CSI AFP-Exam-1 - Applied Financial Planning Certification Exam 1 (AFP)

Demario, age 28, has just started his own law firm. He met with his financial planner, Ivy, and she told him that he needs insurance, but Ivy did not specify which type. Demario is single and owns his own home. At this point in his career, his greatest asset is his human capital. Which type of insurance should Ivy have specified to purchase in order for Demario to best protect this asset?

• A. Term Life.
• B. Extended health care.
• C. Disability.
• D. Critical Illness.

Jonah is meeting with his client, Muhsina, who owns Myke Inc., a Canadian-controlled private corporation.
Based on current market value, if he decides to sell Myke Inc., Muhsina will have a capital gain of $400.000.
He expects the value of Myke Inc. to increase in future years and has a CNIL balance of $100,000. He wants the future increase in value to be taxed in the hands of his children, Teshi and Kaliyah, and to minimize the cost. What action should Jonah advise Muhsina to take to meet his goal?

• A. Set up a joint account with Teshi and Kaliyah.
• B. Sell #### Inc. to his children at fair market value.
• C. Sell #### Inc. to his children for $1.
• D. Set up a joint account with Teshi.

In 2019, Glenda, age 46, visited her financial planner to discuss her goal of retiring at the age of 65. Glenda had questions about whether she qualified for the maximum amount of CPP and OAS benefits as she had immigrated to Canada just 10 years earlier to take a job as a nuclear technician. What should her financial planner have told her?

• A. Glenda would receive the max CPP and partial OAS benefits at age 65.
• B. Glenda would receive partial CPP and no OAS benefits at age 65.
• C. Glenda would receive partial CPP and partial OAS benefits at age 65.
• D. Glenda would receive the max CPP and OAS benefits at age 65.

Todd, a financial planner, is meeting with Vanessa, a new client, to review her investment goals and objectives. During the meeting, Vanessa states that she believes the markets are very efficient and should reflect all available information in the price of securities. She is looking for an investment option that will reflect a similar level of risk and return characteristics as the Canadian market. What investment option should Todd recommend with Vanessa that would reflect her opinions?

• A. Canadian exchange-traded fund.
• B. Canadian neutral balanced fund.
• C. Canadian value mutual fund.
• D. Canadian hedge fund.

Mary, an accredited financial planner, recently met with clients Michael and Radha. They are high- net-worth clients who are in their mid-40s. Michael is a heavy equipment operator at a local oil field, and Radha is a homemaker. They are ready to retire in 10 years and very excited to start planning for the next chapter in their lives. Mary explained her planning process, her accreditation, and her remuneration. When Mary presented the client agreement letter, both clients were surprised. They said they did not know why they would sign a letter to get advice on their own finances. How should Mary answer their question?

• A. The client agreement letter sets expectation for the partnership between, the client, the financial planner and their partners.
• B. The client agreement outlines the specific financial planning strategies that will be implemented to help both Michael and Radha achieve their financial goals.
• C. The client agreement letter is a non-legally binding contract that outlines the business relationship between the clients and the financial institution.
• D. The client agreement letter outlines the overall investment strategy that is being recommended by Mary to Michael and Radha.