AFP -Workbook

B) The portfolio will have a return that is the average of the stocks included in it, but have a risk that is higher than the risk of the stocks. C) The portfolio will have a return and risk, which lies in the range of risk and return of the stocks included in it. D) The portfolio will have a return that is lower than the stocks included in it, but have a risk that is higher than the risk of the stocks. 102. M₹ X held her portfolio for 10 year How will you compute her return over the period in annual terms? A) The holding period return is computed by comparing the total appreciation in the portfolio and the dividends received, with the original amount invested. The number can then be annualized. B) The CAGR of the portfolio, including the dividends received, represents the return on the investment. C) The holding period return will be equal to the dividend yield over the holding period. D) Annual return for every year has to be first computed. This has to then be averaged to know the returns over the 10 year period. 103. An analyst has advised Mr. X after considering him to be risk averse, to invest in a portfolio to optimize or maximize expected return based on a given level of market risk, emphasizing that risk is an inherent part of higher reward. He was referring to ____________. A) Sharpe Ratio B) Post-Modern Portfolio Theory C) Jensen’s Ratio D) Modern Portfolio Theory 104. You tell Mr. X that the primary objective of Financial Planning is to manage one’s cash flows optimally to achieve one’s financial goals. Which one of the following best describes the management of liquidity? It is to manage cash in order to ___________. A) minimise the cash balances to optimise interest earnings B) arrive at optimal cash balance based on a well-drawn budget C) maintain enough cash to meet all liquidity requirements D) strike a balance between liquidity needs and interest foregone on cash balances 105. Mr. X wants to know the logic behind calculation of risk premium for Life Insurance of a person his age, given that in a population of 1,000 persons aged 46 years and are healthy. It is expected 6 persons die during the year. If the economic value of the loss suffered by each family of the dying person is ₹ 5,00,000, calculate the pure risk premium for each person per thousand sum assured. A) ₹ 60 B) ₹ 300 C) ₹ 30 D) ₹ 6 106. You have asked Mr. X to prepare an estimation of the revenue and expenses over a specified future period of time. You are referring him to prepare a/an _________. A) Income and Expenditure Statement B) Balance Sheet 147

C) Budget D) Cash Flow statement 107. You have mentioned to Mr. X that you shall ensure all information and relevant documents given to or gathered by you are securely stored to establish at any time that it has complied with the FPSB India’s Professional Standards and be available for inspection by the FPSB India when required. Such records shall be retained for seven years from the date the document was last acted upon. This is according to the Code of Ethics of __________. A) Compliance B) Professionalism C) Diligence D) Objectivity 108. At the earliest point in the relationship, you have disclosed in writing to Mr. X that you are authorized to sell or advise on a restricted range of products, and any other limitation of their capacity to serve him. You have complied with the Code of Ethics of _________. A) Compliance B) Objectivity C) Diligence D) Competence 109. M₹ X wants partition in Mr. X’s HUF, to claim her share and Mr. X’s share out of the HUF’s assets. In principle, Mr. X wants to know whether M₹ X can legally demand partition of Mr. X’s HUF as she is also one of the members in the same. A) Yes, as Mr. X has no objection B) No C) Yes, With prior permission from IT Department only D) Yes, after the death of Mr. X 110. A Mutual Fund agent has told Mr. X that bigger the AUM of the fund the better it is. Which of the following statements are correct? 1) The bigger the fund’s AUM, the lower the expense ratios and in that sense it could be better. 2) The bigger the fund’s AUM, less are the chances of showing break-out returns as stock buying becomes difficult without moving the price upwards. 3) The bigger the fund’s AUM the worse-off a mid & small cap fund would be, due to its limited pool of stocks. 4) The smaller the AUM of a small cap fund the better it is due to lower expenses & higher returns. A) Only 1 is correct B) Only 1 & 2 are correct C) Only 1, 2 & 3 are correct D) Only 2, 3 & 4 are correct 111. What is the correct sequence to perform six steps of Financial Planning Process to prepare a financial plan for the client? 1. Developing and Presenting the Financial plan 2. Analyzing and evaluating the client’s financial status 3. Implementing the Financial Plan 148

4. Monitoring the Financial Plan 5. Gather client data and determining Goals and Expectations 6. Establishing Client – Planner Relationships A) 1, 3, 4, 5, 2, 6 B) 6, 2, 5, 4, 3, 1 C) 6, 5, 2, 1, 3, 4 D) 5, 6, 2, 1, 3, 4 112. Mr. X before approaching you has also contacted another CFPCM Practitioner for the preparation of his Financial Plan. In his first meeting with the practitioner, Mr. X asked him the sources of compensation available to the practitioner by making a Financial Plan for him other than fee. But the practitioner refused to answer this question by saying that this is out of the scope of engagement. According to FPSB India’s code of ethics, the practitioner has violated Code of Ethic of _________. A) Objectivity B) Professionalism C) Fairness D) Integrity 113. Mr. X’s mother wants to stay with Mr. X & M₹ X on a permanent basis. Before that, she wants to settle her estate. She has decided to give her Pune house to Mr. X. The current market value of this house is ₹ 25 lakh. Since Mr. X is permanently settled in Ahmedabad and has no intention of returning to Pune, he wants to dispose of the house at current market value. From tax planning perspective, what would be the right course of action for Mr. X for transaction relating to this house property? A) Mr. X’s mother should sell this house first and then gift the sale proceed to him. B) Mr. X’s mother should gift this house to Mr. X first and then he should sell the house. C) Mr. X’s mother should make a Will Deed in favour of Mr. X first and then he should sell the house. D) Mr. X’s mother should gift this house in the name of Mr. X and M₹ X equally and then they should sell the house. 114. Which of the following shall you avoid while providing Financial Planning services to Mr. X and M₹ X in line with the Ethical and Professional Conduct of CFPCM Certificant entailed by FPSB India? A) Keep the client informed of developments in the field of Financial Planning. B) Advice the client in those areas in which you have competence. C) Seek council of qualified individuals for areas in which you lack adequate competence. D) Alter existing financial strategy promptly, even without confirming to client, if the change in circumstances materially impacts the client’s financial goals. 115. Mr. X wants to make some investment in the name of her mother so that she receives a regular monthly income to meet her regular expenses. He approaches you to know which of the following asset allocations you would recommend for her who will be dependent on her investments for monthly income later on. A) Fixed Deposits: 60% Post office MIS: 30% Equities: 10% B) Fixed Deposits: 40% Post office MIS: 30% Equities: 30% C) Fixed Deposits: 20% Post office MIS: 40% Equities: 40% D) Fixed Deposits: 10% Post office MIS: 40% Equities: 50% 149

116. You, as a CFPCM Certificant, need to disclose regarding compensation to be received from Mr. X. According to you, which would be the most appropriate option? A) Need not disclose the source of compensation B) Need to disclose compensation structure at the time of establishing relationship C) Need to disclose only when asked by Mr. X D) Need to disclose the source once the financial plan is constructed 117. You have disclosed in writing to Mr. X that you are only authorized to sell or advise on a restricted range of products, and other limitation of your capacity to serve him, this is according to the Rules that relate to the Code of Ethic of _____________. A) Objectivity B) Competence C) Fairness D) Integrity 118. During the financial discussions with Mr. X, you asked him about his income. But Mr. X was bit of hesitant in telling his income details to you. Mr. X wants to know the relevance of income in analyzing his insurance requirement. You explained him that his income would be used to determine: I. The amount of income protection cover required II. The amount of premium loading and/or any exclusion applicable to the policy III. What level of income would be required for dependants in the event of premature death? IV. What level of income would be required in the event of disability? B) I and II C) II and IV D) I, III and IV E) I, II and IV 119. You as a CFPCM Certificant have made it clear to Mr. X that you shall enter into an engagement with him as a client only after securing sufficient information to be satisfied that: a) The relationship is warranted by Mr. X’s needs and objectives; and b) You have the ability to either provide requisite competent services or to involve other professionals who can provide such services. You have followed the Code of Ethic of __________. A) Diligence B) Professionalism C) Compliance D) Fairness 120. During the recent period you feel that the stock market has shown a strong bullish run. The Super Industry Ltd’s Shares, which Mr. X bought for ₹ 900 per share about nine months back, are now at ₹ 1,760 per share. He does not want to sell his shares since he is bullish in the long term. He wants to protect the appreciation on the stock price from the downside which market may face in the short term. He approaches you to guide him what strategy he should use. CALL Option of ₹ 1,740 is available @₹ 60, PUT Option of 1740 is available @ ₹ 50. A) Buy PUT option B) Sell PUT Option 150

