Level 4 - (Workbook)

CFP FINAL LEVEL (WORKBOOK)



CONTENTS 1 - 72 PART – 1 3 QUESTIONS 73 - 248 PART – 2 75 83 CASE STUDY - 1 85 ADDITIONAL QUESTIONS 95 SOLUTIONS ADDITIONAL SOLUTIONS 96 103 CASE STUDY - 2 105 ADDITIONAL QUESTIONS 113 SOLUTIONS ADDITIONAL SOLUTIONS 115 123 CASE STUDY – 3 125 ADDITIONAL QUESTIONS 134 SOLUTIONS ADDITIONAL SOLUTIONS 137 144 CASE STUDY - 4 145 ADDITIONAL QUESTIONS 153 SOLUTIONS ADDITIONAL SOLUTIONS

CASE STUDY - 5 155 ADDITIONAL QUESTIONS 162 SOLUTIONS 163 ADDITIONAL SOLUTIONS 171 CASE STUDY - 6 172 SOLUTIONS 181 CASE STUDY - 7 192 SOLUTIONS 201 CASE STUDY - 8 212 SOLUTIONS 219 CASE STUDY - 9 222 SOLUTIONS 228 CASE STUDY - 10 235 SOLUTIONS 243

Integrated Financial Planning Course The Integrated Financial Planning course finally leads you to CERTIFIED FINANCIAL PLANNERCM certification and hence it is designed to build a comprehensive financial planning knowledge. Financial planning is the process of developing strategies to help people manage their financial affairs to meet life goals, and considers all aspects of a client’s financial situation. By virtue of the design of this course, you study a bit of theory, revise the concepts that you studied earlier but most importantly do lot of practicals and numericals. This course begins with some conceptual books and then you learn to create financial plans and apply you knowledge from all the previous modules that you studied and finally culminate that into a actionable financial plan. It has 3 Modules and all these are highly theoretical in nature. Module 1: Financial Planning Process, Principles and Practice This module teaches candidates the Financial Planning Process, Practice Standards, Professional Skills, Client Characteristics, Client Engagement and Communication components of financial planning 1. Establish and define the relationship with the client 2. Collect the client's information 3. Analyze and assess the client's financial status 4. Develop the financial planning recommendations and present them to the client 5. Implement the client's financial planning recommendations 6. Review the client's situation

Module 2: Engaging Clients in the Financial Planning Process This module is about the human qualities of the financial planning process that sometimes create the unknown difficulties contained within financial planning. The course helps you understand the relationship between the financial planner and the client as it comes to life. You learn lot more about the behavioral aspects of managing your clients and how to engage them in the whole process. candidates with an understanding of how a financial planner would apply the financial planning process within the context of a client engagement to develop and deliver a viable financial plan. Candidates will get an appreciation for the value of professional standards of practice; recognize and be able to apply professional skills to facilitate better communication; and come to understanding client characteristics. Module 3: Developing Effective Financial Plans This course combines the above 2 and then leading you to learn the most important part of how to actually create a financial plan. You get the framework and samples and learn various ways of making elaborate financial plans. The course tells you what are the most critical factors when you develop financial plans for your clients and how do you make financial plans which are effective and rewarding for your clients. Capstone Project: Financial Plan Assessment Project Once you are done with the study of the modules above, you are made to do a live project which is assigned by FPSB. The project is making an actual financial plan for a client scenario given to you. You do the project under the guidance of mentors and this is where you actually learn to finally convert all your learning of the whole course and bring it on a single platter. Once your project is done, you submit the same to FPSB for assessment and it is finally evaluated by a team of practicing financial planners who have been appointed by FPSB. Only when your project is approved by FPSB, you are eligible to take the final exams.

Examination Framework CFP Final exam is different from the first 3 exams that you have passed. CFP Final exam would be Online but it will be of 50 Questions and 100 Marks. The questions in CFP Final Exam are in 2 parts/ categories: 1. One Mark Questions You get 25 questions of 1 mark each and these questions are generally theoretical. They come from the 3 concept books that you studied in level 4 or may also have some conceptual questions from previous levels. They will be all MCQs. 2. Three Marks Question You get 25 questions of 3 marks each, meaning total 75 Marks.These questions are completely numericals and they would be based on a case study. In your exam question, you will be given a comprehensive Case of a person/family and his financial data. Now based on the information given, you will have 25 questions to solve. They would take more time to solve and will require pen, paper, calculator etc. The questions will be all MCQs only and after your solve then , you would need to mark the right answer. The total time allotted would be 3 Hours, which you can ideally break up as : 1 Mark Questions > 25 Questions*1 min each = 25 mins 3 Marks Questions >25 Questions*6 min each = 150 mins And you will still have 5 mins extra to recheck. Ideally you should be quick in solving 1 mark questions and then spend approx. 5 min on each Question of 3 Marks. Remember that Case Study Based Questions (3 Marks Questions) carry 75% weightage (75 out of

