AFP

AFP practice questions, page 4 of 4, with answer review and explanations.

Question 16

Sisters Kyra and Liz jointly operate a successful small business that has been set up in a partnership structure. Kyra plans to retire in five years. The sisters are meeting with a financial planner to discuss a plan for Kyra's transition out of business and into her retirement. What action should their planner suggest the sisters take now in order to manage this expected event?

  1. Incorporate a key person plan.
  2. Put a buy-sell agreement in place.
  3. Purchase a straight life annuity with Kyra as the beneficiary.
  4. Structure a criss-cross ownership approach.

Question 17

Roxanne, a financial planner, is at a large event hosted by a local charity and is speaking with a potential client. She is overheard by an existing client. Malik, as stating that all of her clients earn well in excess of 10%. Malik had met with Roxanne recently to review his portfolio, which only had a 7% rate of return. How has Roxanne's actions failed Malik in regard to her integrity?

  1. She has not been entirely honest and upfront.
  2. She has made a statement that indicated she Is not competent, knowledgeable or up-to-date.
  3. She has spoken about existing clients' accounts performance without their consent.
  4. She has made recommendations that were more beneficial to her than to her clients.

Question 18

Sunil and Shashi are married and both age 45. Each is the personal care Power of Attorney (POA) for the other. They have no children. Shashi would like to revise the personal care POA to ensure that it reflects her medical wishes. How should their financial planner advise Shashi to help her achieve her goal?

  1. Utilize her last will and testament.
  2. Appoint an alternate POA for personal care.
  3. Appoint someone other than Sunil as her POA for personal care.
  4. Utilize a living will.

Question 19

Jasleen has recently sold her shares of a qualified small business corporation valued at $750,000. What can she expect in regard to the taxation of her capital gains as a result?

  1. Her capital gains on the disposal will be fully tax exempt.
  2. Her capital gains on the disposal will be eligible for the lifetime capital gains exemption.
  3. Her capital gains on the disposal will be fully taxable.
  4. Her capital gains on the disposal will be taxed at 50% of the taxpayer's marginal tax rate.

Question 20

Jasper is married and has one child. He has stable employment and is entitled to a comprehensive group benefit package. Jasper would like to ensure that his family will be financially secure should he die from illness or fatal accident. Jasper’s surplus cash flow is projected to be very limited over the next few years, while his child is still young. Which insurance coverage should his planner recommend to help Jasper ensure his goal is met?

  1. Extended health.
  2. Accidental death and dismemberment.
  3. Critical illness.
  4. Term life.