C) Buy CALL Option D) Sell CALL Option 121. Mr. X has come to know about this CFPCM practitioner through a newspaper advertisement. The theme and wording of advertisement says that along with preparation of Financial Plan, they also help to generate assured return of 12% p.a. According to FPSB India’s code of ethics, the practitioner has violated _________. A) Code of Ethic of Objectivity B) Code of Ethic of Professionalism C) Code of Ethic of Fairness D) Code of Ethic of Integrity 122. Before finalizing the Financial Plan, Mr. X tells you that he wants to entrust the estate issues to a solicitor friend, Mr. Z. Which of the following is your best stand? A) This is not permissible as per the Rules of FPSB India B) This is permissible subject to such an arrangement finding an explicit mention in the Financial Plan for the said activity C) This is permissible subject to the advice of the solicitor being integrated into the Financial Plan and monitored along with the Plan D) You may enter into an MoU with the Solicitor and may also have a revenue sharing model 123. M₹ X wants your advice to disclose her professional Income 50% less than the actual to reduce her tax liability in the current year. You advice not to conceal particulars of her Income or furnish an inaccurate particulars of such income, as Penalty payable in addition to tax under section 271(1)c of Income Tax Act is ____________ is payable. A) at the discretion of Commissioner of Income tax B) minimum 200% of the tax sought to be evaded and maximum 300% of the tax sought to be evaded C) minimum 100% of the Income sought to be evaded and maximum 300% of the Income sought to be Evaded D) minimum 100% of the tax sought to be evaded and maximum 300% of the tax sought to be evaded 124. Being pessimistic due to the present recessionary market, M₹ X is thinking to surrender her ULIP after 4 years subscription only. She wants to know from Income Tax planning perspective whether it would be advisable for her to surrender this insurance policy at present as she keeps on claiming deduction u/s 80C against this policy’s investment? A) She should hold this policy for at least one more year B) She can surrender this policy any time after three years from the date of buying the policy C) She should hold this policy for at least six more years D) She should hold this policy for the full term 125. M₹ X wants to adopt a child and part with some of her properties in favour of the child. She wants to plan her Estate as she will remain a spinster throughout her life. But she is afraid that after her death her brother may challenge such transfer. You would advise her __________. A) not to do any Estate Planning 151

B) to prepare a WILL C) to create a Registered Living Trust where the child would be the beneficiary D) to prepare a Power of Attorney in favour of her father to manage her property for the benefit of the Child 126. A Life Insurance Agent has approached M₹ X with two types of Term Insurance Plans: i) Plan I, without return of premium, term 25 years, Sum Assured of ₹ 25 lakh, yearly premium payable ₹ 1.94 per thousand of SA ii) Plan II, with return of total premiums paid, on maturity, term 25 years, Sum Assured of ₹ 25 lakh, yearly premium payable ₹ 2.95 per thousand of SA. M₹ X is not clear which plan to opt for and she seeks yours advice on which policy is beneficial for her, if discounted by the risk free rate. (Assuming M₹ X lives till maturity of the Insurance Policy) B) Plan I is better as the net present value is higher C) Plan I is better as the net present value is lower D) Plan II is better as the net present value is higher E) Plan II is better as the net present value is lower 127. M₹ X wants to know if she dies before the vesting date of the Unit Linked Pension Plan how will it be taxed in the hands of the nominee for the amount received as per currently prevailing provisions of the Income Tax Act, assume the allocation is 100% into equity. A) Fully Taxable B) Fully Exempt C) Subject to long term capital gain of 10% without indexation benefit D) One third would be tax free 128. Mr. X’s father has taken a loan under reverse mortgage scheme against his house in Gurgaon which is valued today at ₹ 20 lakh. Mr. X is curious to know, if the loan amount being received by his father will be treated as income and whether the alienation of property for recovery of loan attracts capital gains? A) The amount received by Mr. X’s father shall be treated as his income and it will be taxable in his hands and for the purpose of alienation of property for recovery of loan shall attract capital gain. B) The amount received by Mr. X’s father shall not be treated as his income and shall be exempt from tax and for the purpose of alienation of property for recovery of loan shall not attract capital gain. C) The amount received by Mr. X’s father shall not be treated as his income hence shall not be taxed, for the purpose of alienation of property for recovery of loan shall attract capital gain. D) The amount received by Mr. X’s father shall be treated as his income and it will be taxable in his hands and for the purpose of alienation of property for recovery of loan shall attract capital gain but only in case of death of the mortgagor. 129. M₹ X wants to adopt a child and part with some of her properties in favour of the child. She wants to plan her Estate as she will remain a spinster throughout her life. But she is afraid that after her death her brother may challenge such transfer. You would advise her __________. A) not to do any Estate Planning B) to prepare a WILL 152

C) to create a Registered Living Trust where the child would be the beneficiary D) to prepare a Power of Attorney in favour of her father to manage her property for the benefit of the Child 130. M₹ X wants to know if she dies before the vesting date of the Unit Linked Pension Plan how will it be taxed in the hands of the nominee for the amount received as per currently prevailing provisions of the Income Tax Act, assume the allocation is 100% into equity. A) Fully Taxable B) Fully Exempt C) Subject to long term capital gain of 10% without indexation benefit D) One third would be tax free 131. Mr. X’s father Mr. X’s father has taken a loan under reverse mortgage scheme against his house in Gurgaon which is valued today at ₹ 20 lakh. Mr. X is curious to know, if the loan amount being received by his father will be treated as income and whether the alienation of property for recovery of loan attracts capital gains? A) The amount received by Mr. X’s father shall be treated as his income and it will be taxable in his hands and for the purpose of alienation of property for recovery of loan shall attract capital gain. B) The amount received by Mr. X’s father shall not be treated as his income and shall be exempt from tax and for the purpose of alienation of property for recovery of loan shall not attract capital gain. C) The amount received by Mr. X’s father shall not be treated as his income hence shall not be taxed, for the purpose of alienation of property for recovery of loan shall attract capital gain. D) The amount received by Mr. X’s father shall be treated as his income and it will be taxable in his hands and for the purpose of alienation of property for recovery of loan shall attract capital gain but only in case of death of the mortgagor. 132. Mr. X read a draft offer document that PFRDA has come out with a New Pension Scheme (NPS) for all citizens of India. He is also thinking to invest in NPS but he is confused with regards to the withdrawal provisions of the scheme in Tier-I. You are required to provide him with the correct details of the withdrawal. i) If he exits before 60 years of age, he will have to invest at least 20% of the pension wealth to purchase a life annuity and the rest 80% of pension wealth may be withdrawn as a lump sum. ii) If he exits on attaining 60 years of age, he will have to invest at least 40% of the pension wealth to purchase a life annuity and the rest 60% of pension wealth may be withdrawn as a lump sum or in a phased manner between ages 60 and 70 yea₹ iii) If he exits before 60 years, he will have to invest at least 80% of the pension wealth to purchase a life annuity and the rest 20% of pension wealth may be withdrawn as a lump sum. iv) If he exits on attaining 60 years of age, he will have to invest at least 60% of the pension wealth to purchase a life annuity and the rest 40% of pension wealth may be withdrawn as a lump sum or in phased manner between ages 60 and 70 yea₹ A) i & iv B) i & ii C) ii & iii D) iii & iv 153