100 marks) and hence they are the most important. Based on CFP Final Exam Pattern and to help you be better prepared to take the exam, this Workbook is also divided in 2 parts. PART 1 : Conceptual MCQs (1 Mark Questions) In this workbook, here you have close to 200+ Questions to practice. Supplement this with the concept books given to you and you would easily able to master this part of your exam. PART 2 : Case Study Based MCQs (3 Mark Questions) In this workbook, here you have 10 Comprehensive Cases and each case followed by 25 to 40 questions for your to practice. Remember, your exam will have only 1 case but since that’s not shared in advance, hence you need to practice more case studies and understand what type of questions generally come and how to solve them. Use this workbook to practice and prepare for CFP Final Exams. In case you need any further guidance, connect to ICOFP Program Manager today. All the best !!

PART - 1 Conceptual MCQs (1 Mark Questions) In this part of the workbook, here you have close to 200+ Questions to practice. Supplement this with the concept books given to you and you would easily able to master this part of your exam. CFP Final Level: Workbook Page 1

CFP Final Level: Workbook Page 2

1. There is immense need to plan our finances so that ------- is available at ---------------to meet our various financial goals. a) Right time, Right amount of money b) Right amount of money, Right time c) Reasonable amount of money, right time d) None of the above is true 2. Investors want the services of ------------who are knowledgeable, experienced, and trustworthy. Individuals want to work with a ------------ who will put the client’s best interests first — above his own goals and objectives and provide comprehensive advice. Please fill in the blank with appropriate option? a) Consultant b) Insurance advisor c) Mutual Fund Distributor d) Financial Planner 3. Mr. X’s parents are maintaining a joint Senior Citizen Saving Scheme account in which Mr. X is the sole nominee. Mr. X wants to know the status of the account after the demise of either of his parents. Which of the following is not appropriate in this context? a) The surviving parent may operate the account alone. b) The surviving parent can receive the amount deposited and close the account. c) Mr. X, being the nominee will automatically replace the deceased parent in the joint account along with the surviving parent. d) The account may be continued for the remaining term with the surviving parent as the only holder and Mr. X as the nominee. 4. An investment analyst has told Mr. X to invest in a portfolio after evaluating on the following parameters - CFP Final Level: Workbook Page 3

I. The performance of portfolio adjusted by the return of risk free assets over the risk of portfolio II. Measure of the volatility in a portfolio as compared to the entire market (index) as a whole III. Measure of how many individual elements tend to deviate from the average IV. Measure excess return on an investment over the benchmark with same degree of risk V. The proportion of variability in a portfolio compare to benchmark The analyst also used a lot of terminology which confused Mr. X. He wants to know how the Terminology used fits into these evaluation parameters. You advise the terminology, respectively, as_______. a) Beta, Sharpe Ratio, Standard Deviation, Alpha, R-Squared. b) Sharpe Ratio, Beta, Standard Deviation, Alpha, R-Squared. c) Alpha, R-Squared, Standard Deviation, Sharpe Ratio, Beta. d) R-Squared, Sharpe Ratio, Standard Deviation, Alpha, Beta. 5. You have advised Mr. X to purchase a ₹ 50 lakh Life insurance Term Plan. Mr. X wants to know whether it is necessary to mention the details of his other Life Insurance policy purchased from different insurance companies. In case he fails to mention the same in the proposal form and subsequently dies due to an accident, under which principle his claim could be questioned by the Insurer, if facts of the other existing insurance policy become known to the insurance company at the time of claim settlement. a) Principle of Insurable Interest b) Principle of Utmost Good Faith c) Principle of Waiver and Estoppel d) Principle of Indemnity 6. Mr. X wants to make a Will and understand its procedures; you explained that the ________ is the person responsible for offering the Will for probate. a) Testator CFP Final Level: Workbook Page 4

b) Executor c) Lawyer d) Beneficiary 7 You have suggested a strategy which aims to invest more when the share price falls and less when the share price rises. It is done by calculating predetermined amounts for the total value of the investment in future periods and then making an investment to match these amounts at each future period. You are indicating a technique known as _________. a) Rupee Cost Averaging b) Value Averaging c) Economic Cost Averaging d) Weighted Averaging 8. Mr. X wants to purchase a Child Plan from a Life Insurance company to meet Mr. X’s educational needs. He wants to know, if he gets permanent physical disabled due to accident which would hamper his income pursuits, by what means can the policy be kept in force without payment of further premium but retaining intended benefits. You advise _________. a) Payor Rider b) Dreaded Disease Rider c) Living Benefit Rider d) Survivor Purchase Option Rider 9. You have explained Mr. X that while Underwriting the Insurer may counter the effects of ____________, insurers (to the extent that laws permit) ask a range of questions and may request medical or other reports on individuals who apply to buy insurance, so that the price quoted can be varied accordingly, and any unreasonably high or unpredictable risks rejected. a) Moral Hazard b) Morale Hazard c) Adverse Selection CFP Final Level: Workbook Page 5

