dealing earlier was not competent enough. Has Alpha violated any of the code of Ethics, if
yes then which Code of Ethic?
A. No, he has just done his duty with diligence

B. Yes, he has violated the code of Ethics of professionalism
C. Yes, he has violated the code of Ethics of Fairness
D. Yes, he has violated the code of Ethics of Diligence
184. Which of the followings is a correct interpretation of the rules of Conduct pertaining to the Ethic of
Competence?
A. A member compensation shall be fair and reasonable

B. A Member shall keep informed of development in the field of financial planning and participating
in continuing education throughout the professional career.
C. The member shall maintain the same standards of communication about the size.
D. The member shall not make a false or misleading communication about the size; scope or areas of
competence of the member's practice
185. Protector International Ltd. Is a financial services firm that specializes in investment advisory
services? In its brochure for financial planning services, it may state
A. It can offer superior investment returns on customer portfolios and talk of the arrangements to
offer advice in other areas.
B. It has the competence to take care of all financial advisory requirements of the customer
C. Its competence in investment advisory services and the arrangements to offer advice in other
areas.
D. Its financial planning services are the best available in the market in light of its investment
advisory capabilities and arrangements to offer advice in other areas.
186. As per code of Ethics, complete disclosure related to professional relationship with product suppliers
should be made to the client and if at a future data there is any change in financial planner's relation with
any of the product suppliers, then t should also be disclosed to the client at the earliest time?

33

187. A CFP designee has every right to defend himself by not co-operating with investigating agency in
case of an enquiry against him?
A. True
B. False
C. partly True
D. Partly False
188. Sakshi, a CFP designee, offered his advice to the client in some legal matters, despite of the fact he is
not having necessary qualifications and skills to do so. Which code of ethic he is violating?

C. Code of Ethic of Competence
D. Code of Ethic of Diligence
189. Ruchi was a CFP designee and he hadn't paid his yearly membership renewal fee for last 3 years of
which his CFP status is revoked. But he still uses CFP mark and promotes himself as such. Is he violating
any code of Ethic, and if yes then which code of Ethic?
A. Yes, Code of Ethic of Competence

B. Yes, Code of Ethic of Professionalism
C. Yes; Code of Ethic of Diligence
D. No code of Ethic is violated in this case
integrity?
A. A member must when requested by the client, provide to a person authorized by the client, all
original documents prepared or received by the member in undertaking the advisory task.
B. A member owes to the member's partners or co-owners a responsibility to act in good faith
C. The Member shall maintain the same standards of confidentiality to employers a as to clients
191. Which code of ethic asserts that a financial planner should provide the client all information
regarding the company responsible for the advice and the identity of the representative?
A. Code of Ethic of Fairness

34
192. Beta; a CFP designee, met a person at a marriage party and when asked by the person, he gives some
investment advice so that person without collecting sufficient relevant data about him, because of this the
person suffered losses. Has Beta violated any code of ethic, if yes then which one?

193. A CFP designee can share his client's personal information if required by law or to defend him
against charges of wrong doing?
A. True
B. False
C. Partly True
D. Partly False
194. As per a CFP designee should disclose all information related to his qualifications, competence,
business affiliations, telephone numbers, credentials, compensation structure etc. to his clients.

D. Code of Ethic of Fairness
195. Which code of Ethics specifies that the CFP Designee shall disclose to the client at the earliest point
about his limitations/restrictions in providing any particular product or services?

C. Code of Ethic of Objectivity
196. Code of Ethic of Diligence is at serial number in the 8 code of Ethic prescribed by FPSB, India
to be followed by CFP practitioners.
A. 7
B. 2
C. 6
D. 3
197. Code of Ethic of competence is at serial number ____________ in the 8 code of Ethic prescribed by
FPSB, India to be followed by CFP practitioners.
A. 2
B. 5
C. 3
D. 8
35
198. Project A has a 10 percent cost of capital and the following cash flows:
Project A
Year Cash Flow
1 -Rs.9000
2 3000
3 4500
4 6000
5 1500
What is Project As payback period?
A. 2.25 years
B. 2.36 years
C. 2.43 years
D. 2.57 years
199. If a domestic currency has depreciated
A. Foreign made goods are cheap relative to domestic made goods.

B. Domestic made goods are cheap relative to foreign made
C. Government spending is likely to decrease
D. The money supply is likely to increase
200. Which of the following statements is correct regarding both debt and common shares of as
corporation?
A. Common shares represent an ownership interest in the corporation, but debt holders do not have
an ownership interest.
B. Common shareholders and debt holders have an ownership interest in the corporation.
C. Common Shares typically have a fixed maturity date.
D. Common shares have a higher priority on liquidation than debt
201. In a closed economy savings are equal to ___________ at the equilibrium level of income.
A. Investments
B. Wages
C. Consumptions
D. Borrowings
202. A liquidity effects occurs when
A. A reduction in government spending lowers the rate of interest

B. Money supply increases lower the rate of interest
C. A money supply increases raises the Rate of interest
36
203. Your client is considering the purchase of land and the construction of a new plant. The land which
would be bought immediately (at t=0) has cost of Rs. 100000 and the building which would be erected at
the end of the first year (t=1), would cost Rs. 500000.1t is estimated that the firm's after tax cash flow will
be Rs. 90000 starting at the end of 2nd year . Also the cash flow will increase @10% annually over the
next 7 years. What is the approximate payback period?
A. 2.34 years
B. 4.32 years
C. 6.34 years
D. 8.53 years
204. An increase in volume of investment will not occur if interest rates
A. Remains constant while the government announces new tax concessions on capital additions.
B. Remains constant while corporate income tax is increased
C. Remain constant, while corporate sector exports increases as results of a decrease in personal
income tax.
205. Macro Economics is concerned with
A. The level of output of goods and services

B. The general level of prices
C. The growth of real output
D. All of the above
206. Your Uncle has agreed to deposit Rs. 3000 in your brokerage account at the beginning of each of the
next five years 9t=1, t=2, t=3,t=4 and t=5) you estimate that you can earn 9% a year on your investments.
How much will you have in your account immediately after your uncle makes his best deposit (at the
beginning of year 5)?
A. Rs. 13719.39
B. Rs. 16709.39
C. Rs. 17954.13
D. Rs. 19570.00
207. You have just purchased a 4 year, Rs. 1000 par value bond. The coupon rate on this bond is 11.80%,
with interest paid semiannually. If your required rate of return is 12.25%, what price did you pay for the
bond?
A. Rs. 986.10
B. 1143.87
C. Rs. 1163.59
D. Rs. 936.79
208. The recurring, but not necessarily periodic changes in aggregate economic activity are termed:
A. Annual trends
37
B. Secular trends
C. Business trends
D. Consumer cycle
209. A real estate investment has the following expected cash flows:
Year Cash Flow
1 Rs. 100000
2 Rs. 250000
3. Rs. 500000
4 Rs. 350000
The discount rate is 8%. What is the investment's present value?
A. Rs. 903799
B. Rs. 961104
C. Rs. 953530
D. Rs. 820000
210. A business cycle contraction will tend to cause a (n):
A. Decrease in inflation
B. Decrease in unemployment
C. Decrease in both unemployment and inflation
D. Increase in both unemployment and inflation
211. Macroeconomics is the study of
A. Inflation
B. Growth
C. Unemployment
D. All of the above
212. Your client has been presented with an investment opportunity that will yield cash flow of Rs. 30000
per year in years 1 through Rs. 35000 per year in years 5 through 9and Rs. 40000 in years 10. This
investment will cost the firm Rs. 150000 today. and the cost of capital is 10%. Assume cash flows occur
at the end of each year. What is the payback period for this investment?
A. 5.23 years
B. 4.386 years
C. 4.00 years
D. 6.74 years
213. Which of the following is a concurrent indicator of the phase of the business cycle?
A. Wholesale price index

