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CSI Applied Financial Planning Certification Exam 1 (AFP) Sample Questions:

1. How should Jenny, a financial planner, explain the benefits of a fee for service method of compensation to a prospective client?

A) The planner is able to charge a higher fee based on the complexity of products sold.
B) The planner is compensated based on the quality of the financial plan.
C) The planner is compensated solely on the performance of the investment portfolio established by the planner for the client.
D) The planner has no incentive to recommend one product that provides higher compensation over another product with lower compensation.

2. Jonah is meeting with his client, Muhsina, who owns Myke Inc., a Canadian-controlled private corporation.
Based on current market value, if he decides to sell Myke Inc., Muhsina will have a capital gain of $400.000.
He expects the value of Myke Inc. to increase in future years and has a CNIL balance of $100,000. He wants the future increase in value to be taxed in the hands of his children, Teshi and Kaliyah, and to minimize the cost. What action should Jonah advise Muhsina to take to meet his goal?

A) Sell #### Inc. to his children at fair market value.
B) Sell #### Inc. to his children for $1.
C) Set up a joint account with Teshi.
D) Set up a joint account with Teshi and Kaliyah.

3. Keitaro, age 42, and Ruth, age 52, are married and have two children - Maximo, age 20, and Hannah, age 16, both from Keitaro's previous marriage. In the event Keitaro dies, he would like to minimize taxes, provide for Ruth for the remainder of her life, and then after her death leave the residual to his children. What estate planning strategy should his financial planner recommend to help Keitaro achieve his goal?

A) Transfer his assets to an inter vivos spousal trust through a will and name his children as income and capital beneficiaries.
B) Transfer his assets to a testamentary spousal trust through a will and name his children as income and capital beneficiaries.
C) Transfer his assets to a testamentary spousal trust through a will and name his children as capital beneficiaries.
D) Transfer his assets to an inter vivos spousal trust through a will and name his children as capital beneficiaries.

4. Justis, age 62, and his wife Jen, age 58, are meeting with their financial planner, Luke. They are both planning to retire by age 65. Their goals are to minimize debt and reduce taxes. The couple's financial situation is outlined below.

Justis' annual income is $25,000. He has a $15,000 RRSP, $30,000 single non-registered account and a
$25,000 TFSA. Jen's annual income is $60,000, and she has a $150,000 RRSP, $50,000 single non-registered account and a $20,000 TFSA.
Jen's marginal tax rate is 35%, and Justis' is 25%. Assuming all investments are making interest income of
10%, what would be the most appropriate strategy for Luke to recommend for the couple?

A) Use Jen's non-registered funds to pay all liabilities.
B) Use Justis's RRSP to pay off all liabilities.
C) Use Justis's non-registered funds to pay off all liabilities.
D) Use Jen's RRSP to pay all liabilities.

5. Ivan relocates for a new job and wants to know whether his move may qualify for the work-related moving expense deduction. What minimum distance test is generally relevant?

A) The new home must be at least 30 kilometres closer to the new work location.
B) The new home must be at least 10 kilometres closer to the new work location.
C) The new home must be at least 25 kilometres closer to the new work location.
D) The new home must be at least 40 kilometres closer to the new work location.

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