d) Uberrimaefidei 10. While preparing a Financial Plan for Mr. X you have made a forecast of his present revenues and expenditures i.e. constructed a model of how his finances might perform in the near future. You have prepared a __________. a) Investment Plan b) Fund Flow statement c) Cash Flow statement d) Budget 11. While explaining the basics of selecting a Mutual Fund scheme you have asked Mr. X to analyse the Mutual Fund Portfolio by five main indicators that apply, one of these is __________ which is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. a) R-Squared b) Alpha c) Beta d) Sharpe Ratio 12. Prior to providing any Financial Planning services, you a Financial Planning practitioner and Mr. X, as your client shall mutually define the scope of the engagement. The letter of engagement would define the scope of engagement by discussing a) Identification of the service(s) to be provided b) Financial Planning practitioner’s compensation arrangement(s) c) Analysis and evaluation of client’s current situation d) Determining the clients and the Financial Planning practitioner’s responsibilities; e) Establishing the duration of the engagement; f) Determine the strategies to achieve financial goals CFP Final Level: Workbook Page 6

i), ii), iv) and v) ii), iii), iv) and vi) i), ii), iii), iv) and v) i), ii), v) and vi) 13. Before beginning work on Mr. X’s Financial Plan, you have drafted“Letter of Engagement” and Sought Mr. X’s consent on the same. Mr. X asked you about relevance of such a letter. In the context of Financial Planning Profession, you explain about the “Letter of Engagement” as a _________. a) Professional requirement under Code of Ethics of FPSB India b) Professional requirement under Practice Guidelines of FPSB India c) Legal contract as per Contract Act 1872 d) Document for his personal record 14. Mr. Gupta wants to know according to which Act his father’s estate would be distributed in case he dies Intestate. a) Hindu Succession Act, 1956, under which people belonging to Sikh, Hindu, Buddhist, Jain religion are covered b) Hindu Succession Act, 1956, under which people belonging to Sikh, Hindu, Parsi& Jain religion are covered c) Indian Succession Act, 1925, under which people belonging to Sikh, Hindu, Buddhist, Jain & Parsi religion are covered d) Indian Succession Act, 1925, under which people belonging to Sikh, Hindu, Jain, Parsi, Christian & Jews religion are covered 15. Mr. X wants to know what is the best instrument to get market returns over a sufficiently long period with the least recurring cost. a) Diversified Equity Growth Mutual Fund Scheme. CFP Final Level: Workbook Page 7

b) Equity Index Funds. c) Equity Shares. d) Growth Option of ULIP. 16. Mr. X saw your name with CFP Marks; he 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. Certified Financial Planner CM a) i) & ii) b) ii), iii), vi) c) iv), v) &vi) d) ii), v) &vi) 17. Mr. X wants to invest in ULIP, but he wants to be cautious before entering a long period of contract. As Per IRDA ULIP Guidelines, if he wants to return the policy within 15 days free look period what amount would be refunded to him? a) He shall be refunded the fund value subject to deduction of expenses towards medical examination, stamp duty and proportionate risk premium for the period of cover. b) Full Premium paid is returned back to him. c) Premium paid less commission paid to intermediary is refunded to him. d) He shall be refunded the fund value. 18. Mr. X wants to know how you will ensure that information and relevant documents given to or gathered by you are securely stored? This would be is accordance to FPSB India's Rules that relate to the Code of Ethics of _____________. CFP Final Level: Workbook Page 8

a) Integrity b) Diligence c) Compliance d) Professionalism 19. Before finalizing the Financial Plan, Mr. X tells you that she wants to entrust the estate issues to a solicitor, who is a friend of Mr. X. Which of the following is your best stand? a) Estate issues being substantial in the case, you maintain that the Financial Plan cannot be an integrated one if the same is outside your purview, hence decline. 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 agree to the arrangement subject to the advice of solicitor made known to you so that you modify the Financial Plan accordingly. 20. While preparing Financial Plan for Mr. X you have ensured that all the significant recommendations are made in writing. If any significant recommendations are given orally, then confirmations have been given in writing. You have complied with Rule that relates to the Code of Ethics of ________. a) Fairness b) Diligence c) Professionalism d) Compliance 21. You have advised Mr. X to buy a Term Insurance for his life , he wants to know the importance of waiver of premium rider? a) It is useless as there will not be any amount to be received from the Insurance Company at the time of maturity of the policy CFP Final Level: Workbook Page 9