133. Mr. X, in a business conference met a CFPCM Practitioner who was one of his old friends. Both of them were discussing about their professions and businesses and during the talks Mr. X asked for some recommendation on his personal finances from his CFPCM friend. He suggested Mr. X to come to his office and he will provide the recommendations in writing. Mr. X asked, is it important to have it in writing? You as a CFPCM Practitioner explained that all recommendations concerning the financial affairs of a client should be presented in writing because: 1) It is regarded as best practice under the FPSB India code of ethics and rules of professional conduct. 2) It provides substantial protection to the planner under common laws against any claims arising thereof. 3) It will not attract the law of contract to determine the civil rights of both the parties. 4) It gives the client the necessary time to fully consider the planner’s recommendations. B) 1, 2 and 4 only C) 2, 3 and 4 only D) 1 and 4 only E) 1, 2, and 3 only 134. Mr. X is planning to create a specific trust under a will and start the new business under the name of the trust. He plans to have Neha as 100% specific beneficiary of the trust for her support and maintenance. He approached you a CERTIFIED FINANCIAL PLANNERCM to take advice on creation of trust. You as a CFPCM Practitioner are required to provide him with the provisions relating to taxation of the income of the trust if the said trust is the only trust created by Mr. X in the benefit of Neha. A) The specific trust will be assessable at a flat rate of 20% plus cess plus surcharge if the income of the trust exceeds ₹ 10 lakh. B) The specific trust will be assessable at the maximum marginal rate of income tax u/s 161(1A) of the Income Tax Act. C) The specific trust will be assessable at the slab rates of income applicable to the total income of an individual and will be covered under the exception clause u/s 161(1A). D) The specific trust under Indian Trust Act cannot override the provisions of the Income Tax Act and Mr. X will be assessed under the head of Business and profession as per provisions applicable to an individual. 135. In the initial stage of Financial Plan preparation, you told Mr. X and also mentioned in the Financial Plan prepared that you would charge fixed fee for the Financial Plan construction and you would also earn commission on sale of recommended financial products, if the same is accepted. Which code of ethics binds the CFPCM Practitioner to disclose conflict of interests? A) Objectivity B) Fairness C) Integrity D) Professionalism 136. You have advised Ms. X to do Estate Planning. According to you what should be the most preferred way for her Estate Planning? A) She should devolve all of her personal properties to her personal HUF. B) She should prepare a Will naming her children as the sole beneficiaries in the same. C) She should prepare a Will naming her children as the sole beneficiaries as well as designate one or more guardians with their prior consent. 154

D) She should transfer all of her existing properties in the names of her children and nominate her both children equally in all her legal documents. 137. Ms. X has told you that before divorce Mr. X had bought a single premium life insurance policy on his own life and expressed on the face of it to be for the benefit of his wife and children as per Section 6 of Married Women's Property Act, 1874. Now, Mr. X wants to change the beneficiary of the said policy. Ms. X asks you whether it is possible. A) Yes, by making an amendment in the trust deed. B) No, alteration is not permitted. C) Yes, but with written consent of Ms. X only. D) Yes, but only by writing a registered Will. 138. Ms. X wants to know how the amount of ₹ 20,000 invested by cheque in her PPF account by Mr. X from his own income in May 2008 would be treated while computing her Income Tax liability. A) ₹ 20,000 now and interest thereon will be tax free in her hands; she would not get benefit of ₹ 20,000 u/s 80C. B) ₹ 20,000 now and interest thereon will be tax free in her hands and she would also get benefit of ₹ 20,000 u/s 80C. C) ₹ 20,000 and the interest thereon would be tax free in her hands and she would get benefits u/s 80C only if she reimburses ₹ 20,000 to Mr. X on maturity. D) ₹ 20,000 will be taxable in her hands now, but the same amount along with the accumulated interest thereon will be tax free in her hands and she would get benefit of ₹ 20,000 u/s 80C. 139. Ms. X saw your name with CFP Marks; she wants to know different ways in which the CFP Marks in India can be written. i) CERTIFIED FINANCIAL PLANNERCM ii) CFPCM iii) CFPcm iv) C.F.P. v) CFPCM vi) C F P vii) Certified Financial PlannerCM A) & ii) B) ii), iii), vi) & vii) C) iv), v) & vii) D) ii), v) & vi) 140. You have advised Ms. X to buy a Householders Insurance policy. She wants to know how the value of house and its contents are assessed by the insurance company. A) The value of House and that of various belongings in the house are assessed as per their individual market value. B) House's value is assessed as per its re-instatement value and the value of the various belongings in the house is assessed as per their individual market value. C) The value of House and that of various belongings in the house are assessed as per their reinstatement value. 155

D) The value of House is assessed as per its market value and the value of the various belongings in the house is assessed as per their individual re-instatement value. 141. You have advised Ms. X to buy a Householders Insurance policy, she wants to know whether burglary by domestic staff is also covered. A) It would be covered under the burglary option of Householders Insurance policy. B) If any domestic staff, whether currently employed or engaged in the past, is involved in burglary at the house, the insurance company is not liable to pay for any losses or damages. C) If any present domestic staff is directly involved in burglary at the house, the insurance company is not liable to pay for any losses or damages. D) If any domestic staff is involved in burglary at the house, the insurance company is liable to pay for any losses or damages if proved that it has been deliberate and violent. 142. While preparing Ms. X's Financial Plan, in all your oral or written recommendations, you have taken reasonable steps to place Ms. X in a position to comprehend the recommendations and the basis thereof. You have also taken due care to explain the nature of the investment risks involved in terms she is likely to understand. You have complied with the Rules that relate to the Code of Ethic of _________. A) Professionalism B) Diligence C) Fairness D) Competence 143. Mr. X’s friend Dinesh used to take advice on his investments from a Financial Planner certified by FPSB India who co-mingled the money of Dinesh with his own money. However, the Financial Planner maintained good records to segregate both cash flows. Which of the following Principles has his 1. Financial Planner violated? 2. Integrity 3. Objectivity 4. Fairness 5. Professionalism A) 1 only B) 1, 2 and 4 C) 1,2 and 3 D) 1,2, 3 and 4 144. Mr. X renewed his car insurance which was due for renewal on 18th March, 2009 by sending out a premium cheque on 14th March, 2009 to the insurer for ₹ 4,500 towards a sum assured of ₹ 1 lakh. He received a cover note subject to realization of cheque. Mr. X’s car met with an accident on 27th March, 2009. He enquired from the insurer about his insurance policy for the car and was shocked to learn that the same was not renewed due to dishonor of his cheque. He seeks your advice regarding admissibility of insurance claim on the basis of cover note received. You advise that _______. A) Mr. X is not entitled to the claim amount as the renewal premium cheque was not honored. 156

B) Mr. X is entitled to the claim as he got a cover note as a proof of his having renewed the policy. C) Mr. X is entitled to get full sum assured because the company didn’t inform him about the cancellation of the contract because of dishonoring of his cheque. D) Mr. X has to get approval from Insurance ombudsman for clearance of his claim from the insurer. 145. Mr. X has many clients who repose faith in him for his skills, knowledge and ethical dealing. One of his clients, M₹ X who is 70 years of age, has a will in which she leaves her entire estate to her two children, who live separately and never take care of her in any way whatsoever. Mr. X helped her a lot in her medical care during her last days. Before she died, M₹ X had changed her will to add a ₹10 lakh gift to Mr. X. She hired a different attorney to add the codicil to the will. Upon M₹ X’s death her children denied to give the gift to Mr. X stating it was invalid because of undue influence. In the light of the facts cited above which of the following statements is correct? A) The gift to Mr. X is invalid because he used undue influence to induce M₹ X to change her will. B) The gift to Mr. X is valid because there was no undue influence, a different attorney added codicil, and her act of adding codicil was with her free consent. C) The gift to Mr. X is invalid because he knew M₹ X was on her last days so he set the circumstances and obtained the gift. D) The gift to Mr. X is valid because the gift was with her consent though he took the advantage of her loneliness and induced her make a favor. 146. Mr. X working in a Legal Firm as Legal Advisor is always under an apprehension that his profile of giving legal advice to clients is full of risk. He plans to take Professional Indemnity Insurance to minimize his professional risk but he is not sure that what is the scope of the policy? He has approached you for your advice. You advise that the Professional Indemnity Insurance has the following scope: A) Any error and/or omission on his/her part committed whilst rendering professional service. B) Any liability arising out of any criminal act or act committed in violation of any law or ordinance is not covered. C) Legal cost and expenses incurred in defense of the case. D) All of the above. 147. Mr.X has asked you about FPSB India’s nature of constitution. You have explained him that FPSB India is a _________________. A) Self Regulatory Organisation B) Professional Standards Setting Body C) Professional Regulatory Organisation D) A Quasi Government Body 148. You have identified some insurance needs for Mr.X and M₹X as follows: i) Health Insurance ii) Accident & Disability Insurance iii) Home Insurance iv) Travel Insurance 157

