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Q:1-On December 31st Lisa purchased a home with a 20-year mortgage for $150,000 and an 8% annually compounding interest rate. What is Lisa's principal reduction for the first year?
Mark one answer:
$1,814
$3,171
$2,507
$3,912

Q:2-The Generation Skipping Transfer Tax (GSTT) has all the following characteristics, except:
Mark one answer:
GST outright gifts qualifying for the annual exclusion are not subject to the tax.
Assets transferred to a trust that has a grandchild as the sole beneficiary may be subject to both gift and generation skipping transfer tax.
If all the children of a trust are grandchildren (whose parents are living) of the grantor then the trust is subject to GSTT.
A "skip person" is a person who is one or more generations younger than the grantor.

Q:3-Gina, age 79, recently had a stroke. Afraid that she may not live long enough to see her family enjoy it, she would like to transfer the beach house she owns to her daughter Taylor. While Gina is willing to make the transfer gratuatious in whole or part, Gina does not want to pay any gift tax or utilize any of her lifetime credit amount. Which of the following techniques, if used by Gina to transfer the beach house to Taylor, will not result in a taxable gift?
Mark one answer:
GRAT.
QPRT.
SCIN.
GRUT.

Q:4-Your client Bebe Rebozo is contemplating the exchange of two parcels of investment land for two similar parcels in two separate transactions. Given the following details of the proposed transaction, compute the amount of recognized gain and loss (if any) on both parcels if your client completes the exchanges: Parcel A: Ten acres of land acquired 15 years ago with a current basis of $50,000. In exchange your client will receive eight acres of land (FMV = $80,000) and $20,000 in cash. Parcel B: Twenty acres of land acquired two years ago with a current basis of $100,000. In exchange, your client will receive twelve acres of land (FMV = $75,000) and $10,000 in cash.
Mark one answer:
Parcel A Recognized Gain = $20,000; Parcel B Recognized Loss = $0
Parcel A Recognized Gain = $20,000; Parcel B Recognized Loss = $10,000
Parcel A Recognized Gain = $50,000; Parcel B Recognized Loss = $10,000
Parcel A Recognized Gain = $20,000; Parcel B Recognized Loss = $15,000

Q:5-Jack, a new client for Robert, a CFP® professional, requests a needs analysis concerning Jack’s life insurance situation. Jack is 42, married and has two children he plans to send to college. He wants Robert to evaluate how much and what type of insurance he should purchase. Which of the following is required to be provided to Jack according to the Code of Ethics?
Mark one answer:
A written agreement for Robert’s services specifying on what terms the agreement can be terminated.
An accurate and understandable description of the compensation arrangements being offered, in writing.
A written summary of likely conflicts of interest between the client and the certificant.
None of the above is required by the Code of Ethics.

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Q:6-Barbara Reed owns an LMN, Inc. bond with a par value of $1,000. LMN is a AA-rated bond that matures in 7 years. Barbara receives $55 of interest income from LMN semiannually. Comparable debt, i.e., is AA-rated, 7-year maturity, yields 12%. The bond's duration is 5 years. What is the intrinsic value of the bond?
Mark one answer:
$703.36
$880.80
$953.53
$954.36

Q:7-A client sold an apartment building last year for $100,000, paying a sales commission of $5,000 plus $2,500 closing costs. The building originally cost $80,000 20 years ago. Total straight line depreciation of $40,000 had been taken. The building had a mortgage of $60,000 which was assumed by the buyer. What is the seller's adjusted cost basis prior to the sale?
Mark one answer:
$32,500
$37,500
$40,000
$42,500

Q:8-Tony Scarponi has come to you asking about the basis of property that his brother Calvin gave to him. The property had a market value of $75,000 and Calvin’s adjusted basis in the property was $18,000 at the time of the gift. Calvin paid gift tax of $3,500 on the gift. Tony wants to know what his adjusted basis in the property is. Assume Calvin had utilized his annual gift tax exclusion for gifts previously given to Tony that year. What will you tell him?
Mark one answer:
Tony’s new basis is $18,000, the same as Calvin’s basis was at the time the gift was made.
Tony’s new basis is the fair market value of the gift at the time of the gift.
The adjusted basis for Tony is $20,660.
The adjusted basis for Tony is $21,500.

Q:9-You are faced with several fixed income investment options. Which of these bonds has the greatest interest rate risk?
Mark one answer:
A U.S. Treasury bond with an 11.625% coupon, due in five years with a price of $1,225.39 and a yield to maturity of 6.3%.
A U.S. Treasury strip bond (zero-coupon) due in five years with a price of $735.12 and a yield to maturity of 6.25%.
A corporate B-rated bond with a 9.75% coupon, due in five years with a price of $1,038.18 and a yield to maturity of 8.79%.
A U.S. T-bill selling for $950 due in six months.

Q:10-Lisa is a condo owner and has an HO-6 policy. She purchased the condo for $400,000. Her HO-6 policy is an open peril policy and has a face value of $360,000. Her contents are covered on a named peril basis with $100,000 in coverage. She also has an 80% coinsurance requirement. A tornado hits the building and completely destroys the roof of the condo. The cost to repair the roof is $50,000. How much would her condo policy cover for the roof damage?
Mark one answer:
$0.
$32,000.
$45,000.
$50,000.

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