b) It is very useful as all future premiums would be waived by the Insurance Company in case the Life Assured becomes totally and permanently disabled c) It is same as Permanent Disablement rider hence need not be mentioned separately d) It is inbuilt with all the Term Insurance plans and thus need not be mentioned separately 22. You have mentioned to Mr. X that as you increase the tenure of insurance coverage, the premium charged per year will also increase. You are referring to which type of Life Insurance coverage? a) Whole Life Insurance Plan b) Endowment Plan c) Unit Linked Insurance Plan d) Term Plan 23. The Financial Planning Practices represent the competencies that relate to the financial planning professional’s ability to: a) Understand and master the inter-relationships among the various Financial Planning Components; b) Integrate among the various Financial Planning Components to derive a financial plan; and c) Apply the six-step financial planning process in performing the core Financial Planning Functions. d) All of the above 24. Mr. X wants to know the tax deduction on reinvestment of Interest on NSC. (3) a) Accrued interest (which is deemed as reinvested) also qualifies for deduction for first 6 years b) Accrued interest (which is deemed as reinvested) also qualifies for deduction for first 5 year c) Accrued interest (which is deemed as reinvested) does not qualify for deduction. d) Accrued interest (which is deemed as reinvested) also qualifies for deduction for first 3 year CFP Final Level: Workbook Page 10

25. What would be the correct sequence to perform six steps of Financial Planning process to prepare a Financial Plan for Dr. X? 1. Developing and Presenting the Financial plan 2. Analyzing and evaluating the client’s financial status 3. Implementing the Financial Plan 4. Monitoring the Financial Plan 5. Establishing Client-Planner Relationships 6. Gather client data and determining Goals and Expectations (3) 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 26. In the initial stage of Financial Plan preparation, you told Dr. 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 27. Mr. X wants to understand the basics to analyze the financial statement of a company, he wants to know the ratios to look for in case he wants to know the profitability: (a) Return on assets (b) Return on equity (c) Total assets turnover ratio (d) Interest coverage ratio CFP Final Level: Workbook Page 11

a) (a) and (b) b) (a), (c) and (d) c) and (d) d) only 28. Mr. X wants to know whether his Mutual Fund portfolio's returns are due to smart investment decisions by the fund manager or a result of excess risk. As he is of the opinion that one portfolio or fund can reap higher returns than its peers, it is only a good investment if those higher returns do not come with too much additional risk. He wants his Mutual Fund to give him better risk-adjusted performance. You would suggest him to look for ________ Ratio. a) Alpha b) Sharpe c) Beta d) R-Squared 29. You have suggested Mr. X to look for few important risk measures which measure different types of risks. When comparing two or more potential investments, an investor should always compare such measures. These are ________. a) CAPM, Treynor Ratio, Beta, Standard Deviation and the Sharpe Ratio b) Alpha, Beta, R-squared, Standard Deviation and the Sharpe Ratio c) Quick Ratio, Alpha, Beta, Sharpe Ratio and Retention Ratio d) Debt/Equity Ratio, Current Ratio, Sharpe Ratio, Alpha and Standard Deviation 30. Mr. X has provided his assets and liabilities statement to you during the retirement planning process. The financial statement will enable you to gain an understanding of all of the following except the__________. a) Diversification of the Mr. X's assets. b) Mr. X's net cash flow. c) Mr. X's liquidity position. CFP Final Level: Workbook Page 12

d) Mr. X's debt position. 31. Which of the following would not be violation of the “Principle of Integrity” in the performance of your Professional service to Mr. X? a) Exercising reasonable and prudent judgment in dealing with Mr. X. b) Making misleading claims about the scope and areas of your competence. c) Giving the impression that you are representing the views of FPSB India. d) Engaging in conduct involving dishonesty, fraud, deceit or misrepresentation. 32. You as a CERTIFIED FINANCIAL PLANNERCM Professional are required to exercise objectivity in providing services to Mr. X, your client. This means you shall be _____________. a) Impartial b) Honest c) Competent d) Diligent 33. Recently in an unfortunate event, one of Mr. X’s brothers 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. 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 d) All of them will have equal right over the property of the deceased. 34. You have advised Mr. X to purchase householders Insurance Policy to insure his house as well as contents of his house. Mr. X discusses with you about the features of Householders CFP Final Level: Workbook Page 13