149. According to you what should be the order of priority for these insurance needs? A) i), ii), iii), iv) B) ii), i), iii), iv) C) iii), ii), i), iv) D) i), iii), ii), iv) 150. Right now Mr.X & M₹X both are getting House Rent Allowance included in their salary and they are living in Mr. X’s apartment & Mr.X is claiming deductions u/s 24(b) and 80C on account of housing loan EMIs. He wants to know the right proposition of taxation of his HRA. Mr.X shall ______________. A) not get any exemption for HRA B) not get any deduction u/s 24 (b) C) not get any deduction u/s 80C D) get the eligible exemption from HRA along with deduction u/s 24 (b) & 80C 151. Mr.X wants to start an SIP in an Equity MF scheme now for ₹ 1,000 p.m. After 12 months, he wants to redeem every 15th of the month, the value of actual number of units he invested 12 months back and deposit such sale proceeds in his PPF account. Also, he intends to deposit another ₹ 1,000 p.m. in his PPF account on the first of every month from now on and plans to continue for the entire tenure of PPF. Mr.X wants to know whether what he proposes to do after a year is feasible or not, and why? A) Feasible as the amount involved over the year would be less than 70,000 B) Not feasible as there cannot be more than one payment a month C) Feasible, as there is no limit to the number of times one can pay in D) Not feasible as only three payments can be made in a financial year 152. Mr.X has asked you a practicing CERTIFIED FINANCIAL PLANNER CM about the ownership of CFPCM mark in the world. You have explained to him that _________________. A) CFPCM mark is owned by FPSB India B) CFPCM mark is owned by FPSB across the world C) CFPCM mark is owned by CFP Board across the world D) CFPCM mark is owned by FPSB, Denver (US) outside the United States 153. Mr. X wants to invest in order to build up a corpus when he returns to India a decade later. In consideration of different choices available to him, taxation is also one of the aspects which he is considering in the proposed investment. He wants to have least operating costs and optimum tax treatment of his investment kitty when he requires the same. As per the currently prevailing tax provisions, what investment option is most suitable for Mr. X. A) Equity option in any Unit Linked Pension Plans of a life insurance company B) Equity option in any Unit Linked Insurance Policy C) Equity Growth fund in any established Mutual Fund Scheme D) All of the above 154. Mr. X wants to know if he makes some withdrawals from his PF account for arranging funds for Mr. X. How will the interest be calculated on the amount of money withdrawn? A) Interest shall be credited from the beginning of the current year on the money withdrawn, up to the last day of the month preceding the month of such withdrawal. 158

B) Interest shall be debited from the beginning of the current year on the money withdrawn, up to the last day of the month preceding the month of the withdrawal. C) Interest shall be debited from the beginning of the current year on the money withdrawn, up to the last day of the month of the withdrawal. D) Interest shall be credited from the beginning of the current year on the money withdrawn, up to the last day of the month of the withdrawal. 155. Mr.X is aware of the New Pension scheme launched by Government of India w.e.f. 01-01-2004. He wants to know whether he can migrate to this scheme from his existing EPS Scheme and if yes whether it is advisable to do so? A) Yes, he should migrate to the new scheme as he can get the equity markets leverage on his till date accumulations and new contributions. B) No he cannot migrate because his existing scheme does not allows migration. C) Yes, because in the new scheme he is permitted to choose his pension contributions according to his comfort. D) No he cannot migrate as it is applicable only for people joining after 31.03.2004. 156. Mr.X has told you that Mr.X’s KVPs are maturing on 28th February 2009. He wants to deposit the maturity proceeds in Mr.X’s NRE account so that it may be utilized by Mr.X in US, if needed at any point of time. What is the right situation in this context? A) He can do so without any restriction. B) No these maturity proceeds are not permitted to be deposited in NRE account. C) These maturity proceeds can be deposited in NRE account only by submission of source of such payment and as per guidelines issued by RBI and provisions of FEMA Act. D) These maturity proceeds can only be deposited in NRE account if Mr.X deposits the same in person during his any of the visits to India. 157. Mr.X is a member of Employees' Pension Scheme. If Mr.X decides to leave his present job at 32 years of age after 8 years of service what will happen to his existing Pension Scheme? (3) A) He can either take withdrawal benefit or scheme certificate so that his 8 year service can be added to any future service that he may put in, in any other covered establishment. B) He cannot take any withdrawal benefit immediately but can add it to any future service that he may put in, in any other covered establishment. C) He can either take withdrawal benefit or scheme certificate only on completion of 10 years of service. D) He can take withdrawal benefit only. 158. As a CFP Certificant, which of the following will not be a correct interpretation of the Rules of Conduct pertaining to the Code of Ethics of Diligence for you while dealing with Mr.X? (2) A) A significant recommendation may be given orally, however confirmation must be given in writing as soon as possible. B) As a CFP Certificant, you are considered to be more knowledgeable than Mr.X and hence may not need to explain the recommendation and basis in a manner that Mr.X may comprehend. C) As a CFP Certificant, you shall enter into an engagement with Mr.X only after securing sufficient information to be satisfied that Mr.X's needs and objectives warrant the relationship. 159

D) As a CFP Certificant, you shall confirm in writing to Mr.X where a subsequent instruction given by him alters the financial strategy of his portfolio under your supervision. 159. Mr.X wants to know whether he is eligible to withdraw from his Employees’ Provident Fund for purchase of his new house. (2) A) Yes, as he has been a member of the fund for more than 3 yea₹ B) No, as he has not been a member of the fund for more than 10 yea₹ C) Yes, as he has been a member of the fund for more than 5 years, and provided he purchases the house in his own name or in his own name and in his wife’s name. D) Yes, as he has been a member of the fund for more than 5 years, and provided he purchases the house in his own name or in his wife’s name. 160. Mr.X plans to take a loan from a bank for purchasing a house in Ahmadabad. He wants to know, against which type of mortgage do the banks normally lend home loan? (3) A) Simple Mortgage B) Usufructuary Mortgage C) English Mortgage D) Equitable Mortgage 161. Mr.X’s father wants to gift ₹ 5 lakh (in cash) to Mr.X to buy a house. Mr.X wants to know how this receipt will be treated in his hands from Income Tax perspective. (2) A) No tax to be paid by Mr.X as it is gifted to him to buy a house. B) No tax to be paid by Mr.X as gift in cash from a father to son is tax free. C) Entire receipt will be taxable in the hands of Mr.X as it is received in cash. D) Entire receipt will be taxable in the hands of Mr.X as it is more than ₹ 50,000. 162. Mr.X’s employer is going to give him a gift worth ₹ 60,000 (in kind) on his wedding anniversary. Mr.X wants to know the tax consequence of this transaction? (3) A) Gift value is taxable for Mr.X under the head ‘Salary’ B) Mr.X’s employer is liable to pay FBT on the full value of gift C) No tax consequence arises for Mr.X and his employer as the gift is in kind D) Rs 50,000 is tax free and balance ₹ 10,000 is taxable under the head ‘Salary’ for Mr.X 163. After preparing the Financial Plan of Mr.X, you have given following notes to the Plan: (2) I. These recommendations are made for your benefit only. II. These recommendations are based on the information provided by you on your current situation; we expect this information to be complete and accurate. III. Returns on investments will depend on market conditions and the policy of fund management followed by fund manage₹ IV. The investments planned for you are long term in nature; therefore volatilities of short term in nature should be ignored. These notes are __________ to your plan. A) disclosures B) disclaimers C) executive summary D) additions 160

164. Mr.X & Mr.X want a written assurance from you that in case they appoint you as their Financial Planner, in no case you will disclose their personal/financial information to any of your firm’s partners and the same shall remain exclusively with you. With reference to FPSB Code of Ethics examine the following statements in this context: I. Yes, you can give such an assurance II. No, you cannot give such an assurance III. You can give such an assurance subject to specific written consent from all the partners of the firm IV. In this case the client should be dealt in personal capacity outside the scope of the firm Which of the above statement/s is/are true? (2) A) Both 1 & 4 B) Only 1 C) Both 1 & 3 D) Only 2 165. Mr.X wants to know from you the difference between the “Portfolio Management Scheme” being offered by many prominent financial institutions and the services offered by you as a Financial Planning practitioner. Examine the following statements: I. In PMS there is a unique profit & loss sharing structure while a CFP is not entitled to participate in profits of his/her client II. PMS is more of a packaged product to suit broad requirements rather than meeting specific needs of clients III. PMS is mainly offered by financial institutions while Financial Planning service is mainly dominated by Individuals only IV. In PMS, the service provider may not cater to overall Financial Planning objectives of the client Which of the above statement/s correctly differentiate/s a PMS from a Financial Planning Service? (2) A) Only 1 B) Only 1 & 3 C) Only 2 & 4 D) Only 1, 2 & 4 166. Mr.X has informed you that he has pledged some NSCs in a government department in pursuance of terms & conditions of the contract with his firm. The NSCs have Mr.X’s name as a nominee. Mr.X wants to know whose right shall supersede in such NSCs in case of a dispute. According to you it would be___________. (2) A) Nominee’s right shall supersede over pledgee B) Pledgee’s right shall supersede over nominee only C) Original holder’s (Mr.X’s) right shall supersede over all others D) Pledgee’s right shall supersede over all others 167. Mr.X has been buying gold ornaments from time to time as investment. You as a planner however advise that she should also look at the features of Gold ETFs for investment purposes. I. Gold ETFs score over physical gold as she can have same returns from gold, but without the making charges II. There is no wealth tax on Gold ETFs & long term capital gain becomes applicable after a year 161

