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CRPC EXAM 2025 QUESTIONS AND
CORRECT ANSWERS
Diversification - CORRECT ANSWER-Acquiring assets with low or negative correlations to
each other with the goal of lowering overall risk
Correlation - CORRECT ANSWER-- a relative measure of the degree to which the returns
of two assets move together
- range from +1.0 to -1.0
- in practice negative correlations are rare
- the further a correlation is from +1.0, the more diversified
Asset allocation - CORRECT ANSWER-- the apportioning of available funds among a
number of asset classes in a way that meets the needs of a particular client, dampens
the effects of periodic market fluctuations, and meets investment goals
Four steps in the asset allocation process - CORRECT ANSWER-1) select asset classes to
be represented
2) determine the percentage that each asset class should represent in the total
portfolio
3) Select individual securities
4) Review and rebalance
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Strategic Asset Allocation - CORRECT ANSWER-- determine asset mix that provides
optimal balance of expected risk and ROR
- asset classes selected and % weight determined
- Used to develop long-term allocation policy
- utilizes rebalancing to maintain targeted weight
Tactical Asset Allocation - CORRECT ANSWER-- used to develop short term strategies to
exploit changes in market conditions
- ofter viewed as a contrarian strategy
- periodic revisions of asset mix; moving funds from over valued investments to
undervalued investments
- market timing strategy
Core-Satellite asset allocation - CORRECT ANSWER-70-80% invested in broad index
fund or etfs
- remaining satellite consists of actively managed MF's in niches such as sector
funds or alt investments like hedge funds
Contrarian Strategy - CORRECT ANSWER-
Dollar-Cost averaging - CORRECT ANSWER-- investing regular amounts at regular
intervals
- reduce market timing risk, improve cost per share
Low P/E strategy - CORRECT ANSWER-Ratio of 1= fair value Ratio >
1= overvalued
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Ratio < 1= undervalued
** The long-term average P/E for stocks is 16
Bond Investment strategies (2) - CORRECT ANSWER-1) Ladder: Owning equal amounts
of bonds along with maturities of equal intervals; ex. 50k of bonds with 10k each in
2,4,6,8,10 year maturities
2) Barbell: Owning short-term and long-term bonds, each with a ladder; ex. 100k of
bonds with 10k each in 1,2,3,4,5 year maturities and in 16,17,18,19,20 year
maturities
Systematic Risk - CORRECT ANSWER-P-purchasing power risk R-
reinvestment risk
I- interest rate risk
M- market risk
E- exchange rate risk
Social Security- Fully insured - CORRECT ANSWER-- having 10 years of employment
covered by social security; expressed as "40 quarters of coverage"
- Must be fully insured for retirement benefits
- fully insured workers are also eligible for disability if he has earned at least 20
work credits in last 10 years
Social Security- currently insured - CORRECT ANSWER-- individual must has at least 6
quarters of coverage in the 13-quarter period proceeding the event for which eligibility
is sought
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- child's benefit, mother/fathers benefits, and lump-sum death benefit are available if
a worker is only currently insured at death
Components of SS calculation - CORRECT ANSWER-- age he starts
- earnings history
SS calculation before full retirement age - CORRECT ANSWER-- Payment reduced by
5/9th of 1% for each month filed before FRA, up to 36 months
- Payment is reduced by 5/12ths of 1% for each month filed early in excess of 36
months
SS calculation after full retirement age - CORRECT ANSWER-- Payment increases by
about 8% each year they delay, until maximum year 70
- actual math is 2/3 for each month
Social Security milestones - CORRECT ANSWER-Ages 50:
disabled survivors can start receiving benefits
60: nondisabled survivors can start receiving
62: earliest one can start receiving benefits at reduced rate
65-67: FRA, depending on birth year
70: delayed retirement age
Social Security income cap - CORRECT ANSWER-$15,720