Insurance Policy. As per you, which of the following is not a feature of Householders Insurance policy? a) Loss or damage by the insured’s domestic staff’s direct or indirect involvement in an attempted burglary is covered. b) He can make an endorsement to the policy during the currency of the policy to record alteration related to change of Insurable interest by way of sale or mortgage. c) Insured can cancel the policy during the currency of policy and get refund of premium paid (after adjustment of administrative and other exp.) on pro-rata basis. d) The Building is insured as per the re-instatement value and the contents are insured as per the market value. 35. Mr. X wants to know, what would happen to the No Claim Bonus on his car insurance after he sells his car. a) He can enjoy the No Claim Bonus on the premium for his new car if he buys it within a specified period from the date of sale of his old car b) No Claim Bonus is lost after sale of old car c) He can enjoy only 50% benefit of the No Claim Bonus on the premium for his new car if he buys it within a specified period from the date of sale of his old car d) He can avail benefit of No Claim Bonus on premium paid for Insurance taken for other purposes from same Insurer 36. 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 CFP Final Level: Workbook Page 14

d) Objectivity 37. 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 38. Mr. 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 Mr. 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 39. 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 CFP Final Level: Workbook Page 15

b) Only 1 & 2 are correct c) Only 1, 2 & 3 are correct d) Only 2, 3 & 4 are correct 40. 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 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 41. Mr. X has received few gifts in the financial year 2020-21 and he wants to know about the taxation of the same. He received a gift of ₹ 63,000 from a friend and another gift of ₹ 24,000 from his neighbor. He wants to know, what is the total taxable amount from the above receipts on which Mr. X will have to pay tax. a) ₹ 63,000, as any amount received in excess of ₹ 50,000 is taxable. b) ₹ 13,000, as the amount received over the limit of ₹ 50,000 is taxable. c) ₹ 37,000, as the total amount in excess of the limit ₹ 50,000 is taxable. d) The whole amount of ₹ 87,000, as the aggregate value of gifts received from one person or more than one person exceeds ₹ 50,000. 42. 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 CFP Final Level: Workbook Page 16

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 43. Mr. X’s mother wants to stay with Mr. 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 Mr. X equally and then they should sell the house. 44. You have ascertained that Mr. X needs a life insurance of at least ₹ 50 lakh on top priority. At his age, a term insurance plan for a 10-year term is available for annual premium of ₹ 10,000 and for a term of 15 years the same is available for an annual premium of ₹ 12,000. He is, however, concerned of getting ‘nil’ survival benefits in case of term insurance policies, though he can currently ill afford a high premium for endowment or ‘with profit’ type of policies. A ‘return of premium’ term policy for a term of 10 years for ₹ 20 Lakh sum assured would CFP Final Level: Workbook Page 17

annually cost ₹ 18,000 for his profile. He wants to know which among the following would be the most appropriate policy for him in the current circumstances. a) He should take the term plan for 15 years, which will take care of his liabilities during this period in case he dies prematurely. b) He should take the term plan for 10 years only as the premium outflow here is the least. c) He should take the ‘return of premium’ policy which would yield ₹ 2 Lakh to provide for his liabilities when he is around 55 years of age. d) He should take 10-year term policy along with a 10-year ‘return of premium’ policy to the extent of ₹ 10 lakh to optimize on premium payment while getting survival benefits. 45. Which of the following shall you avoid while providing Financial Planning services to Mr. X and Mrs. 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. 46. Mr. X had earlier approached a CERTIFIED FINANCIAL PLANNERCM who suggested investment in certain financial products rather than earning minimal returns in a Savings bank account. The Financial Planner recommended such investments as he would earn commission on sale of such products. Which Code of Ethics binds a CFPCM practitioner to disclose conflict of interests? a) Objectivity b) Professionalism c) Integrity d) Fairness CFP Final Level: Workbook Page 18

47. Mr. X’s father had suffered loss from house property and loss from business and profession for the previous year and has delayed in filing his return of income before the due date. Will her father be eligible to carry forward losses at the time of filing his belated return of income? (Assuming he does not have any corresponding income to set off of losses) a) Yes, can he carry forward both b) No, cannot carry forward both c) Can carry forward only loss from house property d) Can carry forward only loss from business and profession 48. Mr. X wants to know which types of insurance she should buy, considering the assets, liabilities and her future goals. In the order of importance, which insurance should she ideally purchase? 1. Life Insurance 2. Health Insurance 3. Disability Insurance 4. Property Insurance a) 3, 1, 2, 4 b) 1, 3, 2, 4 c) 4, 3, 1, 2 d) 3, 2, 1, 4 49. Mr. X wants to buy her residential house today at a hill station as she has received a fabulous offer for a home loan. According to you, which types of insurance she should buy to cover that risk. a) Life Insurance and disability Insurance b) Disability Insurance and Accidental Insurance c) Householder’s Policy and Home loan Protection plan d) Health Insurance and Life Insurance CFP Final Level: Workbook Page 19