III. There is no entry load or exit load in a Gold ETF IV. Problems relating to purity of gold bought, storage & insurance costs are avoided in Gold ETFs Which of the above statements are relevant and correct? (2) A) 1 & 2 B) 2 & 3 C) 1, 2 & 4 D) 2 & 4 168. Mr.X is due to get refund from Income Tax Department of two earlier Assessment yea₹ His friend told him that this amount can be set off against the current tax liability. According to you this information is __________. (2) A) True B) False C) True, if specific permission is taken from the assessing officer D) True, if a letter is taken from the concerned Commissioner of Income tax and attached with the Returns 169. Some time back Mr. X’s investment advisor, also a CFP, recommended him a savings product stating that it offered an assured annual return of 12%. Mr. X was sceptic about the returns and did not invest. You realize that the product has been misrepresented. In reality it is the simple rate of interest with a lock in period of 10 yea₹ According to you ________. (3) A) the advisor has violated Code of Ethics of Fairness B) the advisor has violated Code of Ethics of Integrity C) the advisor has violated Code of Ethics of Professionalism D) the advisor has violated Code of Ethics of Diligence 170. Mr. X proposed to buy another life insurance policy which also offered Critical Illness Rider for an additional premium. Mr. X was considering a sum assured of ₹ 10 lakh for the death benefit and ₹ 2 Lakh under Critical Illness. Before finalizing the same Mr. X wants to know that in case he is identified with a disease, covered under Critical Illness Rider, after 2 years of having taken the policy, what amount would he receive as claim under the Critical Illness Rider? (2) A) A sum of ₹ 2 Lakh shall be paid when such a disease is identified and certified by a Doctor. B) Actual Expenses, subject to a maximum of the Rider amount, shall be paid after treatment of disease. C) Rider benefit is available only in case of death of the Insured person by the disease. D) A sum of ₹ 2 lakh shall be paid when disease is identified and another ₹ 2 Lakh shall be paid at the time of death. 171. Mr.X’s relative, Prashant, met with an accident while driving the car. His car insurance had expired a couple of days before the accident. Mr. X wants to know whether Prashant’s claim will be settled by the insurance company in such a situation. (3) A) This is to be seen in light of the governing terms and conditions of the expired policy. B) If the accident occurs within 15 days after the expiry of policy the claim is payable. C) The cover lapses the moment the policy expires thus denying him any claim. D) Insurance company will take renewal premium along with penalty and then settle his claim. 162

172. Mr. X’s brother in law is an NRI. He wants Mr. X to make some investments on his behalf whenever the right opportunity arises. You suggest: (2) A) Mr. X’s brother in law should prepare a Notarized affidavit in Mr. X’s favor. B) Mr. X’s brother in law should prepare a Special Power of Attorney specifying transactions that can be carried out by Mr. X. C) Mr. X should prepare a General Power of Attorney that gives him the right to do transactions on behalf of his brother in law. D) Mr. X should not get into such an arrangement due to complex tax laws related to NRI investments. 173. Mr. X has not done any Estate Planning as of now. Even his father has not prepared any Estate Planning documents. As Mr. X is the only son of his parents, along with his 3 sisters, what is most suitable for him? (3) A) Mr. X’s father should first prepare his Will and on the basis of that Will Mr. X should prepare his own Will. B) Mr. X should prepare his own Will without waiting for his father’s Will. C) There is no need for any Estate Planning as Mr. X is the only son of his parents. D) Mr. X should prepare his Will by including his father’s property but with an inbuilt provision for his sisters on account of that property. 174. During the initial discussions Mr. X wants to know from you the nature of compliance by which you are bound to FPSB India’s Code of Ethics. You have explained to him that for every practicing CFP certificate it is _____ to adhere to FPSB India’s Code of Ethics. (2) A) Discretionary B) Mandatory C) Obligatory D) Depends upon the country of operation 175. Keeping in view the present uncertainty in the global financial markets, Neeru wants to know the most probable risk faced on their portfolio of GOI taxable bonds. According to you which amongst the following is the most likely option? (2) A) Volatility B) Price C) Currency D) Inflation 176. Mr. X’s company is listed on one of the key regional Stock Exchanges. While discussing the success of Indian Stock Exchanges in securing a prominent place among their global peers Mr. X has asked you the difference between the method of calculation of Sensex of BSE and Nifty of NSE in India. You have explained this as_________. (2) A) Sensex is calculated on the basis of market capitalization method while Nifty is calculated on the basis of free float market capitalization method B) Nifty is calculated on the basis of market capitalization method while Sensex is calculated on the basis of free float market capitalization method C) Both are calculated on the basis of market capitalization method D) Both are calculated on the basis of free float market capitalization method 163

177. Mr. X has not prepared any Will as on date. He wants to know in case he dies intestate, as per prevailing Hindu Succession law in India, which of his existing family member/s can be denied share of his estate in case of a dispute. (3) A) His father. B) His mother and father. C) His daughter if she is married. D) All members have a share on his property on an equitable basis. 178. Till date the couple has never given any attention to their individual insurance needs. Most of the insurance needs of the family are taken care by the company’s group insurance policy which provides all common risk protection to the family. You have explained to Mr. X that this group insurance policy may not cater one important risk which is ________. (2) A) Life insurance B) Health insurance C) Liability insurance D) Disability insurance 179. Mr. X has told you that Mr. X’s would be father in law wants to give a sum of ₹ 10 lakh to the family on the occasion of Mr. X and Priya’s marriage next year. Mr. X wants to know from you how should this gift be accepted from Tax Planning perspective? (3) A) It should be received in Priya’s name B) It should be received in Mr. X’s name C) It should be received in Mr. X’s father name D) It should be received in the name of either Mr. X or Priya 180. Ajay has informed you that his insurance agent has not deposited one of the insurance premiums collected in cash from them, to the life insurance company. The family came to know about this when they got a notice informing the possible lapse of the policy. Ajay wants to know the most suitable remedy available to them in such a situation. (3) A) They can claim premium from the insurance company for which the agent was working. B) They can get a criminal case registered against the agent and also file a complaint against the agent with the insurance company. C) They can pursue with the agent to refund their premium. D) They can get a case registered against the company and the agent, both. 181. M₹ X wants to know that if at any point of time they are required to withdraw some amount prematurely from Aakash and Sanjana’s PO RD account, what rate of interest will be charged from the account holders on the withdrawal amount as per PO RD Rules. (3) A) No premature withdrawal is allowed. B) 1% + applicable rate of interest in PO RD account. C) 2% + applicable rate of interest in PO RD account. D) 15% per annum. 182. M₹ X has told you that her husband is willing to open a Senior Citizen Saving Scheme account after his retirement. She wants to know whether the family can also open a separate account in the same scheme in her husband’s HUF name at the same time. According to you_______. (2) A) No they cannot. 164