B. Index of industrial production
C. Labor costs and capacity utilization
D. Order levels in the manufacturing sector
38
214. If price level falls, then real wages
A. Decrease in proportion to decrease in prices

B. Increase
C. Decreases but not in proportion to decrease in prices
D. Decrease more than proportionately to decrease in price.
215. When the domestic currency's value in terms of other currencies is high
A. We say the domestic currency is depreciated

B. We say the domestic currency has excess value
C. We say the domestic currency is overvalued
D. We say that foreign currencies are overvalued
216. When interest rates increase,
A. Consumption expenditures tend to increase

B. Investment expenditures tend to increase
C. Investment expenditures tend to increase
D. Government expenditures tend to increase
217. A key problem resulting from inflation is:
A. Prices are stable

B. Certainly o future prices
C. A haphazard redistribution of money
D. An increase in the value o money
218. If you withdraw Rs. 1000 from your checking account, this transaction
A. Increases the supply of money

B. Decreases the supply of money
C. Does not change the supply of money
D. Increase the supply of money by Rs. 1000
219. Suppose you purchase one share of the stock of Jagannath Company at the beginning of year 1 for
Rs.70. At the end of year 1, you receive a Re.1 dividend, and buy one more share for Rs.92. At the end of
year 2, you receive total dividends of Rs.2 (i.e., Re.1 for each share), and sell the shares for Rs.67.20
each. The average rate of return on your investment is _________
A. 11.01%
B. 8.78%
C. 19.71%
D. -11.78%
220. Inflation is_____________
A. A decease in the overall level of economic activity
39
B. An increase in the overall price level

C. An increase in the overall level of economic activity
D. A decrease in the overall price level
221. An investor has the opportunity to invest in a project with the following cash flows.
Year 1 Rs.5000
Year 2 Rs.3000
Year 3 Rs.3000
Year 4 Rs.3000
Year 5 Rs.11000
If the investor requires a 20% return, the most she would be willing to pay for this investment is closest
to
A. Rs. 14202.82
B. Rs. 13853.52
C. Rs. 12198.40
D. Rs. 10000
222. Dairy Products, which has a 10% cost of capital, is considering an investment project with the
following cash flows:
Year Cash Flow
1 -Rs.200000
2 80000
3 180000
4 60000
5 120000
What is the project's payback period? Assume cash flows are received evenly throughout the year.
A. 1.67 years
B. 1.86 years
C. 2.11 years
D. 2.49 years
223. A business cycle expansion will tend to cause a (n):
A. Decrease in inflation
B. Decrease in unemployment
C. Decrease in both unemployment and inflation
D. Increase in both unemployment and inflation
224. Given a 9% p.a. interest rate, an asset that generates cash flows of Rs. 10000 in year 1, Rs. 20000 in
year 2, and Rs. 10000 in years 3 and then sold for Rs. 150000 at the end of year 4 has a present value of:
A. Rs. 10036.22
B. Rs. 8337.55
C. Rs. 9354.25
D. Rs. 139992
40
225. An example of a leading economic indicator is:
A. Retail sales
B. Unit labor cost
C. Nonagricultural employment
D. Stock market prices
226. The bank reserves fall rapidly in stages of business cycle.
A. Recession
B. Boom
C. Recession
D. Depression
227. An investment is accepted to produce the cash flow of Rs. 5000, Rs. 2000 and Rs. 8000 at the end of
the next three years. If the required rate of return is 12% the present value of this investment is closest to:
A. Rs. 11752.91
B. Rs. 6337.55
C. Rs. 9354.25
D. Rs. 8316.42
228. Suppose you pay Rs. 9700 for a Treasury bill (face Value Rs. 10000) maturing in six months. What
is the effective annual rate of return for this investment?
A. 3.1%
B. 6%
C. 6.18%
D. 6.28%
229. Assume you hold an annual pay coupon bearing bond to maturity, its holding period return is equal
to
A. The YTM if you can and do reinvest the coupon at a fixed rate
B. The coupon rate
C. The YTM if you can and do reinvest the coupon at the YTM
230. Bank rate interest means
A. The rate of interest on inter bank loan

B. The rate of interest charged by banks to depositors
C. The rate of interest paid by banks to depositors
D. The rate of interest charged by the central bank of a country on its loans to other commercial
banks
41
231.In an inflationary period, the appropriate policy for RBI would be:
A. Sell government securities in the open market

B. Encourage commercial banks to increase their loans
C. Reduce cash reserve ratio
D. Reduce bank rate
232. An increase in price level
A. Reduces the real money supply

B. Increases the real money supply
C. Increases the consumption
D. All of the above
233. Real GDP is a measure of the economies
A. Employment level
B. Money supply
C. Stock market level
D. Output level
234. The specified date on which the principal amount of a bond is repaid is called the bonds:
A. Coupon
B. Face Value
C. Maturity
D. YTM
235. In which type of business entity is the entire ownership interest most freely transferable?
A. General; Partnership
B. Limited Partnership
C. Corporation
D. Sole Ownership
236. Any possible occurrence which may have a negative financial implication can be plotted on a graph
with X axis measuring the frequency (low-high) and Y axis measuring the financial impact (low high).
You can view the classification in four quadrants. Quadrant 1-low frequency, low impact Quadrant 2-low
frequency, high impact Quadrant 3- High frequency, high impact Quadrant b4-High frequency, low
impact it would not be practical to purchase financial instrument for events falling in
A. Quadrant 1 & 4
B. Quadrant 1,2 and 4
C. Quadrant 1. 3 and 4
D. Quadrant 3
42
237. Which of the following statement is/are true?
A. If prices increase then real wages increase

B. If prices increase then unemployment decreases, nominal wages remaining constant
C. Both a and b
238. During a recession, an appropriate fiscal policy would be
A. An increase in taxes
B. An increases in government spending
C. A decrease in the reserve requirement
D. A decrease in discount rate
239. An increase in statutory liquidity ratio will result in
A. An increase in fiscal deficit

B. A decrease in fiscal deficit
C. No change in fiscal deficit
D. An increase in fiscal deficit proportion with an increase in SLR
240. Which of the following categories is not permitted to trade in the forex market?
A. Commercial bank
B. Recognized exporter
C. Development Financial institution
D. Both b and c
241. According to some economists, major reason for business cycle expansions and recessions are
fluctuations in:
A. Import
B. Export
C. Savings
D. Investment
242. Which of the following is not one of the key variables in macroeconomics?
A. The exchange rate

B. The inflation rate
C. The level of the stock market
D. The level of employment in the restaurant industry
243. If you buy a pizza from a restaurant than making the identical product at home:
A. GDP Increase
B. GDP Decreases
43
C. GDP remains unchanged

D. Increase in inflation
244. An increase in the consumer price index (CPI) is generally an indication of
A. Increase unemployment
B. Increased inflation
C. Continued recession
D. Reduced trade deficit
245. The point in which the economy's production has reached its highest level after rising for several
years is best termed a business cycle
A. Expansion
B. Recession
C. Peak
D. Trough
246. Which of the following is not a concern of macroeconomics?
A. Wages in particular occupations

B. Economy Wide level of production
C. Changes in the aggregate price level
D. Economy wide employment
247. The study of inflation is part of:
A. Microeconomics
B. Macroeconomics
C. Normative economics
D. Both a and b
248. The cash flows from a Rs. 1000 capital budgeting project are:
Year 1 Rs. 400
Year 2 Rs. 400
Year 3 Rs. 300
Year 4 Rs. 300
If the firm's cost of capital is 10%, what is the project's payback period?
A. 2.25 Years
B. 2.36 Years
C. 2.43 Years
D. 3.39 Years
249. Which of the following Rs, 1000 face value has the lowest yield to maturity?
44
A. 5% coupon bond selling for Rs. 1000

