Trevor is a member of a defined benefit company pension scheme. Which factor relating to his circumstances confirms that he will avoid incurring a special annual allowance charge in the current tax year?

His total annual earnings have never exceeded 110,000

He is a member of an Employer Financed Retirement Benefit Scheme (EFRBS)

His total annual earnings have never exceeded 110,000

His benefits include the maximum level of death benefit

Stephen is about to commence taking benefits from his personal pension scheme, which includes protected rights. He should be aware that:

He can take up to 25% of the total fund as a pension commencement lump sum

He has the right to exercise the open market option

He can take up to 25% of the total fund as a pension commencement lump sum

He has the right to exercise the open market option

His whole pension fund must provide limited price indexation in payment

The value of the protected rights element will not count towards the lifetime allowance

Frank, age 55, is considering adopting a lifestyle investment technique as he aims to build up his personal pension prior to retirement. He should be aware that:

The asset mix of the fund will be adjusted automatically on pre-determined dates

His ongoing exposure to equities will reduce with lifestyling

Lifestyling is likely to be appropriate if he intends to purchase a conventional annuity with his entire fund.

The asset mix of the fund will be adjusted automatically on pre-determined dates

His ongoing exposure to equities will reduce with lifestyling

After 10 years, a maximum of 25% of the investments will be in bonds

Lifestyling is likely to be appropriate if he intends to purchase a conventional annuity with his entire fund.

Under an employer's group life assurance policy, what is the normal tax treatment of the death benefit?

It is not liable to any form of taxation

It is liable to Inheritance Tax

It is liable to Capital Gains Tax

It is not liable to any form of taxation

If an income protection insurance (PHI) policy has reviewable premiums, this usually means that the insurance company can:

Withdraw cover on any anniversary date

Only increase premiums in line with inflation

Pay benefits for less than the full period of incapacity

Apart from comparing cover and costs, what other key factor should usually be considered if a financial adviser intends to recommend that a client cancels an existing term assurance policy and replaces it with a new one?

The secondhand policy market value

Gross domestic product is:

The total of all goods and services produced in a country used to monitor economic growth

The half of all goods and services produced in a country used to monitor economic growth

The division of all goods and services produced in a country used to monitor economic growth

A cash budget is the valuable money management tool that helps you EXCEPT:

Enhance needles spending so you can increase the funds allocated to savings and investments

Maintain the necessary information to monitor and control your finances

Decide how to allocate your income to reach your financial goals

Implement a system of disciplined spending-as opposed to just existing from one paycheck to the next

Enhance needles spending so you can increase the funds allocated to savings and investments

Budget control schedule is:

A summary that shows how actual income and expenses compare with the various budget categories and where variances (surplus or deficit) exist

A summary that shows how actual income and expenses compare with the various budget categories

A summary that shows how actual income and expenses compare with the various budget categories and where variances (surplus or deficit) exist

A graphical presentation of cash flows

'Shareholder wealth' in a firm is represented by:

The market price per share of the firm's common stock

The number of people employed in the firm

The book value of the firm's assets less the book value of its liabilities

The amount of salary paid to its employees

The market price per share of the firm's common stock

The long-run objective of financial management is to:

Maximize the value of the firm's common stock

A single, overall cost of capital is often used to evaluate projects because:

It avoids the problem of computing the required rate of return for each investment proposal

It is the only way to measure a firm's required return

It acknowledges that most new investment projects have about the same degree of risk

It acknowledges that most new investment projects offer about the same expected return

The cost of equity capital is all of the following Except:

Generally lower than the before-tax cost of debt

The minimum rate that a firm should earn on the equity-financed part of an investment

A return on the equity-financed portion of an investment that, at worst, leaves the market price of the stock unchanged

By far the most difficult component cost to estimate

Generally lower than the before-tax cost of debt

If the following are balance sheet changes:$5,005 decrease in accounts receivable$7,000 decrease in cash$12,012 decrease in notes payable$10,001 increase in accounts payablea 'use' of funds would be the:

$12,012 decrease in notes payable

$5,005 decrease in accounts receivable

$10,001 increase in accounts payable

$12,012 decrease in notes payable

A useful formula for estimating how long it will take to double a sum at a given interest rate

A useful formula for estimating how long it will take to triple a sum at a given interest rate

A useful formula for estimating how long it will take to graphically represent the time value of money

A useful formula for estimating how long it will take to make the future value of deposited money

On an accounting statement of cash flows an 'increase(decrease) in cash and cash equivalents' appears as:

A cash flow from operating activities

A cash flow from investing activities

A cash flow from financing activities

Is the rate at which each dollar of taxable income is taxed on average; calculated by dividing the tax liability by taxable income

Is the rate at which each dollar of taxable income is taxed annually; calculated by dividing the tax liability by taxable income.

Is the rate at which each dollar of taxable income is taxed on average; calculated by dividing the tax liability by non-taxable income

Is the rate at which each dollar of taxable income is taxed on average; calculated by dividing the tax liability by expenses

ABA CTFA Practice Test 2 - Free Online Exam Prep & Questions

Philip took out a qualifying onshore endowment policy for 20 years which he made paidup in year 9. This means that he may become personally liable to tax on the policy proceeds:

At maturity

If he makes a partial surrender

If he assigns the policy to his wife

On settlement of a critical illness claim

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