Introduction - Theory

Which of the following cannot change while agreeing on the implementation responsibilities?
a) The scope of the engagement, as originally defined
b) The sources of compensation and material relationships, previously disclosed
c) The responsibility itself of implementing the recommendations
d) The conflicts of interest, previously disclosed

In establishing relationship with the client, which of the following situations of conflict of interest is
not foreseen in the Financial Planning Practice Standards?
a) Any circumstances orr elationships or facts that would place CFP practitioner's interests in conflict
with the client's interests
b) Any advice that would be in conflict with financial products/services industry's business
interests
c) Any personal conflict that would affect a CFP practitioner's ability to work successfully with the
client
d) Any circumstances orrelationships orfacts that would place the interests of one client in conflict
with another client

The Foreign Exchange (Forex) market does all of the following except:
 It assists in curbing speculation in the value of currencies.
 It facilitates in transferring the currency risk from the risk averse to the risk takers.
 It determines the relative values of different currencies.
 It assists international trade and investment by enabling currency conversion.

Recession is defined as .
 a receding liquidity levels with the bankers due to an increased demand of money in the
economy
 increased spending as a result of improved employment prospects and income levels
 a rise in the general price level of goods and services in an economy over a period of time
 a significant decline in the economic activity that lasts longer, from a few months to a few
years

The Internal Rate of Return (IRR) is .

 The real rate of return indicating the actual purchasing power derived from an investment
 The gross return obtained from an investment overthe entireperiod of investment duration
 The rate of interest which is internally decided by an institution as desirable for evaluating
the profitability of projects
 The discountrate that reduces to zero the net present value of a stream of income inflows
and outflows

Which of the following is in adherence with the professional responsibility of a CFP professional
towards the client?
 Competing with professionals in specialized services to internalize most deliverables
 Referring the client to other professionals for certain duration with transfer of liability
 Having legitimate difference of opinion on an issue from fellow professionals and the client
 Managing one's own prejudices and desires to achieve a proper balance of interests
Under Financial Planner Code of Ethics and Professional Responsibility, the principle of Fairness is
most appropriately interpreted to mean that a CFP professional would .
 assess personal prejudices, feelings and desires in ascertaining the treatment he intended in
a similar situation as the client's
 owe the client all due services meant to be fairly provided, without prejudices and with
proper balance of interests
 be fair in charging, besides the terms of payment, for the services to be rendered outside
the scope of engagement
 treat all clients regarding the same service and deliverables fairly equally

Which of the following cannot be categorized under Fiduciary Responsibility of a financial planner
towards his/her client?
 Disclose all material facts
 Get the best returns on client's investments
 Serve the client's best interest
 Act in utmost good faith

Which of the following functions permitted by the Reserve bank of India for banks are also
permitted for an entity to act in the capacity of a Non Banking Finance Company in India?
 It can engage in the business of accepting demand deposits as well as time deposits.
 It can incorporate itself either under the Banking Companies Act or the Companies Act
depending upon the specific business activity.
 It can engage in the business of loans and advances, acquisition of shares, debentures,
stocks, bonds and government securities.
 It can indulge in agricultural and industrialactivities as well as in construction of immovable
property.

Which of the following discipline does not constitute a core financial planning component?
 Tax Planning
 Estate Planning
 Retirement Planning
 Portfolio Management

The core financial planning competency under the “Synthesis” function relates to .
 Identifying and develop distinct strategies for financial goals
 Performing various financial analysis on the data gathered
 Developing and evaluating strategies to create a financial plan
 Assessing quantitative and qualitative information gathered for analytical purposes

Which of the following Financial Planner Professional Skills would not be categorized under the
segment “Cognitive”?
 Analyzing and integrating information from a variety of sources to arrive at solutions
 Maintaining awareness of changes in the economic, political and regulatory environments
 Using logicand reasoning to considerthe strengths and weaknesses of potential courses of
action
 Arriving at informed decisions when faced with incomplete or inconsistent information
In case of Primary market, the price band of an issue is determined by .
 the issuer in consultation with Merchant Banker
 the forces of demand and supply necessarily
 the price formula stipulated by CCI and SEBI
 the prices of securities of similarly traded companies on the exchanges

In a typical business cycle, which one of the following phases would exhibit periods of increasing
employment and increasing output?
 Expansion
 Trough
 Recession
 Peak

The Real Rate of Return necessarily takes into account the following:
 Compounding
 Inflation
 Present Value
 Frequency of investment or payment

Which of the following is an infringing use of CFP marks to describe an individual eligible to use
them?
 CFP certificant
 CFP expert
 CFP professional
 CFP practitioner

Which of the following does not correspond to the principle of “Professionalism” under Financial
Planner Code of Ethics and Professional Responsibility?
 Enhancing and maintaining the profession’s public image and its ability to serve the public
interest
 Complying with appropriate rules, regulations and professional requirements
 Behaving with dignity and showing courtesy to clients, fellow professionals and business
associates
 Appearing in executive attire, using latest gadgets of communication, find dining skills, etc.