50. Mr. X wants to invest in a new ULIP, but he wants to be cautious before entering a long period of contract. As Per IRDA (ULIP) Guidelines, if he wants to return the policy within 15 days free look period what amount would be refunded to him? a) He shall be refunded the fund value subject to deduction of expenses towards medical examination, stamp duty and proportionate risk premium for the period of cover. b) Full Premium paid is returned back to him. c) Premium paid less commission paid to intermediary is refunded to him. d) He shall be refunded the fund value. 51. While entering into a relationship with you, Mr. X assumed that you being a CERTIFIED FINANCIAL PLANNERCM practitioner, 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? a) This is the right assumption which can be made about all CERTIFIED FINANCIAL PLANNERCM professionals. b) The scope and limitations of the services of the CERTIFIED FINANCIAL PLANNERCM practitioner needs to be disclosed in the beginning, specifically in writing, by the professional to the client. c) A CERTIFIED FINANCIAL PLANNERCM practitioner can never take care of all aspects of a Financial Plan. d) A CERTIFIED FINANCIAL PLANNERCM practitioner is concerned with only making a Financial Plan and not its execution. 52. Mr. X 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? 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. CFP Final Level: Workbook Page 20

53. Mr. X wants to create a private trust in the name of her children. According to you, which of the following are true in case of a private trust I. A trustee shall be any known person capable of holding property II. A trust has to be declared by a non – testamentary instrument in writing , signed and registered or by the will of the author of the trust or of the trustee in case of an immovable property III. A trustee would be taxed in his hands in a representative capacity where the beneficiary is a minor, lunatic or idiot or specifically entitled to receive the income from the trust IV. The author of the trust can be the trustee himself a) (III) and (IV) b) (II) and (III) c) (II), (III) and (IV) d) (I), (II) and (IV) 54. Before beginning work on Mr. X’s Financial Plan, you have drafted a “Letter of Engagement” and sought Mr. X’s consent on the same. Mr. X asked you about relevance of such a letter. In the context of Financial Planning profession, you explain about the “Letter of Engagement” as a _________. a) Professional requirement under Code of Ethics of FPSB India b) Professional requirement under Practice Guidelines of FPSB India c) Necessary legal requirement as per Contract Act 1872 d) Document for his personal record 55. Mr. X, who is a Hindu, wants to know according to which Act his father’s estate would be distributed in case he dies Intestate. a) Hindu Succession Act, 1956 b) Indian Contract Act c) Indian Succession Act, 1925 CFP Final Level: Workbook Page 21

d) Transfer of Property Act 56. Financial Planning is a ----------- term than mere investment advice / recommendations and subsequent placement of funds. a) Broader b) Comprehensive c) Better d) Best 57. Mr. X wants to know what the most appropriate instrument is/are to replicate exactly the equity market returns over a sufficiently long period with the least cost and risks. I. Diversified Growth schemes of Mutual Funds II. Equity Index Funds III. Growth Option of ULIPs IV. Exchange Traded Funds of Equity Indices V. A portfolio of Large Capitalized stocks a) (i) and (ii) b) (ii) and (iv) c) (i) and (iii) d) (iv) and (v) 58. Mr. X saw the acronym CFPCM against your name in your business card. He wants to know about the same. You tell him that ________. a) CFP marks are owned outside the US by US based FPSB Ltd b) FPSB India is the owner of CFP marks within Indian territory c) The US based FPSB Ltd. is licensed globally to administer CFP marks d) The US based FPSB Ltd. and FPSB India are respectively licensed to issue CFP certification in US and India CFP Final Level: Workbook Page 22

59. The planner helps clients to: a) Make informed decisions about their money and how it can be used to best advantage; b) Develop a sound financial plan covering all aspects of their financial well- being (from wealth creation to wealth protection); c) Choose products that meet their specific needs; and d) Review their financial situation on a regular basis and revise their financial plans as necessary. e) All of the above 60. Which of the following shall you avoid while providing Financial Planning services to Mr. X in line with the Ethical and Professional Conduct required of CFPCM professionals by FPSB? a) Alter existing financial strategy promptly in the interest of Mr. X, even without confirming to her, if the adverse developments materially impact her financial goals. b) Keep Mr. X fully informed of adverse developments affecting her financial goals and take remedial action only after her understanding of the situation and her concurrence. c) Advise Mr. X of the developments affecting her financial goals only when she comes for review of Financial Plan after the pre-determined period. d) Revise asset allocation as often as possible to ensure that the financial goals are achieved exactly as set out initially. 61. As per the practice guidelines of FPSB India followed by you, being a CERTIFIED FINANCIAL PLANNERCM practitioner, which amongst the following is the next step after defining and discussing with Mr. X the basic terms of the financial plan construction? a) To collect the quantitative and qualitative information of the prospective client b) To inform the prospective client about the terms of the engagement c) To define the financial goal of Mr. X d) To share past financial records of your existing clients with your prospective client in order to make him comfortable with number and success of your clientele funds CFP Final Level: Workbook Page 23