B. 10% coupon bond selling for Rs. 1000
C. 15% coupon bond selling for Rs. 1000
D. 10% coupon bond selling for Rs. 900
250. Mr. Alpha is 32 years old and getting a monthly salary of Rs. 32000 after deduction. His monthly
expenses are as follows:
Electricity Rs. 1200 per month
Transportation Rs. 1000 per month
Food Rs. 2600 per month
Misc. Expenses Rs. 1200 per month
Assuming Alpha has Rs. 6240 in hand on 1st April, 2009, what will be the cash available to him as on
31-03-2010 assuming the above expenses and income remains constant.
A. Rs. 72000
B. Rs. 154214
C. Rs. 318240
D. Rs. 142464
251. Assuming a discount rate of 20%, what is the discounted payback period for this investment?
Year 0 Year 1 Year 2 Year 3

-1000 603 603 603
A. 1.66 years
B. 2.22 years
C. 3.56 years
252. Consider an investment costs Rs. 100000 and has a cash inflow of Rs. 25000 every year for 5 years.
The required rate of return is 5%. What is the payback period?
A. 1.4 years
B. 2.9 years
C. 3.6 years
D. 1.5 years
253. Which of the following is not one of the key variables in macroeconomics?
A. The unemployment rate

B. The price of rice
C. The inflation rate
D. The interest rate
254. If real and nominal interest rate rise, then
A. Investment spending should fall as well

B. Consumption expenditure should fall as people save more
45
C. Investment spending should remain constant

D. A and B both
255. You buy a national small savings certificate, which of the following is likely to happen?
A. Increase in government market borrowings

B. Increase in the other liabilities of the government
C. Increase in government revenues
D. Decrease in government liability
256. Which of the following factor/s are/is responsible for change in the aggregate demand?
A. Rate of interest
B. Exchange rate
C. Government policies
D. All of the above
257. Which of the following is not likely to be considered part of the economic activity?
A. Getting your automobile washed at as car wish

B. Washing your clothes in a Laundromat
C. Fixing you own car
D. Leasing a new automobile
258. Assume you bought an 8% coupon bearing bond with 4 years to maturity at par and then sold it at a
premium before maturity. If you were able to reinvest the coupons at YTM, then:
A. HPR=YTM
B. HPR is less than YTM
C. HPR is greater than YTM
D. Data insufficient
259. A purchases a house from Suresh and agrees to pay Suresh twenty annual installments of Rs.20000
each, the first to be paid immediately. If money is worth 8% effective, what is the equivalent cash price of
this house as of today?
A. Rs.212072
B. Rs.202124
C. Rs.218452
D. Rs.285131
260. The Glorious Corporation has been presented with an investment opportunity which will yield cash
flows of Rs. 30,000 per year at the end of Years 1 through 4, Rs.40000 per year at the end of Years 5
through 9, and Rs.42000 at the end of Year 10. This investment will cost the firm Rs.165000 today, and
the firm's cost of capital is 10 percent. Assume cash flows occur evenly during the year. What is the
payback period for this investment?
A. 5.23 years
B. 7.10 years
46
C. 4.00 years
D. 6.12 years
261. The present value of the following cash flows generated at the beginning of each year, assuming a
discount rate of 9.5% is
Year Cash Flows

1 Rs. 30000
2 Rs. 20000
3 Rs. 10000
4 Rs. 10000
A. Rs. 56734
B. Rs. 43734
C. Rs. 38734
D. Rs. 64221
262. Suppose you purchase one share of XYZ Company at the beginning of year 1 for Rs.50. At the end
of year 1, you receive a Re.1 dividend, and buy one more share for Rs.72. At the end of year 2, you
receive total dividends of Rs. 2 (i.e., Re.1 for each share), and sell the shares for Rs.67.20 each. The time-
weighted return on your investment is
A. 10.00%
B. 8.78%
C. 19.71%
D. 17.59%
263. Suppose you purchase 100 shares of GMR stock at the beginning of year 1, and purchase another
100 shares at the end of year 1. You sell all 200 shares at the end of year 2. Assume that the price of GMR
stock is Rs.50 at the beginning of year Rs.55 at the end of year 1, and Rs.65 at the end of year 2. Assume
no dividends were paid on GMR stock, your time-weighted return on the stock will be closest to
A. 10%
B. 9.09%
C. 15.36%
D. 11%
264. Which of the following Rs.100 face value securities has the lowest yield to maturity?
A. 6% coupon bond selling for Rs.100

B. 9% coupon bond selling for Rs. 100
C. 15% coupon bond selling for Rs. 100
D. 15% coupon bond selling for Rs. 90
265. Before beginning work on Roger's Financial Plan, you have drafted a document outlining the "Scope
of Engagement" and sought Roger to mutually define and determine the activities that may be necessary
in order to proceed with client engagement. Roger asked you about relevance of such a document. In the
context of Financial Planning Profession, you explain about the "Letter of Engagement" as a
47
A. professional requirement under Practice Guidelines of FPSB India

B. professional requirement under Code of Ethics of FPSB India
C. necessary legal requirement as per Contract Act 1872
D. document for his personal record
266. Your client has bonds bearing a coupon rate of 12%, pay coupons rate of 12%, pay coupons
semiannually, have 3 Years remaining to maturity, and are currently priced at Rs.940 per bond. What is
the yield to maturity? (FV=1000)
A. 14.53%
B. 15.00%
C. 13.99%
D. 12.25%
267. How much money is needed to endure a series of lectures costing Rs.2500 atthe beginning of each
year indefinitely, if money is worth 12% compounded quarterly?
A. Rs.19920
B. Rs.22420
C. Rs.21251
D. Rs.21020
268. Project A has a 10%cost cost of capital and the following cash flows:
Project A
Year Cash Flow
1 -Rs. 3000
2 1000
3 1500
4 2000
5 500
What is the project A's payback period?
A. 2.25 years
B. 2.36 years
C. 2.43 years
D. 2.57 years
269. Ms. Isha 35 years old is an Investment Banker and is earning currently Rs.2400,000 p.a. of which
she is able to save Rs.900,000 p.a. She plans to retire at the age of 48 and has a life expectancy of around
65 years. She wants to enjoy the rest of her life in Mauritius for which she already has made some
investment in real estate of Mauritius. She expects that she will require Rs.27233589 to pay for her living
expenses during retirement. If she being an investment Banker can fetch a return of around 15.5% p.a. by
investing in Indian and International Equities. Which of the following statement is/are correct?
A. Ms.lsha will have to reduce her post retirement expenses drastically, as she will not be able to
48
accumulate such an exuberantly plentiful corpus.

