FP 511 EXAM AND PRACTICE EXAM NEWEST
2024 ACTUAL EXAM TEST BANK 500
QUESTIONS AND CORRECT DETAILED
ANSWERS (VERIFIED ANSWERS) |ALREADY
GRADED
... [Show More] A+
FP 511 FINAL EXAM
Which of the following financial statements provides a
snapshot of the client's net worth at any given point in time,
usually at the end of a calendar year?
1 Personal tax return
2 Cash flow statement
3 Net worth statement
4 Statement of financial position - ...ANSWER...3-4
A statement of financial position, also known as a personal
balance sheet or net worth statement, provides a snapshot of
the client's net worth at any given point in time, most often at
the end of a calendar year.
Which of the following statements regarding a financial
planner's analysis of a client's cash flow statement is
CORRECT?
1 The analysis of the client's cash flow statement can help the
planner determine whether the client is living within his
financial means.
2 The analysis of the client's cash flow statement helps
determine the client's net worth, or total cash surplus, by
tracking cash inflows and outflows over a period of time.
3 Typically, the financial planner will encourage the client to
reduce the variable expenses reported on the cash flow
statement - ...ANSWER...1, 3
The analysis of the client's cash flow statement helps
determine the client's savings level, or total cash surplus, by
tracking cash inflows and outflows over a period of time. Net
worth is determined in a statement of financial position.
You have gathered the following information from Edgar's
financial statements:
Net income $75,000
Gross income $110,000
Total assets $190,000
Total debt $45,000
Consumer debt $20,000
Based on this information, which of the following statements
is CORRECT?
1 Edgar's total debt ratio exceeds the generally recommended
maximum.
2 Edgar's consumer debt ratio exceeds the generally
recommended maximum. - ...ANSWER...all
It is generally recommended that total debts do not exceed
36% of gross income. Edgar's total debt ratio is 40.9%, greater
than the 36% maximum ($45,000 / $110,000 = 40.9%). The
consumer debt ratio is the ratio of consumer debt payments to
net income. Edgar's consumer debt ratio is 26.67%, which
exceeds the generally recommended maximum of 20%
($20,000 / $75,000 = 26.67%)
Blake and Sarah have a monthly mortgage payments of $850
(principal, interest, taxes, and insurance [PITI]) on a mortgage
balance of $95,000 on their home. They have an auto loan
balance of $5,000, with monthly payments of $250.
Additionally, they have a credit card balance of $2,000, on
which they pay $225 each month. Blake and Sarah's net
income for the past year was $35,000. Their gross income was
$48,000.
Are Blake and Sarah using excessive amounts of debt? -
...ANSWER...No, because monthly house payments (PITI)
are less than 28% of gross income and total monthly debt
payments are only 33% of gross income.
Blake and Sarah are not using excessive amounts of debt.
Both ratios should be calculated using gross income.
Which of the following are considered fixed cash outflows?
1 Clothing expenses
2 Mortgage payments
3 Insurance premiums
4 Auto loan payments - ...ANSWER...2,3,4
Clothing expenses are a variable outflow because they
typically do not occur on a regular basis and the amount tends
to vary. The other choices represent fixed outflows because
they tend to occur regularly and the amount is more
predictable.
*** Peter, age 35, has requested your expertise in developing
a college funding plan for his five-year-old daughter, Brooke.
He has presented you with the following information.
Current annual salary—$115,000
Monthly mortgage payment—$1,700
Credit card debt—$3,000 (16.5% fixed)
Checking account balance—$1,345
Long-term group disability insurance—60% of salary to age
65, 60-day elimination period
Life insurance—1x salary (group), $400,000 20-year term
(individual)
After completing a budget with Peter, you have determined
that he has $350 per month in surplus cash flow. He tells you
he would like to use this amount to fund a college plan for
Brooke. Based on the information provided, what should Peter
do first? - ...ANSWER...Establish an emergency fund [Show Less]