62. Shweta has not bought personal accident insurance cover, though her car is covered for damages from accident. She wears seat belt and drives carefully. You, as a CFPCM professional, had your following observation about her risk management? a) She has insured the property risk; she controls some of her personal risk and retains the rest of the risk. b) She has transferred her personal risk to other drivers of the road, insured her property risk and can claim damage if accidents are caused by third party negligence. c) She has controlled her personal risk and insured her property risk.She has not done anything to manage her risks and has to immediately go for accident and personal risk cover. She cannot rely on third party damages alone to cover the risk of the road. 63. Sunita wants to know, which are the documents her claimant (nominee/legal heir) must send to insurance company to claim the policy benefits in case of a life insurance policy? I. An intimation of the death of the life assured to the insurance company II. Death certificate from local authorities III. Completed claim forms and other forms as required by the company IV. Valid Policy of Life assurance V. Authentic Identification that the person claiming is entitled to receive the payment a) (i), (ii), (iii), (iv) & (v) b) (ii), (iii) & (iv) c) (i), (iii) & (iv) d) (ii), (iii), (iv) & (v) 64. Sunita wants to know if she were to meet with an accident and get permanent disability in the third year of her Term Insurance policy, what amount of the premium due in the fourth year would be payable by her. The premium being paid towards the policy is ₹ 15,000 with sum assured of ₹ 50 Lakh. a) ₹ 15,000 b) ₹ 12,000 CFP Final Level: Workbook Page 24

c) ₹ 7,500 d) Nil 65. You have advised Snigdha to do Estate Planning. According to you what should be the most preferred way for her Estate Planning? a) She should prepare a Will naming her children as the sole beneficiaries as well as designate one or more guardians with their prior consent. b) She should devolve all of her personal properties to her personal HUF. c) She should prepare a Will naming her children as the sole beneficiaries in the same. 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. 66. In the initial stage of Financial Plan preparation, you told Mr. X and also mentioned in the Engagement Letter 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 67. Mr. X wants to buy a life insurance policy on the life of his father as well as both his brothers. 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. a) Yes, he can buy the policy in the desired way. b) Yes, but he cannot reserve the right to receive the policy benefits. c) No, in the absence of insurable interest he cannot buy life insurance policy in their name. d) He can buy the policy only in the name of his father in the desired way CFP Final Level: Workbook Page 25

68. Mr. X’s father has made a Will deed for distribution of his assets. Mr. X discusses with you regarding Probate process, as per you which is not a feature of Probate process? a) The assets are gathered, applied to pay debts, taxes and expenses of administration and distribute to those designated as beneficiaries in the Will. b) Executor or Personal Representative named in the Will is in charge of this process. c) All legal heirs will receive notices from the court to file objections. d) The court will give orders to distribute the assets to the heirs as per intestate succession Act. 69. You have disclosed in writing to Mr. X on your ability to advise and sell on a restricted range of products, and some other limitation of their capacity to serve him. You have complied with the Code of Ethics of _____________. a) Integrity b) Objectivity c) Fairness d) Diligence 70. You have already mentioned to Mr. X that you shall confirm in writing to him where a subsequent instruction given by him significantly alters the financial strategy or balance of an existing portfolio under your supervision. You have complied with the Code of Ethics of __________. a) Diligence b) Compliance c) Confidentiality d) Objectivity 71. Mr. X wants to know, what are the factors that are included in the calculation of life insurance premium rate? 1. Rate of Mortality CFP Final Level: Workbook Page 26

2. Investment earnings 3. Expenses 4. Economic condition of the country 5. Political stability a) 1, 2, 3, and 4 b) 1, 2 and 3 c) 1 and 2 d) 1, 2, 3, 4 and 5 72. -----------------------------------establishes realistic expectations for both the client and the financial planning professional. It can be comprehensive or limited advice. a) Mutually defining the scope of the engagement b) Mutually compromising on various aspects of plan c) Mutually discuss the compensation arrangements 73. You have selected a Mutual Fund scheme which has stocks in its portfolio which move together and have a high correlation. 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. 74. The estimated value of a real estate asset in a financial statement of Mr. X, prepared by you would be based upon the: a) Basis of the asset, after taking into account all straight line and accelerated depreciation. CFP Final Level: Workbook Page 27

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 75. 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 members as per FPSB Code of Ethics, is it possible for you? a) Yes b) No c) Yes, but with prior consent of all relevant family members d) No, because client has no authority to demand such type of assurance. 76. Mr. X wants to know what maximum amount can be claimed with respect to each covered family member in the proposed health insurance policy (Family Floater) of Virendra’s family. a) Each family member can claim up to one third amount of total sum assured. b) Both the parents can claim up to 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 77. 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? a) Bank FDR b) Long Term Bonds c) Short Term Bonds d) Floating Rate Bonds CFP Final Level: Workbook Page 28

