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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Investment and Tax Planning | 10% | - Investment strategies and portfolio considerations - Tax planning concepts |
| Topic 2: Financial Planning for Small Business | 15% | - Small business financial strategies - Business ownership structures and planning |
| Topic 3: Savings Planning & Debt Management | 10% | - Debt management techniques - Savings strategies and cash flow management |
| Topic 4: Retirement Planning | 20% | - Retirement income sources and strategies - Government benefits and retirement plans |
| Topic 5: Family Law | 15% | - Legal implications in financial planning - Family property and financial considerations |
| Topic 6: Financial Planning Practice | 10% | - Financial planning process and client relationship management - Professional standards and ethical practices |
| Topic 7: Estate Planning | 10% | - Estate transfer strategies - Wills, trusts and succession planning |
| Topic 8: Insurance Planning | 10% | - Risk management and insurance products - Insurance needs analysis |
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NEW QUESTION # 30
Fiona and Stanley have provided the following data in order for their advisor to proceed with a capital needs analysis:
Fiona ($)
Assets
Stanley ($)
5,000
Cash
3,000
150,000
Life insurance
125,000
30,000
Investments
30,000
Fiona ($)
Estate obligations
Stanley ($)
15,000
Last expenses
15,000
10,000
Car loans
5,000
75,000
Mortgage outstanding
75,000
Assuming their required net monthly income is $3,000, and the discount rate is 6%, how much additional life insurance should Fiona and Stanley obtain respectively?
Answer: D
Explanation:
The capital-needs approach first determines how much capital is required to generate the desired survivor income.
Required annual income is:
$3,000 × 12 = $36,000
At a 6% capitalization rate:
$36,000 ÷ 0.06 = $600,000
For Fiona, estate obligations total:
$15,000 + $10,000 + $75,000 = $100,000
Total capital requirement:
$600,000 + $100,000 = $700,000
Available assets are:
$5,000 + $150,000 + $30,000 = $185,000
Additional insurance required:
$700,000 # $185,000 = $515,000
For Stanley, obligations are:
$15,000 + $5,000 + $75,000 = $95,000
Total requirement:
$600,000 + $95,000 = $695,000
Available resources:
$3,000 + $125,000 + $30,000 = $158,000
Additional insurance required:
$695,000 # $158,000 = $537,000
Thus, Fiona requires $515,000 and Stanley requires $537,000 of additional insurance.
The capital-needs method integrates immediate estate obligations, survivor-income requirements, existing insurance, and other available capital to establish the insurance shortfall.
FPII reference/topic: Insurance Planning - capital needs analysis; income replacement; estate obligations; existing financial resources.
NEW QUESTION # 31
Genki is reviewing the following portfolios:
* Portfolio W earns 18% with a standard deviation of 25%.
* Portfolio X earns 19% with a standard deviation of 30%.
* Portfolio Y earns 21% with a standard deviation of 20%.
* Portfolio Z earns 23% with a standard deviation of 22%.
The risk-free rate is 6%. Which portfolio performs the best on a risk-adjusted basis?
Answer: C
Explanation:
Where the risk-free rate, portfolio returns, and standard deviations are supplied, the appropriate risk-adjusted comparison is the Sharpe ratio:
Sharpe ratio = (Portfolio return # Risk-free rate) ÷ Standard deviation For Portfolio W:
(18% # 6%) ÷ 25% = 0.48
For Portfolio X:
(19% # 6%) ÷ 30% = 0.433
For Portfolio Y:
(21% # 6%) ÷ 20% = 0.75
For Portfolio Z:
(23% # 6%) ÷ 22% = 0.773
Portfolio Z therefore produces the highest excess return per unit of total portfolio risk.
Although Portfolio Y has the lowest standard deviation and an attractive return, its Sharpe ratio of 0.75 remains slightly below Portfolio Z's approximately 0.77. Portfolio Z's higher absolute return more than compensates for its slightly greater volatility.
This illustrates why portfolios should not be evaluated solely by absolute return. A portfolio generating a higher return may be inferior if it requires disproportionately greater risk. Risk-adjusted performance measures normalize returns for the risk undertaken, allowing portfolios with different volatility profiles to be compared on a consistent basis.