- Those who are under FRA and working will lose $1 SS benefit for every $2 they earn
above $15,720
CRPC EXAM 2025 QUESTIONS AND
CORRECT ANSWERS
Diversification - CORRECT ANSWER-Acquiring assets with low or negative correlations to
each other with the goal of lowering overall risk
Correlation - CORRECT ANSWER-- a relative measure of the degree to which the returns
of two assets move together
- range from +1.0 to -1.0
- in practice negative correlations are rare
- the further a correlation is from +1.0, the more diversified
Asset allocation - CORRECT ANSWER-- the apportioning of available funds among a
number of asset classes in a way that meets the needs of a particular client, dampens
the effects of periodic market fluctuations, and meets investment goals
Four steps in the asset allocation process - CORRECT ANSWER-1) select asset classes to
be represented
2) determine the percentage that each asset class should represent in the total
portfolio
3) Select individual securities
4) Review and rebalance
, Page |2
Strategic Asset Allocation - CORRECT ANSWER-- determine asset mix that provides
optimal balance of expected risk and ROR
- asset classes selected and % weight determined
- Used to develop long-term allocation policy
- utilizes rebalancing to maintain targeted weight
Tactical Asset Allocation - CORRECT ANSWER-- used to develop short term strategies to
exploit changes in market conditions
- ofter viewed as a contrarian strategy
- periodic revisions of asset mix; moving funds from over valued investments to
undervalued investments
- market timing strategy
Core-Satellite asset allocation - CORRECT ANSWER-70-80% invested in broad index
fund or etfs
- remaining satellite consists of actively managed MF's in niches such as sector
funds or alt investments like hedge funds
Contrarian Strategy - CORRECT ANSWER-
Dollar-Cost averaging - CORRECT ANSWER-- investing regular amounts at regular
intervals
- reduce market timing risk, improve cost per share
Low P/E strategy - CORRECT ANSWER-Ratio of 1= fair value Ratio >
1= overvalued
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Ratio < 1= undervalued
** The long-term average P/E for stocks is 16
Bond Investment strategies (2) - CORRECT ANSWER-1) Ladder: Owning equal amounts
of bonds along with maturities of equal intervals; ex. 50k of bonds with 10k each in
2,4,6,8,10 year maturities
2) Barbell: Owning short-term and long-term bonds, each with a ladder; ex. 100k of
bonds with 10k each in 1,2,3,4,5 year maturities and in 16,17,18,19,20 year
maturities
Systematic Risk - CORRECT ANSWER-P-purchasing power risk R-
reinvestment risk
I- interest rate risk
M- market risk
E- exchange rate risk
Social Security- Fully insured - CORRECT ANSWER-- having 10 years of employment
covered by social security; expressed as "40 quarters of coverage"
- Must be fully insured for retirement benefits
- fully insured workers are also eligible for disability if he has earned at least 20
work credits in last 10 years
Social Security- currently insured - CORRECT ANSWER-- individual must has at least 6
quarters of coverage in the 13-quarter period proceeding the event for which eligibility
is sought
, Page |4
- child's benefit, mother/fathers benefits, and lump-sum death benefit are available if
a worker is only currently insured at death
Components of SS calculation - CORRECT ANSWER-- age he starts
- earnings history
SS calculation before full retirement age - CORRECT ANSWER-- Payment reduced by
5/9th of 1% for each month filed before FRA, up to 36 months
- Payment is reduced by 5/12ths of 1% for each month filed early in excess of 36
months
SS calculation after full retirement age - CORRECT ANSWER-- Payment increases by
about 8% each year they delay, until maximum year 70
- actual math is 2/3 for each month
Social Security milestones - CORRECT ANSWER-Ages 50:
disabled survivors can start receiving benefits
60: nondisabled survivors can start receiving
62: earliest one can start receiving benefits at reduced rate
65-67: FRA, depending on birth year
70: delayed retirement age
Social Security income cap - CORRECT ANSWER-$15,720
- Those who are under FRA and working will lose $1 SS benefit for every $2 they earn
above $15,720