B. Ms. Isha is saving more than she requires, she can cut her annual savings by around Rs.133869.
C. If Ms. Isha wishes to keep her savings at rs.9 laks p.a., then she will be able to accumulate around
Rs.47, 58,636 more than what she requires.
D. Both B & C are correct
270. A corporate bond matures in 14 years. The bond has an 8 percent semiannual Coupon and a par
value of Rs. 1000. The price of the bond today is Rs.1075. What is the Q bond's yield to maturity?
A. YTM = 14.29%
B. YTM = 3.57%
C. YTM = 7.14°/0
D. YTM = 7.86%
271. ______________ is the minimum amount which a person should be ready to accept today from a
debtor who otherwise has to pay a sum of Rs.4000, today Rs.5000, Rs.7000 and Rs.8000 and Rs.10000 at
the end of year 1, 2, 3, and 4 respectively from today. The rate of interest may be taken at 10%
A. Rs.27171
B. Rs.25426
C. Rs.22091
D. Rs.22103
with interest paid annually. If your required rate of return is 5.75% what price did you pay for the bond?
A. Rs. 1229.74
B. Rs. 1160.13
C. Rs. 1299.35
D. Rs. 1612.59
273. The present value of the following cash flows assuming a discount rate of 9.5% is
Year Cash Flows

1 Rs.30000
2 Rs.20000
3 Rs.40000
4 Rs.25000
A. Rs.100666
B. Rs.100212
C. Rs.41232
D. Rs.58302
274. Importance of cash flow statement includes
A. It helps to check one's financial credibility
49
B. Without proper cash flow planning one can easily get caught in the debt trap mama
C. It helps to generate surplus income which remains deducting all costs
including taxation
D. All the above
275. The early stages of an economic expansion are usually termed a:
A. Peak
B. Trough
C. Recession
D. Recovery
276. The inventory stock will be high in ___________stages of a business cycle
A. Recovery
B. Boom
C. Recession
D. Depression
277. Suppose interest rates are held fixed indefinitely. The risk in holding the 10-year bond is necessarily
______________ than the risk in holding the 1 year bond.
A. Higher
B. Lower
C. The same as
D. Could be either higher or lower
with interest paid annually. If you paid Rs. 1003.36 for the bond, what is your yield to maturity (YTM)?
A. 8.00%
B. 10.24%
C. 8.96%
D. 10.80%
279. A bond matures in 12 years and pays an 8 percent annual coupon. The bond has a face value of
Rs.1000 and currently sells for Rs. 985. What is the bond's yield to maturity?
A. Yield to maturity = 7.92%

B. Yield to maturity = 8.20%
C. Yield to maturity = 7.14%
D. Yield to maturity = 7.86%
280. _____________forms the foundation of Financial Planning.
A. Investment Planning
B. Cash Flow Management
C. Estate Planning
50
D. Retirement Planning
281. ________________ is not usually covered by an insurance policy
A. Destruction of property in due to a comet hit

B. Death while travelling in an airplane
C. Loss suffered in stock trading due to market fluctuations
D. Business interruption as a result of a riot
282. The Economic offences Wing does not deal with
A. Professional Negligence
B. Forgery of currency
C. Money laundering
D. Chit Fund Fraud
283. A Financial Planner does not violate his fiduciary duty to different constituents when he
A. Recommends a particular equity share based on his gut feeling.

B. Works for two different organization at the same time without disclosing the
C. Reveals confidential client data to the media
D. Discloses conflicts of interest in an upfront manner
284. The Consumer Protection Act can apply to
A. Goods
B. Financial Services
C. Medical services
D. All of the above
285. In a period of rising inflation which of following statement holds true?
A. Nominal rates are lower than real returns

B. Nominal rates are higher than real returns
C. Nominal returns are equal to real returns
286. BBB+ rated corporate debt do not have a ___________ as compared to an AAA+ security
.
A. Liquidity risk
B. Default risk
C. Currency risk
D. Volatility risk
287. A period when an economy is experiencing falling unemployment and stable non-inflationary
growth in GDP is termed as
51
A. Recession
B. Depression
C. Expansion
D. Stagflation
288. A period when an economy is experiencing negative growth in GDP and slowly rising
unemployment is termed as
A. Recession
B. Depression
C. Expansion
D. Stagflation
289. GDP calculations do not include
A. Private and public consumption

B. Government outlays
C. Exports less imports
D. Production figures of foreign subsidiaries of Indian companies
290. If a fifteen year old approaches you to make his Financial plan, you will most likely not accept him
as a client because
A. He may not be a high net worth individual

B. He may not have long-term goals
C. He may not be able to afford your fees.
D. He is not deemed to be legally capable of entering into a Contract.
291. The Savings Ratio indicates the proportion of
A. Savings/ Gross Income

B. Savings/ Post tax Income
C. Investments/Gross Income
D. Investments/Post-tax Income
292. _____________ is a measure of systematic risk
A. Correlation coefficient
B. Beta
C. Alpha
D. Sharpe Ratio
293. An increase in the general level of interest rates will most probably result in a home loan borrower
refinancing his loan.
A. True
B. False
52
C. True only for a fixed rate borrower

D. True only for a floating rate borrower.
294. The IRR method assumes that all cash flows are reinvested at
A. The cost of capital

B. The market rate of return
C. The prevailing PLR
D. The rate decreed by the RBI
295. The YTM of a Bond is also known as its
A. Internal Rate of Return

B. Holding period Return
C. Current Yield
296. Internal rate of Return is
A. The interest rate that makes net present value of all cash flow equal zero.
B. The difference between the present value of cash inflows and the present value
C. Uses future free cash flow projections and discounts them to arrive at a present
D. Any of the above
297. Indian tax laws are applicable to
A. Whole of India
B. Whole of India and except the state of Jammu & Kashmir
C. Whole of India except West Bengal
D. While of India except Andaman and Lakshdeeps
298. Suresh, an illiterate farmer borrows a sum of money from Mahesh, a moneylender and enters into a
contract with Mahesh that he will give up possession of his farmland in favor of Mahesh in case he cannot
repay the loan on time. Is this Contract void or initio?
A. No. It satisfies all the essential elements of a valid contract

B. Yes. Because it is against public policy
C. Yes. There is no consideration involved
D. Yes, because Suresh is not capable of entering into a contract. as he is
299. The Net worth Statement of an individual
A. Reflects her financial state at a particular point in time

B. Is the difference between her invested assets and current liabilities?
C. Generally classifies equity share investments as Near Cash Assets
D. All of the above
300. A bond pays a coupon rate of 10% annually with interest paid semi-annually. The bond has duration
53
of three years. The yield on the band is 12%. Find its current price assuming that the maturity value of the
bond is 1000.
A. 1000.83
B. 1050.43
C. 950.83
D. 986.36
301. What is the effective interest rate for 10% compounded monthly, quarterly, semi-annually
A. 10.47, 10.38, 10.25

B. 10.47, 10.40, 10.25
C. 10.42, 10.38, 10.25
D. 10.47, 10.36, 10.25
302. A bond of face value Rs.1, 000 has a coupon of 7.5% and is compounded. Semiannually. The
duration of the bond is 17.5 years. Similar bonds in the market yield 8%.What is the present value of the
bond.
A. 956.34
B. 953.34
C. 1074.43
D. 987.60
303. You have taken a loan of Rs.100. The interest rate is 10% compounded monthly. Which option is
more favorable for you.
A. 0% upfront Rs.8.97 per month in arrears