Which of the following is not prescribed for an entity to act as bank under the Banking Regulation
Act, 1949?
 Use of at least one word bank, banking, banking company in its name
 Restriction on granting loan to person interested in management of the bank
 Prohibition to form subsidiary company for certain purposes
 Restriction on business of certain kinds such as trading of goods etc.

This is not a described category under FPSBIndia’s Financial Planner Competency Profile to discuss
the competent performance of a CFP professional.
 Financial Planning Body of Knowledge
 Financial Planner Professional Skills
 Financial Planner Code of Ethics and Professional Responsibility
 Financial Planner Abilities
Which of the following correctly defines a CFP professional’s working out the financial goals of a
client?
 The CFP professional analyzes the financial information submitted by the clients and
formulates short term and long term financial goals
 The CFP professional assists the client in clarifying and prioritizing short and long-term
realistic financial goals with respect to the current situation
 The CFP professionalseeks all information about financial transactions and assets in order to
structure financial goals of the client
 The CFP professionaldiscusses the merits of financial goals and selects only the achievable
goals

Which of the following is not a fiscal policy measure?

 Reducing Cash Reserve Ratio
 Increasing taxes
 Reducing subsidies
 Reducing Government borrowing

Which of the following best describes the cost of foregone income that results from mak ing an
economic decision to use funds to purchase a piece of capital equipments?
 Fixed cost
 Cost of capital
 Marginal cost
 Opportunity cost

Money has time value. This fact derives its significancefrom several conditions. Choose the one from
the following which does not correspond:
 Cost of foregoing present consumption.
 Possibility of increase in tax rates over time.
 Reduction in the purchasing power over time.
 Ability to buy assets which generate income over time.

The following entities assist in the initial sale of securities in the primary market:
 Brokerages
 Stock exchanges
 Issue Underwriters
 Merchant Bankers

Under the Investment Adviser Regulations, 2013 notified by SEBI, which of the following has not
been considered as one of the eligibility criteria for investment advisers?
 Registration with financial product manufacturers
 Capital Adequacy requirement
 Infrastructure
 Eligible Qualification and Certification

Green Shoe Option means .

 An option to offertheir shares by the existing shareholders of a company which comes out
 with public issue of shares.
 Allotment on afirm basis a certain quota of shares in a publicissue by an issuing company to
Qualified Institutional Buyers (QIBs).
 Allotment on afirm basis a certain quota of shares in a publicissue by an issuing company to
Indian and Multilateral Development Financial Institutions and MFs
 An option reserved with the issuing company to allocate shares in excess of the shares
included in the public issue.

This is not a core financial planning component:

 Tax Planning
 Asset Management
 Risk Management
 Corporate Finance

Which of the following is inferential data, i.e. data that may not be correctly obtained by simply
asking a direct question?
 Current income
 Retirement Age
 Risk appetite
 Time horizon

The finance bill becomes the Finance Act when .

 signed by the President
 presented in the Parliament
 approved by the LokSabha
 presented by the Finance Minister

In establishing relationship with the client, which of the following situations of conflict of interest is
not foreseen in the Financial Planning Practice Standards?
 Any circumstances or relationships or facts that would place CFP practitioner's interests in
conflict with the client's interests
 Any advice that would be in conflict with financial products/services industry's business
interests
 Any personal conflict that would affect a CFP practitioner's ability to work successfully with
the client
 Any circumstances or relationships or facts that would place the interests of one client in
conflict with another client

The following are critical parameter/s foracompany‟s stock to be included in an exchange‟s equity
index:
 Average price quoted in the last six months
 Market capitalization and liquidity
 Industry leadership in terms of sales volume
 Market trading span of at least three years

Which of the following is not an effect of rising inflation in a nation‟s economy?

 It reduces the purchasing power of money.
 It increases uncertainty of future costs of input in the entire economy.
  It decreases the debt servicing burden of forex loans of a nation.
 It weakens the value of the nation's currency in the international markets.

Which of the following is not covered underthe principle of “Competence” under Financial Planner
Code of Ethics and Professional Responsibility?
 Attaining and maintaining an adequate level of abilities, skills and knowledge in the
provision of professional services
 Consulting appropriately with otherprofessionals or referring to them on realizing that one
has limitations in performance of certain tasks
 Committing oneself to a continuing learning process and professional development
 Competing in all components of financial planning with the best professionals in order to
provide the client professional services