Free CFP Exam General Principles of Financial Planning Practice Questions
General financial planning principles on the CFP exam cover the seven-step financial planning process, personal financial statement analysis, time value of money calculations, and economic concepts relevant to comprehensive planning (CFP Board).
Sample Questions
Question 1
Easy
A prepaid tuition 529 plan differs from a 529 savings plan primarily in that:
Solution
D is correct.
A prepaid tuition plan allows families to purchase future tuition credits at participating public institutions at today's prices, hedging against tuition inflation. If the student attends a non-participating institution, value may be limited. By contrast, 529 savings plans invest in portfolios with returns depending on market performance but can be used at any eligible institution for qualified expenses.
A prepaid tuition plan allows families to purchase future tuition credits at participating public institutions at today's prices, hedging against tuition inflation. If the student attends a non-participating institution, value may be limited. By contrast, 529 savings plans invest in portfolios with returns depending on market performance but can be used at any eligible institution for qualified expenses.
Question 2
Medium
The federal student loan interest deduction allows eligible taxpayers to deduct:
Solution
D is correct.
The student loan interest deduction allows up to $2,500 per year as an above-the-line deduction (available regardless of whether the taxpayer itemizes). The deduction phases out at higher MAGI levels. Both federal and private qualified student loan interest qualifies.
The student loan interest deduction allows up to $2,500 per year as an above-the-line deduction (available regardless of whether the taxpayer itemizes). The deduction phases out at higher MAGI levels. Both federal and private qualified student loan interest qualifies.
Question 3
Hard
A grandmother wants to fund her grandchild's education and is comparing a 529 plan contribution to purchasing Series I savings bonds in her own name. Which distinction is most relevant to her decision?
Solution
C is correct.
The education savings bond interest exclusion under Section 135 requires that the bonds be registered in the name of the taxpayer (or taxpayer and spouse). Critically, the taxpayer must be the student or the student's parent to claim the exclusion. A grandparent who purchases bonds in her own name cannot use the interest exclusion for a grandchild's education expenses. This is a frequently tested trap.
The education savings bond interest exclusion under Section 135 requires that the bonds be registered in the name of the taxpayer (or taxpayer and spouse). Critically, the taxpayer must be the student or the student's parent to claim the exclusion. A grandparent who purchases bonds in her own name cannot use the interest exclusion for a grandchild's education expenses. This is a frequently tested trap.