B. 2% upfront Rs.26.05 per quarter upfront
C. 4% upfront Rs.25.25 per quarter upfront
D. 2% upfront Rs.52.17 half yearly in arrears
304. A friend owes us Rs.50, 000/-, the interest is 12% compounded monthly what would you prefer.
A. Take 50,000/-
B. Take 60,000/- after 1 year
C. Take 25,000/- and 32,000/- at the end of the year
D. Take 40,000/- and 15,2001- at the end of the year
305. You invest Rs.50,000 in a commercial real estate property and expect to clear Rs.180,000 (after
selling expenses, closing costs, etc) when you sell it in 8 years What is your expected rate of return on this
property?
A. 17.63%
B. 18.36%
C. 17.36%
54
D. 17.01%
306. Roger has heard that a CFPCM practitioner is able to take care of the execution of all aspects of his
Financial Plan, viz. Investments, Insurance, Tax Planning, Estate Planning, Retirement solutions, etc. He
confirms with you the same: You advise him that:
A. This is not true about all CFPCM practitioners. The scope and limitation of the services of a CFPCM
practitioner need to be disclosed in writing by him/her in the beginning itself.
B. A CFPCM practitioner can never be believed to take care of all aspects of a Financial Plan.
C. This is the right assumption which can be made about all CFPCM professionals.
D. A CFPCM practitioner can make a financial plan, various aspects of which need to be executed by
Experts in their respective fields.
307. Roger wants to invest in ULIP, but he wants to be cautious before entering a long period of contract.
As Per IRDA Guidelines on ULIP, if he wants to return the policy .within 15 days free look period. What
amount would be refunded to him?
A. He would get the prevailing fund value subject to deduction of expenses towards medical
examination, stamp duty and proportionate risk premium for the period of cover.
B. He would get the refund of full premium paid.
C. He would get the refund of premium less commission paid to the intermediary.
D. He would get the prevailing fund value less commission paid to the intermediary.
308. Mr. Gopesh purchased a 2 year bond bearing a 12% coupon rate. He purchased the bond at par
(Rs.1000). If rates fall to 9% what will be the new price of the bond?
A. 1053
B. 1136
C. 1193
D. 900
309. If the post-tax return on a security is 5.50%, the real pre-tax return would amount to _________% if
the income-tax rate is 10% and inflation is 3%.
A. 2.97
B. 3.02
C. 3.07
D. 3.12
310. Suresh wants to purchase a House 10 years from now. He intends to contribute Rs.40,000/- at the
end of every quarter to fund his purchase. Find the quarterly rate of return in case Suresh is able to
purchase the house in ten years time and the cost of the house at that time is Rs.50,00,000, which is equal
to his portfolio value.
A. 4.56
B. 5.13
C. 5.98
D. 6.56
55
311. Mahesh will receive Rs.50, 00,000 from a Trust fund in twenty years. His annual return of 10% p.a.
Find the approximate initial value of the fund.
A. 740000
B. 743000
C. 746000
D. 749000
312. Ruchi needs Rs.2, 00,000 in 5 years' time to pay for the down payment for her house. What is the
amount that she should deposit now, in case she is in a position to earn 10% p.a. compounded monthly?
A. 115557
B. 121557
C. 124557
D. 118557
313. A few years ago, Gopesh started investing in mutual funds with an initial investment of Rs.30, 000.
The investment is now worth Rs.55, 500. Assuming the annual rate of return on investment is 6% p.a.
compounded quarterly, how many quarters has Gopesh been investing?
A. 36
B. 41
C. 46
D. 51
314. Isha wants to give her daughter Rs. 12,000 at the end of each year for the next four years. Assuming
her daughter deposits that amount in an account earning 8% p.a. interest, how much will she get at the
beginning of the ninth year
A. 73565
B. 73485
C. 73348
D. 73112
315. Mahesh has won a scholarship worth Rs.30, 000 now, for his 4-year university course. Assuming an
annual interest rate of 10% when investing the scholarship amount, what is the amount from this
scholarship that he gets at the beginning of each year of his course?
A. 8464
B. 8964
C. 9464
D. 9964
316. A bank deposit of Rs. 250 per day will earn an interest of Rs. ________ at the end of one year, if it
earns 10% p.a. compounded every day.
A. 4371
B. 4731
56
C. 4173
D. 4713
317. If Suresh has saved Rs.5000 each month end for past 6 years, what is the annual interest rate that he
has earned from the account if the balance is now Rs.10, 00,000, assuming monthly compounding?
A. 20
B. 25
C. 30
D. 35
318. Gopesh expects to receive an annual payment of Rs.2, 50,000 from an inheritance fund at the
beginning of the year for 8 years. What is the current worth of this fund assuming the fund is invested
earning an annual rate of return 8.25% and the first payment will only be made 5 years from now?
A. 1028013
B. 1036413
C. 1048073
D. 1049027
319. A bondholder buys a bond maturing in two years for Rs.120 and earns Rs.15 per annum as interest.
His YTM is ____________%
A. 4.00
B. 4.55
C. 4.75
D. 4.95
320. Money has time value because you forgo something certain today for something uncertain tomorrow.
A. True
B. False
321. The uncertainty factor increases with time — the distant the cash flows, the more uncertain they
become.
A. True
B. False
322. The lower is the compounding period, the higher is the effective rate of interest.
A. True
B. False
323. With high inflation rate, the interest rates tend to increase.
A. True
B. False
57
324. One of the reasons for attributing time value to money is that individuals prefer future consumption
to current consumption.
A. True
B. False
325. The nominal rate of interest is equal to the effective rate of interest when interest is compounded
annually.
A. True
B. False
326. The rule of 72 is more precise (provides a better estimate) than the rule of 69 to find the period
required to double your initial amount.
A. True
B. False
327. Financial analysis require an explicit consideration of time value of money because most financial
problems at corporate and individual level involves cash flows occurring at different points in time.
A. True
B. False
328. Given a principal amount of Rs. 10,000 to be invested for 9 months, it is better to invest in a scheme
that offers 12% annual compound interest than investing in a scheme that earns 12% simple interest.
A. True
B. False
329. A bank that pays 10% interest compounded annually pays a higher effective rate of interest than a
bank that pays 10% interest compounded quarterly.
A. True
B. False
330. The formula for effective rate of interest (re) is- re= (l + r/m) n -1
A. True
B. False
331. A regular (deferred) annuity is one in which a series of periodic cash flows of equal amount occur at
the beginning of each period.
A. True
B. False
332. The rule of 72 is useful in determining the future value of an annuity given the rate of interest.
58
A. True
B. False
333. Frequency of compounding has no effect on interest earned.
A. True
B. False
334. Maximum benefit of compounding occurs when money is compounded daily.
A. True
B. False
335. Present value of an uneven stream of cash flows can be calculated with the help of present value of
annuity table.
A. True
B. False
336. While investing money it is always better to insist on a higher frequency of compounding.
A. True
B. False
337. Increased frequency of compounding means the same thing as decrease in compounding period.
A. True
B. False
338. The benefits from increased compounding frequency decrease with each successive increase in
compounding frequency.
A. True
B. False
339. In case of most of banks, fixed deposit money is compounded quarterly.
A. True
B. False
340. Effective rate of interest depends on the compounding period.
A. True
B. False
341. Higher the compounding period, higher is the effective rate of interest.
59
A. True
B. False
342. In simple interest, interest for each year in same.
A. True
B. False
343. The process of determining present value is often called discounting.
A. True
B. False
344. Continuous compounding results in the maximum possible future value for given rate of interest and
time period.
A. True
B. False
345. A perpetuity is an annuity that continues for 100 years.
A. True
B. False
346. In perpetuity, the principal amount remains intact.
A. True
B. False
347. The present value of any future sum is inversely related with rate of interest.
A. True
B. False
348. Continuous compounding occurs when interest is compounding daily.
A. True
B. False
349. Sinking fund factor is used to determine the periodic fixed amount that must be invested regularly to
accumulate a specified sum at the end of a given period at a given rate of interest.
A. True
B. False
350. When debt (loan) is amortized in periodic fixed installments, the principal component of installment
declines over time.
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A. True
B. False
351. The compound value of any sum invested today varies directly with rate of interest (r) and time
period (n).
A. True
B. False
352. Money has time value because a sum of money to be received in future is more valuable than the
same amount today.
A. True
B. False
353. The process of compounding assumes discounting at same rate.
A. True
B. False
354. An annuity due is one in which periodic cast flows of equal amount occur at the beginning of each
period.
A. True
B. False
355. Compounding over the same time period, annuity due will have a higher future value than ordinary
annuity.
A. True
B. False
356. An amortization schedule tells us about the interest component and principal repayment component
of each fixed installment paid by borrower towards loan repayment.
A. True
B. False
357. Annuity tables can be used for all types of cash flows.
A. True
B. False
358. For a given rate of interest(r) and given number of years (n), the present value
annuity factor will be greater than future value annuity factor.
A. True
B. False
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359. In present value tables, all values are less than 1.
A. True
B. False
360. Present value of annuity due is equal to present value of ordinary annuity x (1 + r).
A. True
B. False
361. Future value of annuity due = present value of ordinary annuity x (1 + r)
A. True
B. False
362. 1 ÷ PVAF (Present value Annuity Factor) is knows as capital recovery factors.
A. True
B. False
363. 1 ÷ FVAF (Future value Annuity Factor) is known as sinking fund factors.
A. True
B. False
364. The price of any asset today is the present value of all the future cash flows associated with the asset.
A. True
B. False
365. Bond prices vary inversely with the rate of interest
A. True
B. False
366. An annuity is a stream of constant cash flows occurring at regular intervals of time.
A. True
B. False
367. A perpetuity is an annuity that continues for ever i.e., till infinity.
A. True
B. False
368. The present value of a mixed stream of cash flows is the sum of the present values of the individual
cash flows.
62
A. True
B. False
369. An investment option that comes with specified present value and future value after given period has
hidden rate of interest.
A. True
B. False
370. Money has time value because:
A. Money today is more certain than money tomorrow

B. Money today is worth more than money tomorrow in terms of purchasing power.
C. There is a possibility of earning risk free return on money invested today.
D. All of the above
371. Given an investment of Rs. 10,000 to be invested for one year;
A. It is better to invest in a scheme that pays 10% simple interest.