B) Yes they can. C) Yes, they can but subject to maximum amount deposited in her husband’s individual account or ₹ 15 lakh whichever is lower. D) Yes, they can but subject to maximum amount deposited in her husband’s individual account or ₹ 15 lakh whichever is higher. 183. Ajay has told you that that one of his friends was consulting another CFP who moved a major chunk of his friend’s investments into equities when markets were at their peaks resulting in loss of a major portion of that investment. His friend is very upset with this as he was not taken into confidence before taking this step. Ajay wants to know what Code of Ethics prevents a CFP from committing such actions. (2) A) Code of Ethics of Objectivity B) Code of Ethics of Integrity C) Code of Ethics of Professionalism D) Code of Ethics of Diligence 184. Ms. X seeks your opinion on taking suitable risk covers, having seen the tragedy with her husband. Your advice is ______. (3) A) she should go in for a term insurance to take care of her mortgage liability B) she should take disability insurance for herself and health insurance for all members of the family C) a suitable health insurance for Clifford is must during his stay in Germany D) All of the above 185. The fatal car accident in which Ms. X lost her husband, the driver of the car sustained severe injuries but has recovered now without any permanent disability. Who is liable to pay compensation towards the driver’s medical expenses and loss of earnings? (3) A) The insurance company insuring the vehicle involved in the accident with Mr. Martis’ car, is liable to pay the compensation provided the vehicle is insured for third party claims. B) None. The driver being the risk carrier should have insured himself against such an eventuality. C) If the driver approaches Motor Accident Claims Tribunal, the compensation as awarded will be payable from Ms. X’s own pocket. D) Mr. Martis’ car insurance company shall pay such compensation; the policy purchased being a comprehensive one covering additional liabilities. 186. Before finalizing the Financial Plan, Ms. X tells you that she wants to entrust the estate issues to a solicitor friend, Mr. Larry D’Silva. Which of the following is your best stand? (2) A) This is not permissible as per the Rules of FPSB India. B) This is permissible subject to such an arrangement finding an explicit mention in the Financial Plan for the said activity. C) This is permissible subject to the advice of the solicitor being integrated into the Financial Plan and monitored along with the Plan. D) You may enter into an MoU with the Solicitor and may also have a revenue sharing model. 165

187. You have started working on the financial plan for Dr. Mishra. One day he called you & told that for Estate Planning aspects of his financial plan he shall be taking the services of his brother, an advocate. As per FPSB Code of Ethics how would you proceed in this aspect? (2) A) This is not possible as the Financial Plan has to cover all aspects. B) This must be stipulated in writing. C) Prior consent of Dr. Mishra’s wife must be taken. D) Prior consent from his brother must be taken. 188. One day, while sitting in the office of his stock broker, Dr. Mishra heard some discussions about demutualization of Stock Exchanges in India. Dr. Mishra is unaware about this term and has thus asked you about this concept. According to you _________. (2) A) in demutualization, the administration of Stock Exchange is kept isolated from its trading brokers/members B) demutualization refers to privatization of all government owned Stock Exchanges in India C) demutualization refers to Self Regulatory Organizations (SRO) structure of Stock Exchanges in India D) All of the above 189. Dr. Mishra is planning to take a life insurance policy as per you advice. His agent has suggested him that he should take “Critical Illness Rider” on the new policy and thereby save 60% portion of his health insurance premium by taking this rider with this policy. Dr. Mishra wants to take your advice whether he should replace his health insurance by this rider as by doing this transaction he is saving 60% of his current health insurance premium. According to you, he should ____________. (2) A) not replace his health insurance with this rider as both have different features B) replace this health insurance as there is a direct saving on the premium C) reduce his health cover by 50% and take the 50% rider as suggested by the agent D) Both options are same and anyone may be opted 190. Recently one of the life insurance agents has informed Dr. Mishra that if one takes a life insurance policy under “Key Man Insurance”, one can get deduction of the premium of this policy from their taxable income. According to you ________. (2) A) Dr. Mishra can claim deduction but the maturity value of this policy shall be taxable in his hands B) Key Man Insurance is not applicable in his context C) this is applicable on second life insurance policy only D) None of the above 191. Acting upon your advice Dr. Mishra decides to take a life insurance plan for himself. At the time of choosing mode of payment, Dr Mishra has asked you the difference between various modes of payment of insurance premium (monthly/quarterly/half yearly/yearly) from claims perspective, in case if any. According to you ___________. A) monthly mode is better because in case of claim the same shall be payable against the minimum possible paid premium B) there is no difference among all options from claims perspective C) yearly mode is better because it offers a rebate in premium to the Life assured D) choice may be different depending upon the age of the life assured 166

192. Sneha wants partition of his father-in-law’s HUF to claim her share and her husband’s share out of the HUF’s assets. In principle, Dr. Mishra is not keen for the same and wants to know whether his wife can legally demand partition of his father’s HUF as she is also one of the member in the same? (2) A) Yes B) No C) With prior permission from IT Department only D) Data insufficient 193. A Mutual Fund agent has told Dr. Mishra that bigger the AUM of the fund the better it is. Which of the following statements are correct ? 1) The bigger the fund AUM, the lower the expense ratios and in that sense it could be better. 2) The bigger the funds AUM, lesser are the chances of showing break-out returns as stock buying becomes difficult without moving the price upwards. 3) The bigger the fund AUM the worse-off a mid & small cap fund would be, due to its limited pool of stocks. 4) The smaller the AUM of a small cap fund the better it is due to lower expenses & higher returns.(3) B) Only 1 is correct C) Only 1 & 2 are correct D) Only 1, 2 & 3 are correct E) All are correct 194. While interacting with you during the data collection sessions, Gunjan and Neerja became so impressed with your professional approach and the trust created that the couple requested you to become a whole time legal guardian of their kids regarding execution of all required financial steps at every stage in future even without further recourse to the couple. As per FPSB Code of Ethics, is this possible for you? (2) A) Yes B) Yes, but you can do it in your individual capacity and not in professional capacity. C) Yes, but in that case you will not be in a position to charge any professional fee from the couple. D) No 195. Gunjan’s housing loan was granted on “Equitable Mortgage” basis. In view of the current credit crisis hovering over major world economies, Gunjan’s lender wants to convert this loan on the lines of “English Mortgage” clause. Gunjan wants to know if he accepts this option, what major change will occur in the terms and conditions governing his housing loan? According to you, if he accepts the new clause he will have to _______. (2) A) deposit the title deed of the property with the lender right now B) sell his property to the lender right now on the condition that if at any time Gunjan fails to repay the outstanding loan, the sale shall be absolute, otherwise it will be void C) transfer the possession to the lender right now with a condition of re-transfer on repayment of the entire loan amount D) All of the above 196. Before joining the present employment in May 2008, Neerja was working with a fabric manufacturing unit in Surat since 1999. When Neerja joined this unit, there was a 55 member staff 167

but when Neerja resigned from there in May 2006, only 6 members were left there. Neerja wants to know whether she is entitled to get any gratuity from this company. (2) A) Yes B) No C) No, because Neerja herself resigned and was not expelled by the company. D) No, because on the date of resignation, company was exempt from the provisions of the Gratuity Act. 197. Gunjan wants to know which of the health insurance plans of insurer XYZ he should opt for, from the cost effectiveness perspective, if he wants to take minimum sum assured of ₹ 1 lakh per member of his family. (2) A) Individual Member Policy B) Family Floater Policy C) Gunjan should take 50% risk cover under both the policies D) Gunjan should take 75% cover under individual policy and 25% cover under Family floater policy 198. Gunjan & Neerja want to ensure a life annuity for their kids. You have suggested an immediate annuity plan from a life insurance company in which they can buy the policy by paying a lump sum premium and the kids will start getting annuity from the end of 1st policy year. Gunjan and Neerja will be the proposers for the beneficiaries Mayank and Manas, respectively in these policies. The Life Insurance company is giving 4 annuity options. From the perspective of ensuring maximum benefit to their children, which option should be chosen by the couple? (3) A) Life Annuity B) Life Annuity certain for 15 years C) Joint life last survivor D) Joint life last survivor with return of purchase price 199. The Post Office MIS accounts of Mayank and Manas were opened on 01-04-2008. The couple wants to know how much amount will be received from each of these accounts if they are closed today. (3) A) No premature closure is allowed in PO MIS account within one year B) ₹ 2.94 lakh from each account C) ₹ 2.97 lakh from each account D) ₹ 3.00 lakh from each account 200. Gunjan wants to know that the income from PO MIS accounts of both kids shall be added in whose taxable income as the amount of one account was gifted by the Gunjan’s parents and that of other account was gifted by Neerja’s parents? (3) A) Income from both accounts shall be added to the taxable income of Gunjan. B) Income from both accounts shall be added to the taxable income of Neerja. C) One account's income in Gunjan’s and the other in Neerja’s taxable income. D) Income shall not be added in the incomes of Gunjan and Neerja. 201. Amaranth prefers Comprehensive Insurance for his fleet of taxies. This time while renewing his policy, he was surprised to notice that the premium was more for one of the taxis than what he paid last year. On investigating, he found that the insurance company has charged a “Malus” on the premium and therefore the premium is more. Amaranth wants to know what “Malus” is. You 168

