Top FPQP® - Module 3 Exam Questions with Completely
Verified Answers Graded A+ 2025/2026
Discounting - correct answer the process of finding present value; the inverse of
compounding to find future value
Discounting Period - correct answer The period of time in which interest is discounted
once. For example, if interest is discounted annually, the ____ period is one year. If it is
discounted weekly, the _______ period is one week.
Future sum - correct answer An amount of money to be received in a single payment
at some point in the future.
Future Value - correct answer The value of a single sum or a stream of payments after
compounding has taken place.
future value of an annuity - correct answer The value after compounding of a stream of
equal payments made at equal intervals.
Inflation-Adjusted Return - correct answer The "real" rate of return after taking into
account inflation
interest - correct answer The payment for the use of money
Interest rate per compounding period - correct answer Pertains to the time value of
money. It is the periodic rate, that is, the annual rate divided by the number of
compounding periods in a year. If interest is compounded semiannually and the annual
rate is 8%, the interest rate per compounding period is 4%.
Interest rate per compounding period - correct answer Pertains to the time value of
money. It is the periodic rate, that is, the annual rate divided by the number of
compounding periods in a year. If interest is compounded semiannually and the annual
rate is 8%, the interest rate per compounding period is 4%.
,Opportunity Cost - correct answer The additional rate of return that could be earned on
an alternative investment
Ordinary Annuity - correct answer Pertains to the time value of money. Payments are
made or received at the end of the time period
Periodic payment - correct answer Pertains to the time value of money. A periodic
payment is a disbursement or receipt of the same amount of money over regular
intervals.
Present sum - correct answer Pertains to the time value of money. It is the value of an
investment before any compounding has taken place. It typically refers to a lump sum,
that is, a dollar amount invested or available at a single point in time.
Present Value - correct answer Pertains to the time value of money. It is the current
value of a future sun or a stream of payments, given a discount rate, or the value of an
investment before any compounding takes place
Present value of an annuity - correct answer The discounted value of a future stream
of payments
Serial payments - correct answer A payment that is increased each year to take
inflation into account. With a _____ ________ one would maintain the same amount of
buying power over time.
time value of money - correct answer The principal that the value of money changes
over time, such as the concept that a dollar you receive today is more valuable than a
dollar you receive in the future because you can invest the dollar you receive today and
earn a return on it.
When making rate of return assumptions for a client's goal, a planner should use
A) a rate of return specified by the client.
, B) a conservative rate of return.
C) current market rates.
D) an aggressive rate of return to achieve the goal more easily. - correct answer B) a
conservative rate of return.
Explanation:
Because levels of return can fluctuate widely, planners should be somewhat more
conservative with the inflation rates and rates of return assumed during goal
forecasting. It is better for clients to get surprises on the upside rather than on the
downside.
LO 3-7
What effect does an assumption, regarding the rate of return, have on achieving a goal?
A) An assumption of a low rate of return will make it possible to achieve a particular
goal.
B) An assumption of a low rate of return may result in needing fewer years to achieve a
particular goal.
C) An assumption of a high rate of return may result in fewer dollars being invested to
achieve a particular goal.
D) An assumption of a high rate of return will allow greater flexibility in achieving a
particular goal. - correct answer C) An assumption of a high rate of return may result in
fewer dollars being invested to achieve a particular goal.
Explanation:
An assumption of a high rate of return may indeed result in fewer dollars being invested
to achieve a particular goal because the high return means that fewer dollars will need
to be invested.
LO 3-7
All other relevant variables being equal, which of the following statements is
CORRECT?
A) The present value of an ordinary annuity will be greater than the present value of an
annuity due.
Verified Answers Graded A+ 2025/2026
Discounting - correct answer the process of finding present value; the inverse of
compounding to find future value
Discounting Period - correct answer The period of time in which interest is discounted
once. For example, if interest is discounted annually, the ____ period is one year. If it is
discounted weekly, the _______ period is one week.
Future sum - correct answer An amount of money to be received in a single payment
at some point in the future.
Future Value - correct answer The value of a single sum or a stream of payments after
compounding has taken place.
future value of an annuity - correct answer The value after compounding of a stream of
equal payments made at equal intervals.
Inflation-Adjusted Return - correct answer The "real" rate of return after taking into
account inflation
interest - correct answer The payment for the use of money
Interest rate per compounding period - correct answer Pertains to the time value of
money. It is the periodic rate, that is, the annual rate divided by the number of
compounding periods in a year. If interest is compounded semiannually and the annual
rate is 8%, the interest rate per compounding period is 4%.
Interest rate per compounding period - correct answer Pertains to the time value of
money. It is the periodic rate, that is, the annual rate divided by the number of
compounding periods in a year. If interest is compounded semiannually and the annual
rate is 8%, the interest rate per compounding period is 4%.
,Opportunity Cost - correct answer The additional rate of return that could be earned on
an alternative investment
Ordinary Annuity - correct answer Pertains to the time value of money. Payments are
made or received at the end of the time period
Periodic payment - correct answer Pertains to the time value of money. A periodic
payment is a disbursement or receipt of the same amount of money over regular
intervals.
Present sum - correct answer Pertains to the time value of money. It is the value of an
investment before any compounding has taken place. It typically refers to a lump sum,
that is, a dollar amount invested or available at a single point in time.
Present Value - correct answer Pertains to the time value of money. It is the current
value of a future sun or a stream of payments, given a discount rate, or the value of an
investment before any compounding takes place
Present value of an annuity - correct answer The discounted value of a future stream
of payments
Serial payments - correct answer A payment that is increased each year to take
inflation into account. With a _____ ________ one would maintain the same amount of
buying power over time.
time value of money - correct answer The principal that the value of money changes
over time, such as the concept that a dollar you receive today is more valuable than a
dollar you receive in the future because you can invest the dollar you receive today and
earn a return on it.
When making rate of return assumptions for a client's goal, a planner should use
A) a rate of return specified by the client.
, B) a conservative rate of return.
C) current market rates.
D) an aggressive rate of return to achieve the goal more easily. - correct answer B) a
conservative rate of return.
Explanation:
Because levels of return can fluctuate widely, planners should be somewhat more
conservative with the inflation rates and rates of return assumed during goal
forecasting. It is better for clients to get surprises on the upside rather than on the
downside.
LO 3-7
What effect does an assumption, regarding the rate of return, have on achieving a goal?
A) An assumption of a low rate of return will make it possible to achieve a particular
goal.
B) An assumption of a low rate of return may result in needing fewer years to achieve a
particular goal.
C) An assumption of a high rate of return may result in fewer dollars being invested to
achieve a particular goal.
D) An assumption of a high rate of return will allow greater flexibility in achieving a
particular goal. - correct answer C) An assumption of a high rate of return may result in
fewer dollars being invested to achieve a particular goal.
Explanation:
An assumption of a high rate of return may indeed result in fewer dollars being invested
to achieve a particular goal because the high return means that fewer dollars will need
to be invested.
LO 3-7
All other relevant variables being equal, which of the following statements is
CORRECT?
A) The present value of an ordinary annuity will be greater than the present value of an
annuity due.