B. It is better to invest in a scheme that pays 10% annual compound interest.
C. Both A and B provide the same return
D. Data Insufficient
372. Given an investment of Rs. 10,000 for a period of one year, it is better to invest in a scheme that
pays:
A. 12% interest compounded annually

B. 12% interest compounded quarterly
C. 12% interest compounded monthly
D. 12% interest compounded daily
373. Ms. Sakshi plans to retire on her 60th birthday. She wants to put the same amount of funds aside
each year for the next twenty years-starting on her next birthday, so that she will be able to withdraw
Rs.100, 000 per year for twenty years once she retires, with the first withdrawal on her 61' birthday. Ms.
Sakshi is 20 years old today. How much must she set aside each year for her retirement if she can earn 8%
p.a. on her funds?
A. Rs.4791
B. Rs.4971
C. Rs.4603
D. Rs.4306
374. The rule of 72 is used to find;
A. Approximate doubling period, given the interest rate (r)

B. Approximate interest rate, given the doubling period (n)
C. Both A and B above.
63
375. The relation between effective annual rate of interest (re) and nominal rate of interest (r) is best
represented by;
A. re = (1 + r /m)mn —1
B. re = (1 + r/m)m —1
C. r = (1 + re/m) —1
376. To find the present value of a sum of Rs. 10,000 to be received at the end of each year for the next 5
years at 10% rate, we use:
A. Present value of a single cash flow table

B. Present value of annuity table.
C. Future value of a single cash flow table
D. Future value of annuity table
377. Sinking fund factor is the reciprocal of:
A. Present value interest factor of a single cash flow.

B. Present value interest factor of an annuity.
C. Future value interest factor of a single cash flow.
D. Future value interest factor of an annuity.
378. According to the 'Rule of 69' doubling period of an investment at an interest rate of 15% is:
A. 4.6 years
B. 4.2 years
C. 4.95 years
D. 5.25 years
379. If the effective rate of interest compounded quarterly is 16%, then the nominal rate of interest is
A. 14.6%
B. 15%
C. 14.8%
D. 15.12%
380. If the interest rate on a loan is 1% per month, the effective annual rate of interest is
A. 12%
B. 12.36%
C. 12.68%
D. 12.84%
381. If a loan of Rs. 30,000 is to be paid in 5 annual installments with interest rate of 12% pa. then the
equal annual installment will be;
64
A. Rs. 7400
B. Rs. 8100
C. Rs 7812
D. Rs. 8322
382. X took a housing loan of Rs. 25, 00,000. The loan is to be redeemed in 120 monthly installments of
Rs. 31,000 each to be paid at the end of each month. What is the implied interest rate per annum?
A. 8.50%
B. 8.1%
C. 7.70%
D. 9.12%
383. The difference between effective annual rate of interest with monthly and quarterly compounding,
when nominal rate of interest is 10% is;
A. 0.10%
B. 0.14%
C. 0.21%
D. 0.09%
384. A bond has a face value of Rs. 1000 and a coupon rate of 10%. It will be redeemed after 4 years at
10% premium. Find the present value of bond at a required rate of 12%:
A. Rs. 1002.80
B. Rs. 960.72
C. Rs. 980.84
D. Rs. 1020.12
385. Axis bank offers 10% nominal interest for a three year fixed deposit to senior citizens. If the
compounding is done quarterly, then effective annual rate of interest is:
A. 10.25%
B. 10.38%
C. 10.46%
D. 10.52%
386. Mahesh deposits Rs. 2500 at the end of every month in a bank for 5 years. If the interest rate offered
by bank is 8% p.a. compounded monthly, the accumulated sum Mahesh will get after 5 years will be:
A. Rs. 1,76,802
B. Rs. 1,83,692
C. Rs. 1,91,507
D. Rs, 1,94,752
387. You invest Rs. 1500 at the end of year one and Rs. 2000 at the end of second year and Rs. 5000 each
year from third to tenth. Find the present value of stream at discount rate of 10%
65
A. Rs. 25,062
B. Rs. 24,712
C. Rs. 26,502
D. Rs. 24,242
388. If you take a loan of Rs 1, 00,000 today and return Rs. 1, 51,807 after 4 years to clear off the loan,
what effective annual interest rate is paid by you:
A. 12%
B. 13%
C. 11%
D. 12.4%
389. In how much period Rs. 1 becomes Rs. 3 at 12% rate of interest compounded annually.
A. 12 years
B. 8 years
C. 10.42 years
D. 9.69 years
390. Which of the following statements is true?
A. Frequency of compounding has no effect on rate of interest.

B. An annuity is a series of cash flows of variable amount.
C. The nominal rate of interest is equal to or more than the effective rate of interest.
D. Cash flows occurring in different time periods cannot be compared unless they are discounted to
a common date
391. If a 12% loan is to be paid back after 10 years, the sinking fund factor will be equal to
A. 0.03471
B. 0.05698
C. 0.04231
D. 0.09109
392. Mr. Suresh has decided to deposit Rs. 70,000 per year in his public provident fund account for next
15 years. At 8% interest compounded annually, how much money will accumulate in his accounts?
A. Rs. 19,00 648

B. Rs. 20,14 340
C. Rs. 16,05.151
D. Rs. 19,91, 243
393. If a bank offers to double your money in 8 years, what is the effective rate of interest?
A. 8.9%
B. 9.7%
66
C. 10.2%
D. 9.05%
394. An investment of Rs.5000 in a deep discount bond will return Rs. 1, 00,000 in 20 years. Find the
interest rate implicit in the offer?
A. 16.72%
B. 15.234%
C. 17.121%
D. 16.159%
395. A machine is to be replaced after 5 years, when it is expected to cost Rs. 10, 00,000. How much
equal sum should be set aside and invested, at the end of each year at 12% p.a. to accumulate the desired
sum?
A. Rs. 1,62,416
B. Rs. 1,57,410
C. Rs.1.75,115
D. Rs.1 53,429
396. Salary for the purpose of House Rent Allowance is taken on:
A. Due basis
B. Receipts basis
C. Either at the option of the assesse
D. Either at the option of the officer
397. You are applying for an overdraft facility with the bank. What is the rate of interest you will pay on
this facility?
A. The bank will apply a flat rate of interest on the amount of overdraft allowed to actually utilize.
B. The bank will apply a flat rate of interest on the amount of overdraft allowed to you.
C. The bank will apply rate of interest linked to the term deposit rate, on the amount of overdraft
utilized.
D. The bank will apply rate of interest linked to the term deposit rate, on the average amount of
overdraft remaining unutilized from the OD limit.
398. A professional indemnity policy protects the insured from risk arising out
of
A. Intentional misconduct
B. Misrepresentation of professional competence
C. Negligence
D. Undisclosed conflict of interest
399. Which of the following is a concurrent indicator of the phase of the business cycle?
A. Wholesale price Index

