CFP: Certified Financial Planner

CFP: Certified Financial Planner practice questions, page 8 of 12, with answer review and explanations.

Question 36

(A) In level term insurance policies, the coverage remains constant throughout the term. (B) The premium payable in level term insurance policies can remain same or increase with change in working conditions of Insured.

  1. Both (A) & (B) are incorrect
  2. Both (A) & (B) are correct
  3. (B) is correct
  4. (A) is correct

Question 37

Possession of the property is transferred to the Mortgagee in _______________.

  1. usufructuary mortgage
  2. English mortgage
  3. mortgage by conditional sale
  4. simple mortgage

Question 38

Any possible occurrence which may have a negative financial implication can be plotted on a graph with X axis measuring the frequency (low-high) and Y axis measuring the financial impact (low-high). It would not be practical to purchase insurance for events which would fall in the high frequency, high impact quadrant because _________.

  1. the best way to cover such a risk would be to alter the functioning of the business
  2. such a risk cover would be very expensive
  3. usually this is a business risk, which is rewarded by profit motive
  4. such occurrences are so few that no insurer would be offering a risk cover

Question 39

While making an investment in a Debt fund for your client you make the following remarks: (A) Rate of return by the instrument in the past is 8.5% and is expected to continue in future. (B) The investment would have low risk. In view of the CFP code of Ethics, which of the above statement is voilative?

  1. (A) Only
  2. (B) Only
  3. Both (A) and (B)
  4. None of the above

Question 40

A type of risk with high frequency but low severity is probably best handled by:

  1. Transfer.
  2. Coinsurance.
  3. Reinsurance.
  4. Self Insurance.