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CFP Exam Review Latest Update
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CFP Exam Review Latest Update ...
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CFP Exam Review Latest Update 2024-2025Current ratio - Answer Current assets/current liabilities
Target: 1.0-2.0
Housing payment ratio - Answer All monthly nondoscretionary housing costs (PITI) /
monthly gross income
Target: <= 28%
Debt-to-income ratio - Answer All monthly debt payments and housing costs/gross
monthly income
Target: <= 36%
Solvency Ratio - Answer Total assets/total debt
Target >= 1.1
Savings Ratio - Answer Savings per year/gross income
Target: subjective with the client, but between 8%-25%
Emergency Fund - Answer 3-6 months of expenses
Margin call - Solution Margin is too low, investor must deposit more
=debit balance/(1-maintenance margin)
Maintenance margin typically = 35%
Poor Form - Solution Price incorporates only technical analysis
Semistrong Form - Solution Price integrates only technical and fundamental analysis
, Strong Form - Solution Price embodies all three levels of analysis: technical,
fundamental and insider information
Call option - ANS: Right to buy at a specified price in a specified period of time
Put option - ANS: Right to sell at a specified price in a specified period of time
Premium - ANS: Cost to buy call or put
Reason to buy call - ANS: Hope stock will appreciate in value
Reason to sell a call - ANS: Do not expect stock to appreciate in price
Want the premium
Reason to buy put - Answer Expects downward movement in price of security to protect
long position
Portfolio insurance
Reason to sell a put - Answer Written on stocks at new lows
Hope the stock will rise
Want the premium
In the money - Answer Exercise price is below the market price for a call or above the
market price for a put
Out of the money - Answer Exercise price is above the market price for a call or below
the market price for a put
Holding period return (HPR) - Answer Add all cash flows (positive and negative) and
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