B. Index of Industrial production
67
C. Labor costs and capacity utilization

D. Order levels in the manufacturing sector
400. Consider a portfolio of two investments viz. A & B. The sum total of volatility of A and B
respectively, represented by standard deviation of the two investments, will be equal to the volatility of
the portfolio as a whole if
A. A and B have a correlation of Zero

B. A and B have a correlation of 1
C. The portfolio is equally divided between A and B
D. The return on the portfolio is equal to the sum of returns of A and B
401. Mr. Gopesh's investment portfolio comprises Rs.2 lakh in equity, Rs.5 lakh in debt and Rs. 1 lakh in
his bank current account. Over one year the returns on equity and debt are 5% and 12%. At the end of the
year to maintain his current asset allocation, he needs to
A. Do nothing.
B. He needs to move Rs, 10000/- from equity and Rs. 60000/- from debt to cash.
C. He needs move Rs.7500/- to equity from debt and Rs. 8750/-to cash from
D. He needs to invest Rs. 70000/- in debt and equity.
402. A 10 year 8.0% bond (Face Value- Rs.1000, interest payable semi-annually) maturing 6 years from
today is available at a yield to maturity of 6.0%. It is likely to be priced at
A. Rs. 1100
B. Rs. 1149
C. Rs. 1168
D. Rs. 1498
403.Isha and Suresh are aged 55 and 58 years respectively. Both expect to work till they turn 65. Their
only goal is to fund their retirement. Which of the following is likely to be an appropriate asset allocation
strategy for them?
A. 10% sectorial equity, 20% diversified equity, 30% long-term debt, and 40% medium term debt
B. 20% Sectorial equity, 60% diversified equity, 20% long-term debt
C. 30% Sectorial equity, 30% diversified equity, 40% cash/ liquid investments.
D. 80% long-term debt, 20% medium term debt
404. If the post-tax rate of return on an investment is 8% and the inflation rate is 5% the real rate of return
is
A. 3.5%
B. 3.0%
C. 2.86%
D. -3.0%
405. Which of the following is a tort of negligence?
A. Mr. Gopesh was playing golf. He swings a new golf club on the fairway and the head of the club
68
flies off, and hit another golfer who was standing 20 feet away.
B. Mr. Suresh takes medication that he knows makes him drowsy and then proceeds to drive. He
gets into an accident injuring the passengers in another car.
C. Mrs. Ruchi locks Ms. Isha in a room to prevent her from leaving the building
D. Mrs. Sakshi experienced a sudden surge of chest pain while driving, which causes her to lose
control of her car and hit another car.
406. The presence of risk means that
A. Investors will lose money

B. More than one outcome is possible
C. The standard deviation of the payoff is larger than its expected value
D. Final wealth will be greater than initial wealth
407. Gopesh wants to withdraw Rs. 1200/- at the end of each month for the next 5 years. He expects to
earn 10% interest compounded monthly on his investments. What lump sum should he deposit now?
A. Rs. 56949
B. Rs. 58630
C. Rs. 56478
D. Rs. 59119
408. Suresh invests Rs.5000 in a Bank Deposit today @ 8% p.a compounded monthly. He hopes that this
investment will enable him to fund his college education (estimated to cost Rs. 9000) which commences
after 4 years. What will be the value of this investment in four years?
A. Rs. 6802
B. Rs. 6870
C. Rs. 6878
D. Rs. 6925
409. You have suggested an investment strategy which aims to invest more when the share price or NAV
falls and less when the share price or NAV rises. It is done by achieving the total targeted value of the
investment by making appropriated amounts at each predetermined interval. You are indicating a
technique known as
A. Value Averaging
B. Rupee Cost Averaging
C. Economic Cost Averaging
D. Weighted Averaging
410. Mr. Gopesh has purchased 100 convertible debentures of Essar Oil on 1/1/95 at Rs.500 each.
40% of the value of the debentures is convertible into one share of Rs. 50 each after seven years. Mr.
Gopesh exercised his option on 1/4/2002 and received 100 shares. Compute the cost of acquisition of
these shares.
A. Rs. 200
B. Rs. 205
69
C. Rs. 195
D. Rs. 185
411. The stage of the business cycle which is marked by increased consumer and investment spending,
higher price levels and money wages, and rising employment and national income, is:
A. Boom
B. Contraction
C. Recession
D. Recovery
412. Which of the following is not normally an influence upon short-term interest rate movements?
A. Movements in the current account deficit

B. The trend of interest rates overseas
C. Fiscal policy.
D. The rate of long-term unemployment.
413. Giving the symbols their usual meaning, if

C=Rs.140 billion 1= Rs.40 billion G= Rs.60 billion x =Rs.65 billion
M=Rs.70 billion what will be the value of GNP?
A. Rs.240 billion
B. RS.235 billion
C. Rs. 245 billion
D. Rs. 375 billion
414. When the government adjusts economic policy through the central budget, it is exercising:
A. Monetary policy
B. Fiscal policy
C. Incomes policy
D. Exchange rate policy
415. Deduction under section 80D is available in respect of
A. Interest paid toward the education loan

B. Principle amount paid towards the education loan
C. Premium paid toward the life insurance
D. Medical insurance premium paid
416. Assuming all other things being equal, if the government increases the, circulation of money, interest
rates will:
A. Increase
B. Decrease
C. Stabilize
D. Remain unaffected
70
417. A life policy that has no savings elements or cash value is:
A. Term insurance
B. Whole of life insurance
C. Endowment insurance
D. An annuity.
418. Of the following investments, which is the most suited for short term parking of readily accessible
cash?
A. Money market mutual fund

B. Govt. securities
C. A piece of property
D. Shares
419. What would be the main reason for a small investor using a mutual fund instead of direct
investments in Shares?
A. lower market risk

B. lower charges
C. access to broad asset portfolio
D. higher return
420. In periods of inflation, nominal interest rates are __________than real interest rates
A. Higher
B. Lower
C. Equal
D. one of the above
421. Legislation risk _______________ minimized by diversifying investment across sectors
A. can be
B. can't be
C. legislation does not have any impact
D. none of the above
422. ALC in the context of cash flow planning and budgeting refers to
A. Average living costs

B. Annual living cash flow
C. Annual living cost
423. If the inflation rate is 3% and the tax rate is 40%, the required rate of return to maintain the value of
an investment is
71
A. 4%
B. 5%
C. 6%
D. 7%
424. A company's relative capital structure can be known from its
A. debt-equity ratio
B. P/E ratio
C. Liquidity ratios
425. What is the effective interest for 10% compounded monthly, quarterly, semi-annually?
A. 10.47,10.38.10.25
B. 10.47,10.40,10.25
C. 10.42,10.38,10.25
D. 10.47,10.36,10.25
426. The standard deviation is:
A. A measure of variability
B. The under root of the variance
C. Twice the standard error
D. In the same units as the observations
427. The code of ethic of professionalism requires
A. A member shall not engage in any conduct that reflects adversely on his or her integrity or fitness
as a member, upon the marks, or upon the profession.
B. A members shall provide services diligently and on a timely basis
C. A financial planning practitioner shall make and / or implement only recommendations that are
suitable for the client
D. In all professional activities, a member shall perform services in accordance with applicable rules
and policies of the FPSB.
428. The CFP certificant will not indulge in any practices which are detrimental to the profession is a
requirement of which code of ethic)
A. The code of ethic fairness

B. The code of ethic of professionalism
C. The code of ethic of integrity
D. The code of ethic of compliance
429. A friend owes us Rs.50, 0001- ; the interest is 12% compounded monthly what you would prefer
A. take 50.000/-
72
B. take 60,000/ -after 1year

