2024 Edition

Certified Financial Planner Practice Exam

Take this free practice test to get an idea of what is on a certification test for financial planners. 

CFP® certification gives you an advantage in your financial planning career. Candidates for CFP® certification must pass the CFP® exam, which tests one’s ability to apply financial planning skills and techniques to real-life situations. Topics on the test include: financial planning process and principles, tax planning, income and retirement planning, estate planning, risk management and insurance, investment planning, tax planning, retirement savings and income planning, estate planning and psychology of financial planning. The exam is 170 questions (multiple choice, short scenario and case study) and is three hours long.

Professional Conduct and Regulation

1. Adela has just received notice that she has passed the CFP® exam. She may do which of the following:
2. Joe was a CFP® Practitioner for a decade before letting his certification lapse five years ago when he started teaching at the local college. Joe is allowed to use The Marks again by:
3. Heather wishes to participate in the startup community of her hometown. She is not an accredited investor as she has a net worth of $250,003 and an income of $101,000 and is divorced. Under the JOBS Act, Heather could do which of the following?
4. Matthieu would violate the Integrity component of the CFP® Standards of Conduct if he did which of the following?

General Principles of Financial Planning

5. Annabeth can choose from multiple options to accumulate money for her dream of opening her business in three years, when she will be 42. She needs $45,000 at that point. Which is the best option for her?
6. Petra the planner is putting together a checklist of documents for her client to complete or bring to the meeting. Assume the financial planning engagement has been signed and will include retirement calculations, investment allocations, and insurance planning at death or disability. Which of the following is inappropriate for Petra to ask the client?
7. Chow wants to have a discussion with you as his planner about expanding his business. He currently has about two dozen employees, all in one facility which uses a lot of commodities in the manufacturing process and semiskilled labor with advanced machinery. He is concerned about being able to finance and staff this expansion. Based upon the business cycle, what data would give favorable feedback for this move?
8. You are a planner who is working with a newly licensed Medical Doctor who has finished his residency and is about to accept a position paying him $240,000 net of taxes and retirement contributions as a single individual. He has $220,000 in student loans ($100,000 each at 4% and $120,000 at 6%, a mixture of Federal and Perkins loans) both with 20 year terms. He also has $5,000 of credit card debt at 9.5%, a car loan for $50,000 at 4.5% for six years, and believes he can purchase a $500,000 house within a year with 5% down through a special program for new doctors. He has $12,000 in liquid savings accumulated during residency. What would be a reasonable recommendation for this new doctor based on this scenario which would allow him to balance a purchase of a new home while paying down debt?

Risk Management and Insurance Planning

9. Mary Lou is 82 and has been divorced for 40 years and never had any children. She receives Social Security and a pension that covers all of her monthly expenses and allows her to take two trips a year. She has an IRA which she takes her RMD from each year, giving away most of it to charity each year as she does not need the money and has some charitable inclinations. Which of the following is an appropriate recommendation for a planner to make to Mary Lou?
10. Billie is buying a new sportscar with part of the proceeds of her new hit single, her third #1 this year and tenth in the past four years. Her vehicle is worth $200,000. Which of the following would be the least important component of her car insurance coverage for her situation?
11. A thirty-year old newly minted MBA, Tawnya has accepted a position with a mid-sized company which she plans to stay with for roughly two years before transitioning to do her own business. She is unmarried and has no children. She has no risky hobbies. Her parents are recently retired and doing well on their own and she has no siblings. Tawnya has $40,000 in student loan debt and that is her only debt. She has $18,000 in an old IRA from her pre-grad school days, and will start at $150,000 base salary with expected bonuses of $15,000 and 5% increases in salary and bonus for each year she stays with the company.
12. Delilah is a 38 year old single mother with two teenage boys. She is trying to save for retirement, help her kids go to community college in a few years, and wants to continue to pay down the debt from her divorce. Cashflow is tight for the next few years until the debt is taken care of, and she has stable employment with good growth potential but limited benefits at the moment as it is an early-stage company. Given these competing goals, what type of life insurance would make the most sense for Delilah?

