Online Access Free FP2 Practice Test

Jerry, age 58, has been working for the same employer since he graduated university. Over the years, he has had a few promotions. Jerry and his wife, Beth, are well on their way to financial independence, and they plan to retire in two years. Which of the following scenarios will most likely represent Jerry and Beth's financial scenario?
Scenario
Liquid assets relative to total assets (%)
Investment assets-to-net worth ratio (%)
Debt-to-asset ratio (%)
A
5
75
10
B
10
25
20
C
15
45
25
D
20
70
30

• A.Scenario C.
• B.Scenario A.
• C.Scenario B.
• D.Scenario D.

What tax consideration should employers take into account when setting up a supplemental executive retirement plan (SERP)?

• A.A SERP permits higher tax-deductible contributions by the employer than those allowed under a registered retirement savings plan.
• B.When a SERP is registered with the Canada Revenue Agency (CRA) under the Income Tax Act, it provides for the employers contributions to be tax-deductible.
• C.The employer does not receive a tax deduction for the SERP contribution until the employee receives the benefits.
• D.A SERP is eligible to be registered with the CRA provided that the employer makes a minimum contribution on behalf of the employee based on a percentage of the company's profits.

What factors are used for calculating contributions to an individual pension plan?

• A.Annual contributions required to fund the plan must be calculated based on the age of the employee, the benefit formula and amount of business profits available.
• B.Annual contributions are based on the employee's unused registered retirement savings plan deduction room plus 18% of their earned income from the previous year.
• C.Annual contributions are based on the lesser of 18% of the employee's salary paid by the employer or half the limit for money purchase plans.
• D.Annual contributions required to fund the plan must be calculated based on the age of the employee, their earnings history and the benefit formula.

Franco is retiring from his job as a high school principal at the end of the year, at age 66. He has $100,000 in his group Registered Retirement Savings Plan (RRSP). His wife will continue to work for another 10 years, and he does not need money from his group RRSP. What would be the best retirement option for Franco?

• A.Transfer funds to a personal RRSP for five years, then transfer to a registered retirement income fund.
• B.Transfer to his personal RRSP until his wife is fully retired.
• C.Transfer the funds to a spousal RRSP.
• D.Leave it in the group RRSP.

Kimberly, age 24, has few assets, and is single with no children. Kimberly has a 10-year-old niece Tanya who she would like her entire estate to be distributed to at death. She consults with her lawyer Jackie to write a will. What is the most important clause Jackie should add in Kimberly's will?

• A.Funeral instructions and requirement to pay all debts and obligations.
• B.Discretionary powers to divest assets, borrow from estate and to make investment decisions.
• C.Appointment of a guardian for a minor.
• D.Discretionary encroachment.