C. take 25,000/-and 32,000/-at the end of the year
D. Take 40,000/- and'15,200/-at the end of the year.
430. There is a 35 year old man with a wife and 2 children aged 6 and 9 years. Their topmost priority
should be:
A. Retirement planning
B. Income protection
C. Life insurance
D. Critical illness insurance
431. There is a 22 year old male with no dependents and nominal income) His topmost priority should be
A. Retirement planning
B. Income protection
C. Life insurance
D. critical illness
432. An investor has Rs.9000 in mutual funds, Rs. 6000 in fixed deposits and Rs. 3000 in the savings
bank. He wants to reshuffle portfolio, keeping the ratio 3.5:2.5:1.5. What should he do?
A. Take Rs. 600 from mutual funds and-put it in the savings bank
B. Take Rs. 1200 from mutual funds put it in fixed deposits, take Rs. 600 from savings bank and put
it in mutual funds
C. Take Rs. 600 from. mutual funds and put it in fixed deposits, take Rs. 1200 from fixed deposits
and put it in savings Dank
D. D Take Rs 200 from savings bank and put it in mutual funds
433. You consider yourself a very conservative investor and compare the return on any low-risk
investments against the guaranteed rate you could obtain in a fixed deposit (FD) from a reputable Bank.
This benchmark for alternative investments is called the
A. Nominal rate
B. Opportunity cost rate
C. Periodic rate
D. Effective annual rate
434. You invest Rs.50, 000 in a commercial real estate property and expect to clear Rs. 180000 (after
selling expenses, closing costs, etc) when you sell it in 8 years. What is your expected rate of return on
this property?
A. 17.63%
B. 18.36%
C. 17.36%
D. 17.01%
435. The "Rule of 72" says that if you earn 8%per year, your money will double in years.
73
A. 12
B. 6
C. 8
D. 9
E. 72
436. Why do firms issue debt?
A. Managers like to have debt on the balance sheet as it gives them more discretion as to investment
than does equity.
B. Debt has a lower cost than equity.
C. Debt decreases the financial leverage of the firm.
437. Convertible debt is debt that
A. The issuing firm can convert into common stock.

B. The issuing firm can pay off early.
C. The bondholder can sell back to the firm at a guaranteed price)
D. The bondholder can convert into shares.
438. In the event of a bankruptcy _______________?
A. Bondholders get paid before shareholders.

B. Jr. Bonds holders get paid before Sr. Bond holders (ladies and children first!)
C. The bondholders and other credit holders are guaranteed their initial investment back.
D. all of the above
439. Which of the following statements is most correct?
A. When investors require higher rates of return for investments that demonstrate higher variability
of returns, this is evidence that is consistent with risk aversion.
B. Risk aversion' plies that investors will, not diversify.
C. Risk aversion' \lies a general dislike for risk, thus, the lower the standard deviation the higher the
risk premium.
D. In comparing two m each other only with respect to risk, the expected returns on the stock of the
firms should be equal.
440. Beta__________
A. Is a measure of firm specific risk?

B. Is a measure of market risk?
C. Is a measure of total risk
D. Is calculated by regressing the market return on the historical market dividend yield
441. Firm specific risk is also called
A. Market risk
74
B. Macro risk
C. Un diversifiable risk
D. Non-Systematic risk
442. Which of the following best describes the investment characteristics of a high-quality long-term
municipal bond?
A. High inflation risk; low default risk

B. Low inflation risk; high market risk
C. Low inflation risk; low default risk
D. High inflation risk; high market risk
443. Which of the following statements concerning supply and/or demand is/are true?
I. If demand increase and supply simultaneously decrease, equilibrium price will rise
II. There is an inverse relationship between price and quantity demanded)
III. If demand decrease and supply simultaneously increase, equilibrium price will fall.
IV. If demand decrease and supply remains constant, equilibrium price will rise)
A. 1,11 and III only

B. I and III only
C. I and IV only
D. IV only
444. Which of the following are non-diversifiable risks?

I. Business Risk
II. Management Risk
III. Company or Industry Risk
IV. Market Risk
V. Interest Rate Risk
VI. Purchasing power risk
A. IV,V and VI only

B. 1,11 and III only
C. V,VI and II only
D. 1,111 and IV only
445. American depository receipts (ADRs) are used to

I. Finance foreign exports.
II. Eliminate currency risk.
III. Sell U'S. Securities in overseas markets.
IV. Trade foreign securities in U.S. markets.
A. land III only

B. land IV only
C. Hand IV only
D. IV only
75
446. Movement through the phases of the business cycle is initiated by shifts in aggregate demand which
create fluctuations in Gross Domestic Product (GDP). Which combination of the following statements
would be the most significant contributor to the upward shift in aggregate demand?
I. Increase in demand for capital goods
II. Increase in interest rates
III. Increase in disposable income
IV. Increase in savings
A. I and III only

B. I, II and III only
C. I, III and IV only
D. II and IV only
447. Which of the following is 'incorrect' with respect to a proprietorship concern?
A. The assets and liabilities of the firm belong to the proprietor.

B. The firm has to be compulsorily registered to enable it to get assessed under IT.
C. The assessment of firm and individual takes place simultaneously.
D. Any of the above
448. You are likely to receive Rs.85, 000 and Rs.91, 000 at the end of 19 and 21 years, and if the discount
rate is 6%, what is the present value?
A. 54862
B. 54678
C. 54863
D. 51234
449. In the regime of 'soft interest', which of the following actions taken by RBI will not increase the
bond prices significantly?
A. Selling of Treasury bills at low rates

B. Move to privatize and improve tax collections
C. Deficit financing
D. Any of the above
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Introduction to Financial Planning – Practice Book

2. A comprehensive financial plans include:

3. While review of a financial plan, what are the factors to be considered:

A. Change in the client's objective

A. Your finances, i.e. your income, assets and liabilities

I. What are your goals for this investment?

8. Which of the following data is qualitative data?

A. Establishing the relationship

12. The first step of the financial planning process involves.

A. Establishing the relationship

13. An appropriate financial plan is influenced by one's

A. Develop a sound financial plan.

A. Contacting the other financial planner

A. Personal financial plan

A. A short term financial goal

A. Review and revision of plan

21. Which of the following is the basic characteristic of a client goal?

A. It must be defined in terms of money

24. Which of the following is a step in developing the financial plan?

A. Evaluating one's financial plan

A. A consumable products financial goal

A. Determining your current financial position.

29. What is the first step in the financial planning process?

A. Client data Questionnaire

A. Determining your current financial position.

36. Which of the following is not qualitative information?

A. A net worth statement

39. An example of a personal opportunity cost would be:

A. The time it takes you to drive to work.

40. A letter of engagement is:

A. Essentials for establishing the client-planner relationship

C. Document essential in the financial planning process

A. Withdraw his investment from the equities

A. Review and revision of plan

45. Which of the following is true in regard to a financial planner's liability?

A. A disclaimer removes all liability

48. Which of the following is true; a professional financial planner provides.

A. Both I and II are false

A. The above statement is true

50. A professional financial planner is one who

A. Takes pride in his/her work

A. Any amount of fees

A. To comply with legal requirements

56. A CFPCM certificant shall act in a_____________capacity regards clients' funds

D. None of the above

59. Under the rules of the IRDA, no insurance agent shall

A. disclose his commission to the prospect

60. Under the rules of the IRDA, no insurance agent shall

A. Sell life insurance on the telephone

61. Professional responsibility is based on

A. Not held responsible

A. He can still take action under the Consumer Protection Act.

64. A contract with a minor

A. Is voidable at the option of either party

65. A contract may be discharged by

66. Tort does not cover.

67. The first requirement of an agency is

A. An agent should have authority to act on behalf of the principal

68. Fiduciary relationship requires