explain “Malus” as the extra premium which insurance company charges on the ____________________. (3) A) basis of his overall claim experience in motor insurance policies issued by that company in the last 3 years B) basis of claim lodged by the policy owner in the last year policy C) basis of accidental track record of the driver of the insured vehicle D) commercial passenger carrying vehicles 202. Amaranth wants to take a life insurance policy on the life of his father as well as both his brothers, because all of them are playing a crucial role in managing his business. However, in case of any eventuality he wants to reserve all legal rights of receiving the policy benefits in his name. He wants to know whether it is legally possible for him. (2) A) Yes, he can take the policy in the desired way. B) Yes, but he cannot reserve the right to receive the policy benefits in his name. C) No, in the absence of insurable interest he cannot take their life insurance policy. D) Data insufficient 203. Amaranth firmly believes in charity. Towards this, he wants to donate 5% of his gross total income to a Trust providing full time education to orphan children. Amaranth wants to do this charity in a tax efficient manner. However the specific Trust he has identified is not a recognized institution for the purpose of Section 80G of the Income Tax Act. According to you in what manner Amaranth can do this charity in a tax efficient way? (3) A) He can donate 5% portion of his all properties to that Trust. B) He can give 5% of his gross total income to Trust and claim this amount as his personal expenditures from his business income. C) He can create a non-revocable charge of 5% of his total income upon his all business properties/incomes by executing a legal document in favor of that Trust. D) All of the above. 204. In your initial meeting, to make an impression on your client, you discuss the Financial Plan made by you for a famous doctor and also his spending habits with Arvind. Which Code of Ethics prohibits you to have such a discussion with Arvind? A) Code of Ethics of Professionalism B) Code of Ethics of Confidentiality C) Code of Ethics of Fairness D) Code of Ethics of Integrity 205. You advise Arvind to buy a ₹ 50 Lakh life insurance term plan. While filling the proposal form for purchase of this term plan Arvind does not mention details of another Life Insurance policy, taken by him earlier, from a different insurance company. In case of any mishap, under which principle the claim of Arvind could be questioned by the present Insurer, if facts of his earlier insurance policy become known? (3) A) Principle of Insurable Interest B) Principle of Utmost Good Faith C) Principle of Waiver and Estoppel D) Principle of Indemnity 169

206. Arvind would like to know how the property would devolve if a person dies intestate and also the importance of Estate Planning. According to you, which of the following is not appropriate in Estate distribution when a person dies intestate? (3) A) A Succession Certificate is applicable when there is no valid Will. B) Legal Heirs will apply to the civil court for grant of a Succession Certificate. C) Law of Inheritance is applicable in Estate distribution. D) Legal Heirs get Estate rights on the basis of probate. 207. While analyzing and evaluating Arvind & Sudha’s personal and financial information in his Financial Planning process, which of the following tasks have been completed by you at this stage? 1. Identifying alternative investment vehicles. 2. Identifying financial strengths and weaknesses. 3. Recommending specific tax strategies. 4. Preparing preliminary financial statements. (2) A) 2 and 4. B) 1, 2 and 3. C) 2, 3 and 4. D) 1, 2, 3 and 4. 208. Tarun wants to know whether he is entitled to deal with you on behalf of Ragini for preparation and execution of her Financial Plan. As per FPSB Code of Ethics, what is the correct option in this context? (2) A) Tarun cannot represent Ragini on such matters as the assets are in her name. B) All investments should first be transferred in Tarun’s name. Only afterwards Tarun can deal with you. C) You can verbally cross check with Ragini and if she has no objection, you can deal with Tarun. D) You should seek written authority from Ragini before start of discussions or draft of letter of engagement. 209. Tarun has heard about professional indemnity policy and would like to know the applicability of this policy in the context of Ragini. According to you _________. (2) A) by use of this policy, Ragini can assure her sponsors of the performance of her obligations towards them B) by use of this policy, Ragini can protect her sponsors from the risk of her non- performance in the competitions C) this policy can insulate Ragini from the unseen losses by the persons having her confidential financial information D) this policy is not applicable in her context 210. While drafting a risk management plan for Ragini, you have arrived at her initial insurance requirements as follows: I. Life insurance II. Health Insurance III. Disability Insurance IV. Property Insurance According to you what should be the most suitable priority order of these insurance needs for Ragini from the given options? (2) 170

B) I, III, II, IV C) II, III, IV, I D) III, IV, II, I E) III, I, II, IV 211. Tarun is the nominee in the existing Post Office NSC investments of Ragini. Tarun wants to know in case these NSCs are pledged to a bank for availing a loan, what impact will it have on his nomination in these NSCs. (2) A) His nomination shall stand as it is. B) His nomination shall stand cancelled as soon as any pledge is made. C) No pledge is permitted for NSC. D) Decision on carry forward of existing nomination upon pledge of NSCs is a privileged right of the Post Master of the Post Office concerned. 212. Tarun wants to know relative advantages of having exposure to Gold as an asset class through Gold Exchange Traded Funds (Gold ETFs) which can be purchased and traded as units through the Demat A/c. Which of the following is not appropriate in this context? (2) A) In Gold ETF, Long Term Capital Gains tax is levied after one year of purchase against 3 years in case of physical Gold. B) In case of an investor holding physical Gold, he has to pay Wealth tax after the net wealth crosses a certain limit. C) Most of the Gold ETF schemes available in India reflect international prices of Gold and are insulated from local demand-supply facto₹ D) Securities Transaction Tax (STT) is applicable on purchase and sale of Gold ETF. 213. Ragini wants to donate to the National Sports Fund some amount out of the ₹ 1 crore which she is likely to get as award. Tarun wants to know if any benefit is available to Ragini under the Income Tax Act on account of this donation. (3) A) The whole amount received shall be tax free and there shall be no tax benefit on such donation. B) The amount received will be taxable but the part donated will be tax free under section 80- G. C) The donated amount can be off-set against her earnings from endorsements. D) No benefit will be available as her taxable income is above ₹ 10 lakh. 214. Tarun is eager to know when is the right time for him to start Estate Planning for Ragini. In your opinion the same ____________. (2) A) right now B) after Ragini’s marriage C) after Ragini’s retirement D) there is no need for her Estate Planning as she is having sufficient wealth and there is no dependent on her 215. While interacting with you, Sahil came to know about your investing style, viz. Direct Equity investment and some schemes of Mutual Funds. He wants to know whether you can manage some of his money in your investments and assign him appropriate share in the profits thereof. As per FPSB Code of Ethics is it possible for you? (2) A) Yes 171

B) Yes, but with prior permission from FPSB against a written proposal letter from Sahil C) Yes, but with a proper written agreement in which all terms and conditions must be stipulated in advance D) No 216. Sahil wants to accumulate retirement funds in one of the government schemes. His friend has suggested him ‘New Pension Scheme’ of the Government of India, which is effective from 01-01- 2004. Sahil wants to know whether the said scheme has provisions whereby he can also start investing in this Scheme in near future. (3) A) Yes B) No C) The Scheme is only for Senior Citizens D) The Scheme is only for Government employees 217. Sahil has informed you that his previous employer has not paid gratuity due to him till this date. Sahil now wants to know if any remedy is available to him in this matter. (3) A) Sahil can move an application to the Controlling Authority which may further forward it to the District Collector for recovery of the same from the company. B) Sahil can go to Civil Court and file a recovery suit against the company. C) Sahil can go to Labor Court and file a recovery suit against the company. D) Sahil can file a police complaint against his previous employer and get a cheating case registered. 218. Sahil’s parents are maintaining a joint Senior Citizen Saving Scheme in which Sahil is the sole nominee. Sahil wants to know about the status of the account after the demise of either of his parents. Which of the following is not appropriate in this context? (2) A) The surviving parent may operate the account alone. B) The surviving parent can receive the amount payable and close the account. C) Sahil, being the nominee, will automatically replace the deceased parent in the joint account with the surviving parent. D) The account may be continued for the remaining term with the surviving parent as the only holder and Sahil as the nominee. 219. Sahil has informed you that his Post Office MIS account is maturing next month. He wants to know whether this account can be extended further and, if so, for what duration? (2) A) Cannot be extended. B) Can be extended for 24 months. C) Can be extended for 60 months. D) Can be extended for 72 months. 220. Sahil wants to liquidate immediately some of his assets for investing in fresh business opportunities. As he would have large cash with him and it may take about 2 months before the same is invested in business purposes, Sahil wants to know the ideal investment option for this money for this short period. Your suggestion would be _________. (2) A) he should invest this money in a Bank FDR B) he should invest this money in Long Term Bonds C) he should invest this money in the Liquid Funds Scheme of a Mutual Fund D) he should invest this money in Equity Growth Scheme of a Mutual Fund 172

