FPQP ® Exam: Cash Management and the Use of Debt:
Proficiency Knowledge Test Exam Questions and Certified
Answers 2025/2026
Which of the following are types of systematic risk? - correct answer Interest rate risk
Market risk
Which one of the following techniques is a way to reduce unsystematic risk? - correct
answer Diversify an investment portfolio.
The measurement of a security's volatility relative to the market (as measured by the
S&P 500) is that security's - correct answer beta - measures a security's volatility
relative to a benchmark such as a stock index.
The advantages of investing in mutual funds include which of the following? - correct
answer Pooling of investors' funds
Diversification
Access to professional money managers
Detailed recordkeeping of shareholder investments and transactions
Joshua is considering two investments in a large-cap fund: Fund A with a three-year
average return of 11.57% and a beta of 0.89, and Fund B with a three-year average
return of 13.56% with a beta of 1.05. On a risk-adjusted basis, which fund should
Joshua choose? - correct answer A risk-adjusted return is calculated by dividing the
mean return by beta.
Fund A is 11.570.89 = 13.00%,
Fund B is 13.561.05 = 12.91%.
On a risk-adjusted basis, Fund A has the best return.
Which of the following are potential returns an individual can achieve by investing in
common stock? - correct answer Dividends
,Capital appreciation
A SWOT analysis would include - correct answer strengths
weaknesses
opportunities
threats
Taxable income is defined as - correct answer adjusted gross income (AGI) reduced
by the greater of itemized deductions or the standard deduction.
All of the following are possible reasons to invest in bond mutual funds - correct
answer diversification.
professional management.
interest income.
a tax credit is the amount - correct answer is a dollar-for-dollar offset against the
income tax liability; thus, it is deducted directly from the tax liability.
Falynn has a joint bank account with her son Bowen, and there is $142,000 in their
account. The bank is covered by FDIC insurance and Falynn wants to know if their
entire account balance is covered by FDIC insurance. You would inform her that -
correct answer all $142,000 is covered—$71,000 in Falynn's name and $71,000 in
Bowen's name.
FDIC insured banks provide up to $250,000 coverage for an individual in each
"ownership category."
LO 6-1
The marginal income tax bracket is - correct answer the tax rate applied to a
taxpayer's last dollar of taxable income.
The tax benefits of qualified retirement plans include which of the following? - correct
answer Employee contributions to the plan are excluded from taxable income.
, Earnings on invested funds inside the plan are tax-deferred until withdrawn.
Distributions are taxed as ordinary income only when withdrawn.
Bryan and Sarah received stock as a gift that Bryan's parents purchased several years
ago for $5,000, and it was worth $7,200 when the couple received it. They just sold the
stock for $7,500 and want to know what their basis is, and any tax ramifications. You
would correctly advise them that the cost basis is - correct answer $5,000, and they
will owe capital gain taxes on $2,500.
In this, case the basis would be $5,000—the original purchase cost for Bryan's parents.
Bryan and Sarah would pay capital gains taxes on any amount they receive above the
$5,000; in this case, it is $2,500.
For an annuity, under which one of the following scenarios would a 10% penalty tax
apply? - correct answer Kelly, age 38, takes a lump sum distribution
Which one of the following statements regarding education credits is CORRECT? -
correct answer The Lifetime Learning Credit includes expenses to acquire or improve
job skills.
Which one of the following applies to defined benefit plans? - correct answer They
provide a predetermined, fixed retirement benefit for participating employees.
A small-business owner who is paid $200,000 each year by his company wants to
establish a retirement plan. He has part-time employees but only wants to include full-
time employees in the plan. The profits and cash flow of the business fluctuate from
year to year, and the owner wants to have the flexibility of having up to 20% of his
compensation contributed to a retirement plan for his benefit each year. Which one of
the following plans satisfies these conditions? - correct answer Profit sharing
Which one of the following is not a requirement to receive retirement benefits from
Social Security? - correct answer You must be currently insured.