78. 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? 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. 79. 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. 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. 80. Mr. X wants to buy a life insurance policy on the life of his father as well as both his brother 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. a) Yes, he can buy the policy in the desired way. b) Yes, but he cannot reserve the right to receive the policy benefits. c) No, in the absence of insurable interest he cannot buy life insurance policy in their name. d) He can buy the policy only in the name of his father in the desired way. CFP Final Level: Workbook Page 29

81. Mr. X’s father-in-law is a well-established businessman and Mr. X’s wife is his only child. He wants to include Mr. X as a member in their HUF. Is it possible? a) Yes b) No c) Yes, but with prior permission from IT department d) Yes, but first Mr. X’s father-in-law should prepare a non-revocable Will in favour of Mr. X 82. What is the status of nominee in financial assets of his Mrs. X as she has died intestate? a) Nomination shows that Mr. X will get the full custody and the sole ownership as well of the financial assets. b) Nominee has only the right to receive the proceeds of financial assets; the distribution of such assets to legal heirs may take place later as per Succession law. c) Nominee’s role in nomination is equivalent to the role of executor applied in case of Will. d) Nomination gives right of share of ownership even to person who has no blood relation with deceased. 83. Mrs. X held her portfolio for 10 years. 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. CFP Final Level: Workbook Page 30

84. 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 85. 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 86. 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 c) Budget d) Cash Flow statement 87. 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’s Professional Standards and be available for inspection by the FPSB 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 CFP Final Level: Workbook Page 31

b) Professionalism c) Diligence d) Objectivity 88. 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 89. 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 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 CFP Final Level: Workbook Page 32

90. Which of the following shall you avoid while providing Financial Planning services to Mr. X and Mr. 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. 91. 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% 92. You, as a CFPCM Certificant, need to disclose regarding compensation to be received from Mr. X. a) According to you, which would be the most appropriate option? b) Need not disclose the source of compensation c) Need to disclose compensation structure at the time of establishing relationship d) Need to disclose only when asked by Mr. X e) Need to disclose the source once the financial plan is constructed CFP Final Level: Workbook Page 33

93. 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 94. 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? a) I and II b) II and IV c) I, III and IV d) I, II and IV 95. 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: The relationship is warranted by Mr. X’s needs and objectives; and 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 __________. CFP Final Level: Workbook Page 34

a) Diligence b) Professionalism c) Compliance d) Fairness 96. 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 c) Buy CALL Option d) Sell CALL Option 97. 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 e) Code of Ethic of Integrity 98. 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 CFP Final Level: Workbook Page 35

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 99. Being pessimistic due to the present recessionary market, Mrs. 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 100. Mrs. 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 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 101. A Life Insurance Agent has approached you 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. CFP Final Level: Workbook Page 36

III. You are not clear which plan to opt for and you seek Financial Planner’s advice on which policy is beneficial for you, if discounted by the risk free rate. (Assuming you live till maturity of the Insurance Policy) a) Plan I is better as the net present value is higher b) Plan I is better as the net present value is lower c) Plan II is better as the net present value is higher d) Plan II is better as the net present value is lower 102. Shweta 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 103. 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. CFP Final Level: Workbook Page 37

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. 104. 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 years 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 year a) i & iv b) i & ii c) ii & iii d) iii & iv 105. 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 CFP Final Level: Workbook Page 38

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. a) 1, 2 and 4 only b) 2, 3 and 4 only c) 1 and 4 only d) 1, 2, and 3 only 106. 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. CFP Final Level: Workbook Page 39

107. 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. Mr. 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 Mrs. X only. d) Yes, but only by writing a registered Will. 108. 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 2018 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. 109. 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. CFP Final Level: Workbook Page 40

c) The value of House and that of various belongings in the house are assessed as per their reinstatement value. 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. 110. 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. 111. 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 112. Mr. X’s friend Dinesh used to take advice on his investments from a Financial Planner certified by FPSB who co-mingled the money of Dinesh with his own money. However, the Financial CFP Final Level: Workbook Page 41

Planner maintained good records to segregate both cash flows. Which of the following Principles has hisFinancial Planner violated? 1. Integrity 2. Objectivity 3. Fairness 4. Professionalism a) 1 only b) 1, 2 and 4 c) 1,2 and 3 d) 1,2, 3 and 4 113. Mr. X renewed his car insurance which was due for renewal on 18th March, 2019 by sending out a premium cheque on 14th March, 2019 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, 2019. 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 dishonour 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 honoured. 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 dishonouring of his cheque. d) Mr. X has to get approval from Insurance ombudsman for clearance of his claim from the insurer. 114. Mr. X has many clients who repose faith in him for his skills, knowledge and ethical dealing. One of his clients, Mrs.Y who is 70 years of age, has a will in which she leaves her entire estate to CFP Final Level: Workbook Page 42