FPII reference/topic: Investment and Tax Planning - modern portfolio theory; standard deviation; risk-free return; Sharpe ratio; risk-adjusted performance.
NEW QUESTION # 32
Bonny is looking to lease a vehicle. Here is the information given to her by the salesperson:
Net capitalized value
$25,000
Monthly payments
$300
Term of the lease
48 months
Residual value
$13,450
Sales taxes on residual value
$1,749
Down payment (including taxes)
$4,500
What is the total cost of leasing?
Answer: C
Explanation:
The cost of leasing the vehicle during the contractual lease period consists of Bonny's lease payments plus the initial down payment.
Total monthly lease payments are:
$300 × 48 months = $14,400
Add the initial down payment:
$14,400 + $4,500 = $18,900
Therefore, the total cost of leasing is $18,900, corresponding to option B.
The residual value of $13,450 represents the vehicle's contractual value at the end of the lease. It is relevant if Bonny elects to purchase the vehicle at lease-end, but it is not part of the cost of simply leasing and returning the vehicle.
Similarly, the $1,749 of sales tax associated with the residual value becomes relevant in connection with the purchase of the vehicle at the residual amount. Since the question asks for the cost of leasing-not the combined cost of leasing and subsequently purchasing the vehicle-those amounts should not be added.
This distinction is central when comparing leasing with financing. Lease analysis must separate the cash flows required to use the vehicle during the lease term from the optional amount required to acquire ownership when the lease terminates.
FPII reference/topic: Savings Planning and Debt Management - vehicle leasing; lease payments; residual values; lease-versus-buy analysis.
NEW QUESTION # 33
Fiona's eligibility for insurance benefits is measured by her ability to perform the usual activities of daily living. What type of insurance policy does Fiona have?
Answer: A
Explanation:
Long-term care insurance is the correct classification because eligibility for benefits is commonly based on an insured person's inability to independently perform specified activities of daily living (ADLs). Typical ADLs include bathing, dressing, eating, toileting, transferring, and maintaining mobility. The Financial Consumer Agency of Canada describes long-term care insurance as coverage intended for individuals who become unable to care for themselves or who require assistance managing daily activities.
Disability insurance is fundamentally different. Its principal purpose is income replacement where illness or injury prevents the insured from performing occupational duties. Eligibility therefore normally depends on an occupational definition of disability rather than inability to perform basic ADLs. Critical illness insurance generally pays a lump-sum benefit following diagnosis of a covered condition that satisfies the policy definition. Extended health insurance reimburses eligible medical and health-related expenses that provincial plans may not fully cover.
The wording specifically connects benefit eligibility to Fiona's functional capacity in everyday living. That is the characteristic trigger associated with long-term care coverage.
FPII reference/topic: Insurance Planning - health-related insurance; long-term care coverage; activities-of- daily-living benefit triggers.
NEW QUESTION # 34
From the perspective of self-employment, how are personal benefits treated for the purposes of calculating child support?
Answer: D
Explanation:
Personal benefits paid through a self-employed individual's business are generally added back to income and grossed up when determining appropriate income for child-support purposes.
The purpose of the child-support income calculation is to identify the parent's true financial capacity rather than simply accept taxable income reported under the Income Tax Act. A business may legitimately deduct an expenditure for tax purposes while all or part of that expenditure provides a personal benefit to the owner- for example, personal vehicle use, housing expenses, meals, utilities, or other personal consumption paid by the business.
Where such expenditures effectively replace expenses the parent otherwise would have paid personally from after-tax income, the benefit is added back. A gross-up may then be necessary to express that tax-free or after- tax economic benefit as an equivalent amount of pre-tax income. Canadian child-support jurisprudence has repeatedly applied this approach to personal benefits funded through a business.
This prevents a self-employed support payor from artificially depressing guideline income by routing personal consumption through deductible business expenses.
Therefore, option D correctly reflects both required adjustments: add the personal benefit to income and gross it up where appropriate.
FPII reference/topic: Family Law - Federal Child Support Guidelines; determination of self-employment income; personal benefits; imputed income.
NEW QUESTION # 35
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