Proficiency Knowledge Test Exam Questions and Certified
Answers 2025/2026
Which of the following are types of systematic risk? - correct answer Interest rate risk
Market risk
Which one of the following techniques is a way to reduce unsystematic risk? - correct
answer Diversify an investment portfolio.
The measurement of a security's volatility relative to the market (as measured by the
S&P 500) is that security's - correct answer beta - measures a security's volatility
relative to a benchmark such as a stock index.
The advantages of investing in mutual funds include which of the following? - correct
answer Pooling of investors' funds
Diversification
Access to professional money managers
Detailed recordkeeping of shareholder investments and transactions
Joshua is considering two investments in a large-cap fund: Fund A with a three-year
average return of 11.57% and a beta of 0.89, and Fund B with a three-year average
return of 13.56% with a beta of 1.05. On a risk-adjusted basis, which fund should
Joshua choose? - correct answer A risk-adjusted return is calculated by dividing the
mean return by beta.
Fund A is 11.570.89 = 13.00%,
Fund B is 13.561.05 = 12.91%.
On a risk-adjusted basis, Fund A has the best return.
Which of the following are potential returns an individual can achieve by investing in
common stock? - correct answer Dividends
,Capital appreciation
A SWOT analysis would include - correct answer strengths
weaknesses
opportunities
threats
Taxable income is defined as - correct answer adjusted gross income (AGI) reduced
by the greater of itemized deductions or the standard deduction.
All of the following are possible reasons to invest in bond mutual funds - correct
answer diversification.
professional management.
interest income.
a tax credit is the amount - correct answer is a dollar-for-dollar offset against the
income tax liability; thus, it is deducted directly from the tax liability.
Falynn has a joint bank account with her son Bowen, and there is $142,000 in their
account. The bank is covered by FDIC insurance and Falynn wants to know if their
entire account balance is covered by FDIC insurance. You would inform her that -
correct answer all $142,000 is covered—$71,000 in Falynn's name and $71,000 in
Bowen's name.
FDIC insured banks provide up to $250,000 coverage for an individual in each
"ownership category."
LO 6-1
The marginal income tax bracket is - correct answer the tax rate applied to a
taxpayer's last dollar of taxable income.
The tax benefits of qualified retirement plans include which of the following? - correct
answer Employee contributions to the plan are excluded from taxable income.
, Earnings on invested funds inside the plan are tax-deferred until withdrawn.
Distributions are taxed as ordinary income only when withdrawn.
Bryan and Sarah received stock as a gift that Bryan's parents purchased several years
ago for $5,000, and it was worth $7,200 when the couple received it. They just sold the
stock for $7,500 and want to know what their basis is, and any tax ramifications. You
would correctly advise them that the cost basis is - correct answer $5,000, and they
will owe capital gain taxes on $2,500.
In this, case the basis would be $5,000—the original purchase cost for Bryan's parents.
Bryan and Sarah would pay capital gains taxes on any amount they receive above the
$5,000; in this case, it is $2,500.
For an annuity, under which one of the following scenarios would a 10% penalty tax
apply? - correct answer Kelly, age 38, takes a lump sum distribution
Which one of the following statements regarding education credits is CORRECT? -
correct answer The Lifetime Learning Credit includes expenses to acquire or improve
job skills.
Which one of the following applies to defined benefit plans? - correct answer They
provide a predetermined, fixed retirement benefit for participating employees.
A small-business owner who is paid $200,000 each year by his company wants to
establish a retirement plan. He has part-time employees but only wants to include full-
time employees in the plan. The profits and cash flow of the business fluctuate from
year to year, and the owner wants to have the flexibility of having up to 20% of his
compensation contributed to a retirement plan for his benefit each year. Which one of
the following plans satisfies these conditions? - correct answer Profit sharing
Which one of the following is not a requirement to receive retirement benefits from
Social Security? - correct answer You must be currently insured.
