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Sample Case and Questions2011 Edition DoubleIndemnitydisablement ntingentbeneficiaryGeorgeSunnySunnyCash valuesHKD800,000-----As a reward to loyal customers, Happy Insurance Company hasrecently offered two extra riders free-of-charge to David, who aimsto maximize the long-term benefits he can get from them.13. David is still uncomfortable with his current insurance coverage,and would like to make sure that Nancy and their children will beprovided with the largest amount of income as soon as possible ifhe predeceases them, or if his children are suddenly orphaned.Because one of his friends has bought an annuity for this purposeand recommends it to him, David asks Lily for a proposal for a purelife annuity.14. Other employee benefits provided by Tasty include annual returnairfare to Canada, and a Canadian superannuation account intowhich Tasty contributes 9% of David’s salary every month. Theaccount balance can be withdrawn upon David’s retirement.Though not required by law, both Tasty and David also contributeto the Mandatory Provident Fund Scheme in Hong Kong.15. On 1 June 2004, Nancy bought a small residential flat in Ma Wan atHKD2,500,000 as part of her investment. The purchase of the flatwas fully financed by a mortgage with Coco Bank for a term of 15years at a fixed rate of 6% p.a. The first mortgage payment wasmade on 30 June 2004. The current market value of the flat isHKD3,200,000 and it is expected to grow at an annual rate of 4%in the future. The flat has been let out for rental income since itwas bought.Nancy is responsible for the management fee,government rent and rates. After deducting these expenses, theremaining rental income is exactly enough to pay for the monthlymortgage. Nancy expects that the rental income will remain stablefor the duration of the mortgage term. Nancy has taken out abuilding insurance policy on the flat since purchasing it. She is notsure if she should adjust the sum insured since it has been over 5years when she bought the flat.16. David would like to restructure his investment portfolio byincluding one of the following funds into it: Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.7

Sample Case and Questions2011 EditionFundSUNMOONSTAREARTHAverage annual return duringthe last five years9.5%12%13%13.5%Standard deviations of returnduring the last five years6%8%8.5%9.5%- Fund SUN: An equity income mutual fund investing in Hong Kongstocks.- Fund MOON: A growth-oriented mutual fund investing in HongKong stocks.- Fund STAR: An international equity mutual fund.- Fund EARTH: Taiwan equity index exchange-traded fund.- The short-term certificate of deposit rate in Hong Kong is 4%.The correlation coefficients of the above four funds during the lastfive years .70.70.2EARTH1.017. As David is approaching his intended retirement date, which fallson his 60th birthday, the family has been thinking about returningto Canada. Sunny and Sandy will definitely go back to Canada fortheir university education, where they will work part-time and payfor their own tuition fees like their father did. The family hastherefore made up its mind to return to Canada after David retires,by which time they will sell the flat in Ma Wan and use theproceeds to buy a house in Canada. David has been researchingthe prices of property in Canada, and found that a property thatfits the needs of the family is selling at a price equivalent toHKD3,000,000 Hong Kong dollars today, and is expected to growat an annual rate of 6%.18. David and Nancy have both made wills two years ago while theywere on their annual trip to Canada. Nancy has kept the only copyof her will with a relative in Toronto while David has kept his with afriend who Nancy does not know.In David’s will, he has madebequests in favour of Nancy and his children only. Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.8

Sample Case and Questions2011 Edition19. Other information:Exchange rate: CAD1.00 HKD7.80CAD stands for Canadian dollars.- End of Case Facts - Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.9

Sample Case and Questions2011 EditionSample QuestionsQuestion 1Which of the following are David’s personal and financial goals?I.Ensure a stable stream of income for his family after hisretirement and after his death.II. Arrange for long-term health care protection for both himself andNancy.III. Provide for housing arrangements in retirement.IV. Set up a fund for the university education of Sunny and Sandy.A.B.C.D.I & IV onlyII & III onlyI, II & III onlyI, II, III & ****Answer: C Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.10

Sample Case and Questions2011 EditionQuestion 2What is the amount of rental income from the Ma Wan flat for the yearended 31 March *****Answer: C Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.11

Sample Case and Questions2011 EditionQuestion 3Which of the following statement(s) about the Jones couple’s currentfinancial status and investment position is/are CORRECT?I.Based on the information provided, their solvency ratio is greaterthan 0.6.II. The length of their pre-retirement investment horizon is of anintermediate term.III. They have a high net worth hence they have a high risk tolerancelevel.IV. They should allocate part of their savings to high leverageinvestments.A.B.C.D.II onlyI & II onlyI, II & IV onlyI, III & IV ******Answer: B Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.12

Sample Case and Questions2011 EditionQuestion 4What is the appropriate advice for Nancy regarding the insurancepolicy she took out on her flat in Ma Wan?A.B.C.D.Nancy should adjust the sum insured with reference to thechange in repair/rebuilding cost of the flat, if any.Nancy should adjust the sum insured with reference to the valueof the household contents in the flat.Nancy should increase the sum insured to reflect the increase inthe property price.There is no need for Nancy to review the sum insured since thepremium is calculated with reference to the gross floor area of **********Answer: A Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.13

Sample Case and Questions2011 EditionQuestion 5Assume that relevant factors remain constant. Which of the followingitems should Lily Fong include in a Needs Approach analysis in order toascertain whether David currently has adequate life insurance cover?I.II.III.IV.V.Education fees for Sunny and Sandy.Financial support to Nancy.Mortgage repayments for the Ma Wan flat.Support to George.Term life insurance cover of Nancy.A.B.C.D.II & V onlyI, II & IV onlyI, III & V onlyI, II, III, IV & ***Answer: B Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.14

Sample Case and Questions2011 EditionQuestion 6To address David’s aim, which TWO of the following riders offered freeof-charge by Happy Insurance Company should Lily advise him tochoose?I.II.III.IV.Critical/terminal illness benefit rider.Disability income benefit rider.Medical benefits rider.Waiver of premium rider.A.B.C.D.I & III onlyI & IV onlyII & IV onlyIII & IV ******Answer: A Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.15

Sample Case and Questions2011 EditionQuestion 7With respect to David’s request for a proposal for an annuity, which ofthe following is/are APPROPRIATE piece(s) of advice that Lily shouldgive him (see paragraph 13 of this case)?I.For the purposes of attaining David’s goal, a Joint-and-LastSurvivor Annuity is more suitable than his original choice.II. David can achieve his aim to a certain extent by utilizing asuitable settlement method for his whole life policy.III. David’s original choice of an annuity will help him cope with theimpact of inflation.A.B.C.D.I onlyI & II onlyII & III onlyI, II & *****Answer: B Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.16

Sample Case and Questions2011 EditionQuestion 8What is/are the advantage(s) of choosing Fund EARTH compared withthe other three potential funds that David is considering?I.Easier to trade.II. International diversification.III. Lower bid-ask spread.A.B.C.D.I onlyI & II onlyII & III onlyI, II & *****Answer: A Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.17

Sample Case and Questions2011 EditionQuestion 9David would like to know the performance of the four funds accordingto the Sharpe’s performance index. Which ONE has the *************Answer: A Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.18

Sample Case and Questions2011 EditionQuestion 10Assume that David would like to restructure his portfolio so that half ofhis portfolio’s value will be invested in Fund MOON, and the other halfin Fund STAR. What would be the expected standard deviation for hisportfolio after the proposed *********************************Answer: D Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.19

Sample Case and Questions2011 EditionQuestion 11Assume that David begins to withdraw from his superannuationaccount when he retires, and transfers the money to one of hisfollowing existing investments. Ignoring tax issues, which ONE ofthem is the MOST SUITABLE choice for him?A.B.C.D.Canadian dollar time deposit account which generates an annualreturn of 5%.Canadian stock market portfolio which generates an averageannual return of 12%.Emerging markets long-term bond fund which generates anaverage annual return of 8%.Money market mutual fund which invests in Euro money marketsecurities and generates an average annual return of *****Answer: A Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.20

Sample Case and Questions2011 EditionQuestion 12Which ONE of the following statements about David’s tax position as aCanadian expatriate is CORRECT?A.B.C.D.David is liable to pay Salaries Tax in Hong Kong because he hasmade Hong Kong his home and ordinarily resides in Hong Kong.David is liable to pay Salaries Tax in Hong Kong because underthe double tax treaty signed between China and Canada, anyonewho spends more than 180 days in Hong Kong in a year is liable.David is liable to pay Salaries Tax in Hong Kong but incomegenerated from any services rendered outside Hong Kong can beexcluded.David is liable to pay Salaries Tax in Hong Kong but is entitled toclaim exemption from Salaries Tax on the ground that all hissalary income has been taxed in *********Answer: C Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.21

Sample Case and Questions2011 EditionQuestion 13In relation to the education benefits from Tasty to David as regardsSunny and Sandy, which ONE of the following is a CORRECT HongKong tax implication with respect to David?A.B.C.D.Debentures to be provided by Tasty will be taxable because theyare deemed to be income from employment.Scholarships for Sunny and Sandy are not taxable because theyare not income received by David.Tuition fees paid by Tasty are not taxable if Tasty enters intocontract with the school and pays directly.Tuition fees paid by Tasty are taxable because this is a fringebenefit provided by the ***********Answer: D Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.22

Sample Case and Questions2011 EditionQuestion 14Which of the following ways can help the Jones to minimize theirProperty Tax payable in Hong Kong?I.Ask the tenant to pay the management fees directly to theproperty management company and reduce the monthly rent bythe corresponding amount.II. Ask the tenant to shoulder the rates and reduce the monthly rentby the corresponding amount.III. End the existing tenancy agreement and enter into a new contractwith rent payable annually in advance in lump sum.IV. Have Nancy elect to be assessed under Personal Assessment.A.B.C.D.I onlyI & III onlyI, II & IV onlyII, III & IV ******Answer: A Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.23

Sample Case and Questions2011 EditionQuestion 15What is the net assessable value of the Ma Wan flat under the HongKong Property Tax for the year of assessment ********Answer: B Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.24

Sample Case and Questions2011 EditionQuestion 16For the purpose of calculating David’s Salaries Tax for the year ofassessment 2009/10, what is the amount of rental value to beconsidered as part of his assessable *******Answer: B Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.25

Sample Case and Questions2011 EditionQuestion 17Why is Tasty NOT obliged to enroll David to the Mandatory ProvidentFund (MPF) Scheme in Hong Kong?A.B.C.D.David’s employment is on contract basis, therefore he is notconsidered a permanent employee and is exempted.David has no right of abode in Hong Kong and is exempted as anexpatriate.Tasty has enrolled David in a Canadian superannuation schemeand is exempted.Tasty is a Canadian company and is exempted as an ******************Answer: C Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.26

Sample Case and Questions2011 EditionQuestion 18What piece(s) of advice should Lily give David with respect to estateplanning for himself and his wife?I.To arrange for ancillary probate of the Ma Wan flat with theprobate court in Canada.II. To ensure that their respective wills comply with the WillsOrdinance in order for them to be enforceable in Hong Kong.III. To make copies of their respective wills so that they have copiesin Hong Kong and Canada.A.B.C.D.II onlyI & III onlyII & III onlyI, II & *****Answer: C Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.27

Sample Case and Questions2011 EditionQuestion 19Assume that relevant factors remain constant. Which of the followingactions should David take to help fulfill his wish in paragraph 13 of thiscase?I.II.III.IV.Appointing more than one executor for his will.Changing the contingent beneficiary in his whole life policy.Having joint bank and investment accounts with Nancy.Setting up an enduring power of attorney for himself.A.B.C.D.II & III onlyII & IV onlyI, II & III onlyI, III & IV ******Answer: A Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.28

Sample Case and Questions2011 EditionQuestion 20If David passes away in Hong Kong tomorrow and because no one canfind his will, he is deemed to be intestate, which of the followingstatements about the succession of his estate are CORRECT?I.George is entitled to apply to the court for reasonable financialprovisions from David’s estate.II. Nancy, Sunny and Sandy will be entitled to share David’s personalchattels.III. Nancy will first be entitled to a net sum of HKD500,000 fromDavid’s residuary estate with interest, as well as a half of theremainder of his residuary estate.IV. Sunny and Sandy will be entitled to share the remainder ofDavid’s residuary estate, but their share will be held on statutorytrusts.A.B.C.D.I & II onlyI & III onlyI, III & IV onlyII, III & IV ******Answer: C- End of Sample Case and Questions - Copyright 2011. All rights reserved. The Institute of Financial Planners of Hong Kong Limited.29

樣本個案及試題 CFPCM資格認證考試樣本個案及試題CFP 資格認證考試CM

This sample case and questions booklet consists of 1 sample case and 20 sample questions. The sample case and the sample questions are provided to help candidates familiarise themselves with the form and style of questions which they may see in the CFP Certification Examination. They may NOT fully reflect the cognitive level of questions of the .