221. Sahil has informed you that the joint MIS account of Aniket & Akhil was opened from the sale proceeds of some gold ornaments which were gifted to Namrata by Sahil’s father. Sahil wants to know the tax treatment of the interest income received from this account? (3) A) Interest income shall be taxable in the hands of Sahil. B) Interest income shall be taxable in the hands of Namrata. C) Interest income shall be taxable in the hands of Sahil’s father. D) Data insufficient to ascertain the taxability of the interest. 222. Sahil’s father-in-law is a well-established businessman and Namrata is their only child. He wants to include Sahil as a member in their HUF. Is it possible? (2) A) Yes B) No C) Yes, but with prior permission from IT department D) Yes, but first Sahil’s father-in-law should prepare a non recoverable Will in favor of Sahil 223. Mr. X informed you that prior to consultations with you, he had contacted another CFPCM practitioner who demanded a flat remuneration of 35% of the “Assets under Management” from Mr. X for providing his services. Is there any violation of “Code of Ethics” as stipulated by FPSB India by the earlier Practioner? (3) A) This is a matter of mutual consent between the practitioner and the client only. B) This is a violation of Code of Ethics of Professionalism. C) This is a violation of Code of Ethics of Fairness. D) This is a violation of Code of Ethics of Compliance. 224. Mr. X’s parents are senior citizens. They have no other source of income other than what they get from Mr. X per month. Mr. X wants to ensure a separate source of cash inflow for them thereby ending their dependency upon him. For this purpose he wants to deposit ₹ 5 lakh each in the name of both of his parents in Senior Citizen Saving Scheme, 2004. However before doing so he wants to know from you whether the same is allowed. (2) A) No, any deposit in the said scheme should be made only from the retirement benefits of the concerned depositor. B) Yes, after the age of 60 years of depositor, source of deposit is immaterial. C) No, any deposit in the said scheme should be sourced from self funds only. D) Yes, any person not having any source of income can make a deposit in the said scheme. 225. While drafting a Financial Plan, on examining the annual cash flow of Mr. X you have observed one crucial factor. How would you explain that factor? (2) A) His personal expenses’ proportion is too high and needs to be curtailed. B) His net cash flow is too high to justify a small housing loan. C) Excess cash which is not routed to a suitable liquid and tax efficient investment. D) Net cash flows will decrease in future yea₹ 226. While entering into a relationship with you, Mr. X assumed that you being a practicing Certified Financial Planner, you are fully able to take care of the execution of all aspects of his Financial Plan, i.e. Taxation, Insurance, Investments, etc. As per FPSB India Code of Ethics, what is the best proposition in this context? (3) A) This is the right assumption which can be made about all Certified Financial Planne₹ 173

B) The scope and limitations of the services of the Certified Financial Planner needs to be disclosed in the beginning, specifically in writing, by the Certified Financial Planner to the client. C) A Financial Planner can never take care of all aspects of a Financial Plan. D) A Financial Planner is concerned with only making a Financial Plan and not its execution. 227. Mr. X is seeking your advice regarding suitability of a health insurance plan for his family. Taking into account the health status of the family, what would be your advice? (3) A) The family has good liquidity to take care of any sudden medical expenses, hence no health insurance policy is required. B) Given fairly good medical history, they should postpone taking health insurance for 5 more yea₹ C) A floater policy which covers the medical expenses of any member of the family, as well as disability insurance of Mr. X, at least, must be taken. D) Mr. X can save upto ₹ 15,000 under section 80 D by taking a suitable health cover to that extent. 228. Mr. X wants to know the tax treatment of the withdrawals by way of switch-outs he is making out of his Money Market Mutual Fund (MMMF) to the equity scheme and in the pension scheme. In your opinion __________. (3) A) the income related to every monthly withdrawal shall be subject to normal rate of tax applicable to Mr. X B) the income related to monthly withdrawals shall be subject to Capital Gains Tax as is applicable to debt instruments C) the MMMF being a mutual fund scheme, all income received on withdrawal shall be tax free D) these being switch-outs, no money is being withdrawn, hence no incidence of tax 229. Recently in an unfortunate event, one of Mr. X’s brother died in a road accident. He was a bachelor and he died intestate. Mr. X’s parents were living with his deceased brother. Apart from Mr. X there are three other siblings of the deceased. Mr. X wants to know the applicable order of priority as per Hindu Succession Act for the disposition of his deceased brother’s property. (3) A) Both parents will get the priority over all siblings of Mr. X including Mr. X himself. B) All siblings of Mr. X will get the priority over their parents. C) Mr. X’s mother will get priority over her husband and sons. D) All of them will have equal right over the property of the deceased 230. You have selected a Mutual Fund scheme which has stocks in its portfolio which move together and have a high correlation. How will that impact the risk and return of Mr. X's portfolio? (2) A) The Mutual Fund portfolio will have a return that is lower than the stocks included in it, but have a risk that is higher than the risk of the stocks. B) The Mutual Fund portfolio will have a return that is the average of the stocks included in it, but have a risk that is lower than the risk of the stocks. C) The Mutual Fund portfolio will have a return that is the average of the stocks included in it, but have a risk that is higher than the risk of the stocks. D) The Mutual Fund portfolio will have a return and risk, which lies in the range of risk and return of the stocks included in it. 174

231. You, being a Financial Planner, would help Mr. X to set his financial goals in __________. (2) A) any term as desired by him B) both current & future money terms C) current money terms D) future money terms 232. The estimated value of a real estate asset in a financial statement of Mr. X, prepared by you would be based upon the: (2) A) Basis of the asset, after taking into account all straight-line and accelerated depreciation. B) Mr. X's estimate of current value. C) Current replacement value of the asset. D) Value that a well-informed buyer is willing to accept from a well-informed seller where neither is compelled to buy or sell. 233. Mr. X has asked you to give him a written assurance that if you prepare a Financial Plan for him, then in no case you would reveal any of his information to any other person, including his family membe₹ As per FPSB Code of Ethics, is it possible for you? (3) A) Yes B) No C) Yes, but with prior consent of all relevant family membe₹ D) No, because client has no authority to demand such type of assurance 234. After working on the restructuring of the existing portfolio of Mr. X Chaudhary, you have recommended for a major shift into equities and he has acted upon your advice implicitly. Unfortunately in the current year, equities performed badly and Mr. X’s portfolio lost almost 50% of the original investment. If he blames you for the same, then on what ground you may seek relief? (2) A) Volenti non fit injuria (to a willing person one cannot do injustice) B) Caveat emptor (let the buyer beware) C) Cuiusvis hominis est errare (every human can make a mistake) D) Ignorantia legis non excusat (ignorance of the law is no excuse) 235. Mr. X wants to know what maximum amount can be claimed with respect to each covered family member in the proposed health insurance policy of Virendra’s family. (2) A) Each family member can claim upto one third amount of total sum assured. B) Both the parents can claim upto 40% each of the sum assured while the child can claim 20% of the sum assured. C) No limit is defined for individual family member subject to overall sum assured. D) None of the above 236. Mr. X wants to take your advice about his Retirement Planning. He is eager to know the time when he should plan for his retirement? (2) A) Immediately B) At the time of dissolution of his joint family C) In case he does not get re-elected as an MLA D) After the demise of his father 175

237. Mr. X is seriously concerned with the ongoing rising inflation. Taking a bitter experience of his earlier equity investments, he is keen to do some investments in debt instruments. Keeping in view the constantly rising inflation rate into account, which type of investment, from the given options, is advisable for Mr. X in the current scenario? (2) A) Bank FDR B) Long Term Bonds C) Short Term Bonds D) Floating Rate Bonds 238. Mr. X has not done any Estate Planning as of now. Even his father has not prepared any Estate Planning documents. As Mr. X is the only son of his parents, along with his 3 sisters, what is most suitable for him? (2) A) Mr. X's father should first prepare his Will and on the basis of that Will Mr. X should prepare his own Will. B) Mr. X should create his own Will without waiting for his father’s Will. C) There is no need for any Estate Planning as the family is a joint family & Mr. X is the only son of his parents. D) Mr. X should create his Will by including his father’s property but with an inbuilt provision for his sisters on account of that property. 176