Investment Planning

13. Your client Chuck has the following stocks, all purchased on the same date 368 days ago. Assume that they are non-dividend paying and held in a TOD account intended to purchase a new truck ($65,000 cost) in roughly three years, and a new house with land (net $500,000 in five to seven years when he decides to retire in a state further south and sells his current home. Chuck will do anything to avoid debt and is willing to accept market risk or delay purchase to avoid debt but is concerned about the markets.
14. Based on Modern Portfolio Theory, which of the following mixes of investments would provide the lowest risk for a 72 year old female retiree while still giving her a reasonable hedge against inflation for her 15 year life expectancy?
15. Tanaka is looking at alternatives for a stock purchase and follows fundamental analysis.  Which of the following stocks is most valuable based upon the Gordon Model?
16. KB wants to sell her Faraday Automotive (an electric car company) stock to lock in a gain but thinks it could take a major hit soon because of company specific risk. If she believes in the future of electric vehicles, she should:

Tax Planning

17. Ken has an inherited investment portfolio of individual securities from his mother valued at $1,250,000 at her date of death in 2022, representing her entire estate. There was no previous gifting. She had purchased these securities in the 1980's for $50,000. Assuming no state inheritance taxes nor state capital gains taxes, how much tax does Ken owe if he sells the securities for $1,300,000, nine months after inheriting them? Assume that Ken is single and earns $300,000 a year and no dividends were paid.
18. Loki is 25 years old and earns $92,000 a year as an engineer for a Fortune 500 Company where he has been for three years, and he is contributing 9% to his salary with the first 4% matched dollar for dollar. Which of the following will yield the greatest after tax income at age 65, assuming all net returns after expenses and fees are equal at 8% per year over the accumulation time frame and that he can contribute $4,000 per year into any of the alternatives?
19. Natasha has an adjusted gross income of $100,000.  Unfortunately she and her family have had some significant expenses this year as shown below. Based upon these various expenses, how much may Natasha deduct against her Adjusted Gross Income?
20. Jimmy Ville's wife Margarita is pregnant with twins and due on January 1st. She goes into labor around 8:00 pm, and baby Zan is born just before midnight while sister Janna is born just after midnight. What is the tax implication?

Retirement Savings and Income Planning

21. Devesh seeks to increase his net after tax cash flow for the first decade of retirement, commencing this year. Given that he has no pension, Social Security benefits of $2,250 per month, $1,250,000 in his IRA, an appreciated stock portfolio of $1.5 million ($500,000 basis), $300,000 in savings, and a home with no mortgage worth $425,000 and is widowed with one grown child who is independently successful.
22. Rocio is an architect doing contract work for various firms around New York City as a 1099 Employee. She earns $130,000 net as a single individual and is concerned about setting aside money for her retirement. Which method will allow her to set aside the most money on a pre-tax basis?
23. Juan has three ex-wives, Juanita, Kavita, and Lori. He and Juanita were married for 11 years and she is remarried. He and Kavita were married 12 years and she is not remarried. Lori and Juan were married in Las Vegas and divorced a week later. Lori has not remarried. Assuming Juan is 68 as is Juanita, Kavita is 63 and Lori is 27, what is the impact on Juan's Social Security benefits when he, Juanita, and Kavita all apply for retirement this month?
24. Shuri is independently wealthy due to the patent portfolio she created combined with her inherited family wealth. She was a good saver during her working years and her 401(k) that she rolled over into an IRA has a balance of $2,000,000. Assuming Shuri is 74 years old, what are the tax implications for her retirement?

Estate Planning

25. Richard (age 75) and his wife Fly (age 73) have been married for 47 years, and have one daughter Simona (45). Simona is married to Connor (also 45) and they have three minor children: Aiden (15), Ryan (14), and Keegan (11). Richard and Fly are in great shape and expect to live another 15 years based upon family history, diet, and two hours of tennis every day. The couple have a net worth of $15,000,000 including their home ($2,000,000), Fly's $2,200,000 IRA that she is taking RMDs from, Richard's $500,000 IRA that they take RMDs from, $260,000 of personal property, $2,240,000 in artwork that Fly created during her career, and the balance in investments of publicly traded securities.
26. Which of the following approaches would generate income for a publicly traded charity for a determined period while allowing the appreciation of the underlying securities to ultimately return to the family of the donor?
27. Bau is a 69 year-old widow and has four children (Diem, Paul, Janet, and Rob). Diem is married to Jay and has two kids (Minh and Xuan), Janet is married to Akira but has no children. Rob's wife has also passed on and he has a child, Liam.

Psychology of Investment Planning

28. A client says that they want to put all of their money into the EAFE Index because it has gone up for four years in a row and "that's what it always does." Their logic is an example of:
29. Olivia is exhibiting Optimism Bias by which of the following?
30. A client in their late 30s decides to move all of the money in their IRA into a Target Retirement Date fund while they travel the world for the next two years, collecting information for their next book. This investment decision is an example of: