CRPC EXAM 2024-2025 ACTUAL
EXAM 180 QUESTIONS AND
CORRECT DETAILED ANSWERS WITH
RATIONALES (VERIFIED ANSWERS)
|ALREADY GRADED A+
Mary Goodwin's financial situation is as follows:
Cash/cash equivalents$15,000
Short-term debts$8,000
Long-term debts$133,000
Tax expense $7,000
Auto note payments $4,000
Invested assets $60,000
Use assets $188,000
What is her net worth? - CORRECT ANSWERS-Assets = $263,000; liabilities = $141,000, so net
worth is $122,000. Taxes and auto note payments appear on the cash flow statement. 1-3
Salaries$70,000
Auto payments$5,000
Insurance payments$3,800
Food$8,000
Credit card balance$10,000
Dividends$1,100
Utilities$3,500
,Mortgage payments$14,000
Taxes$13,000
Clothing$9,000
Interest income$2,100
Checking account$4,000
Vacations$8,400
Donations$5,800
What is the cash flow surplus or (deficit) for Bill? - CORRECT ANSWERS-Income = $70,000 +
$1,100 + $2,100 = $73,200. Expenses = $5,000 + $3,800 + $8,000 + $3,500 + $14,000 + $13,000
+ $9,000 + $8,400 + $5,800 = $70,500, so there is a surplus of $2,700. The checking account and
credit card balances would be on the statement of financial position.
LO 1-3
correct statements about income replacement percentages - CORRECT ANSWERS-Income
replacement percentages are typically much higher for those with lower preretirement
incomes.
Income replacement percentages vary between low-income and high-income retirees.
Income replacement ratios should not be used as the only basis for planning.
Income replacement ratios are useful for younger clients as a guide to their long-range planning
and investing.
The inverse of Option I is true. Those with a lower preretirement income typically need a much
higher income replacement percentage in retirement.
LO 1-4
,If Tom and Jenny want to save a fixed amount annually to accumulate $2 million by their
retirement date in 25 years (rather than an amount that grows with inflation each year), what
level annual end-of-year savings amount will they need to deposit each year, assuming their
savings earn 7% annually? - CORRECT ANSWERS-Set your calculator to the "End" mode and "1
P/Yr." Inputs: FV = 2000000, I/YR = 7, N = 25, PV = 0, then PMT = $31,621
1-4
Bill and Lisa Hahn have determined that they will need a monthly income of $6,000 during
retirement. They expect to receive Social Security retirement benefits amounting to $3,500 per
month at the beginning of each month. Over the 12 remaining years of their preretirement
period, they expect to generate an average annual after-tax investment return of 8%; during
their 25-year retirement period, they want to assume a 6% annual after-tax investment return
compounded monthly. They want to start their monthly retirement withdrawals on the first day
they retire.
What is the lump sum needed at the beginning of retirement to fund this income stream? -
CORRECT ANSWERS-The monthly retirement income need is not specified as "today's dollars,"
and no inflation rate specified; therefore, it must be assumed that the $2,500 net monthly
income need represents retirement dollars, and the retirement period income stream is level.
To calculate the lump sum needed at the beginning of retirement, discount the stream of
monthly income payments at the investment return rate:
10BII+ PVAD calculation:
Set calculator on BEG and 12 periods per year, then input the following:
2,500 [PMT]
25 [SHIFT] [N]
6 [I/YR]
0 [FV]
Solve for PV = $389,957
LO 1-4
, Chris and Eve Bronson have analyzed their current living expenses and estimated their
retirement income need, net of expected Social Security benefits, to be $90,000 in today's
dollars. They are confident that they can earn a 7% after-tax return on their investments, and
they expect inflation to average 4% over the long term.
Determine the lump sum amount the Bronsons will need at the beginning of retirement to fund
their retirement income needs, using the worksheet below.
(1)HAdjustHincomeHdeficitHforHinflationHoverHtheHpreretirementHperiod:$H90,000presentHvalueHofHr
etirementHincomeHdeficit25numberHofHperiodsHuntilHretirement4%%HinflationHrateFutureHvalueHo
fHincomeHdeficitHinHfirstHretirementHyear$239,925
(2)HDetermineHretirementHfundHneededHtoHmeetHincomeHdeficit:$239,925paymentH(futureHvalueH
ofHincomeHdeficitHinHfirstHretirementHyear)30numberHofHperiodsHinHretirement
TheHlumpHsumHneededHatHtheHbeginningHofHtheH-HHCORRECTHANSWERS-
ThisHPVADHcalculationHrequiresHthatHtheHcalculatorHbeHsetHforHbeginning-of-
periodHpayments.HFirst,HtheHannualHretirementHincomeHdeficitHisHexpressedHinHretirement-year-
oneHdollars,HresultingHinHaH$239,925HincomeHdeficitHinHtheHfirstHretirementHyear.HThisHincomeHdefi
citHgrowsHwithHinflationHoverHtheH30-
yearHretirementHperiod,HandHtheHretirementHfundHearnsHaH7%Hreturn.H
TheHcalculatorHinputsHareH
$239,925,H[PMT];H
30,H[N];H
2.8846,H[I/YR].H(1.07/1.04)-1Hx100H
SolveHforH[PV],H
toHdetermineHtheHretirementHfundHthatHwillHgenerateHthisHincomeHstream.HIfHyouHenterH2.8846Hdir
ectlyHintoHtheHcalculator,HyouHwillHgetH$4,911,265.HIfHyouHuseHtheHequationHtoHcomputeHI/YR,HandH
EXAM 180 QUESTIONS AND
CORRECT DETAILED ANSWERS WITH
RATIONALES (VERIFIED ANSWERS)
|ALREADY GRADED A+
Mary Goodwin's financial situation is as follows:
Cash/cash equivalents$15,000
Short-term debts$8,000
Long-term debts$133,000
Tax expense $7,000
Auto note payments $4,000
Invested assets $60,000
Use assets $188,000
What is her net worth? - CORRECT ANSWERS-Assets = $263,000; liabilities = $141,000, so net
worth is $122,000. Taxes and auto note payments appear on the cash flow statement. 1-3
Salaries$70,000
Auto payments$5,000
Insurance payments$3,800
Food$8,000
Credit card balance$10,000
Dividends$1,100
Utilities$3,500
,Mortgage payments$14,000
Taxes$13,000
Clothing$9,000
Interest income$2,100
Checking account$4,000
Vacations$8,400
Donations$5,800
What is the cash flow surplus or (deficit) for Bill? - CORRECT ANSWERS-Income = $70,000 +
$1,100 + $2,100 = $73,200. Expenses = $5,000 + $3,800 + $8,000 + $3,500 + $14,000 + $13,000
+ $9,000 + $8,400 + $5,800 = $70,500, so there is a surplus of $2,700. The checking account and
credit card balances would be on the statement of financial position.
LO 1-3
correct statements about income replacement percentages - CORRECT ANSWERS-Income
replacement percentages are typically much higher for those with lower preretirement
incomes.
Income replacement percentages vary between low-income and high-income retirees.
Income replacement ratios should not be used as the only basis for planning.
Income replacement ratios are useful for younger clients as a guide to their long-range planning
and investing.
The inverse of Option I is true. Those with a lower preretirement income typically need a much
higher income replacement percentage in retirement.
LO 1-4
,If Tom and Jenny want to save a fixed amount annually to accumulate $2 million by their
retirement date in 25 years (rather than an amount that grows with inflation each year), what
level annual end-of-year savings amount will they need to deposit each year, assuming their
savings earn 7% annually? - CORRECT ANSWERS-Set your calculator to the "End" mode and "1
P/Yr." Inputs: FV = 2000000, I/YR = 7, N = 25, PV = 0, then PMT = $31,621
1-4
Bill and Lisa Hahn have determined that they will need a monthly income of $6,000 during
retirement. They expect to receive Social Security retirement benefits amounting to $3,500 per
month at the beginning of each month. Over the 12 remaining years of their preretirement
period, they expect to generate an average annual after-tax investment return of 8%; during
their 25-year retirement period, they want to assume a 6% annual after-tax investment return
compounded monthly. They want to start their monthly retirement withdrawals on the first day
they retire.
What is the lump sum needed at the beginning of retirement to fund this income stream? -
CORRECT ANSWERS-The monthly retirement income need is not specified as "today's dollars,"
and no inflation rate specified; therefore, it must be assumed that the $2,500 net monthly
income need represents retirement dollars, and the retirement period income stream is level.
To calculate the lump sum needed at the beginning of retirement, discount the stream of
monthly income payments at the investment return rate:
10BII+ PVAD calculation:
Set calculator on BEG and 12 periods per year, then input the following:
2,500 [PMT]
25 [SHIFT] [N]
6 [I/YR]
0 [FV]
Solve for PV = $389,957
LO 1-4
, Chris and Eve Bronson have analyzed their current living expenses and estimated their
retirement income need, net of expected Social Security benefits, to be $90,000 in today's
dollars. They are confident that they can earn a 7% after-tax return on their investments, and
they expect inflation to average 4% over the long term.
Determine the lump sum amount the Bronsons will need at the beginning of retirement to fund
their retirement income needs, using the worksheet below.
(1)HAdjustHincomeHdeficitHforHinflationHoverHtheHpreretirementHperiod:$H90,000presentHvalueHofHr
etirementHincomeHdeficit25numberHofHperiodsHuntilHretirement4%%HinflationHrateFutureHvalueHo
fHincomeHdeficitHinHfirstHretirementHyear$239,925
(2)HDetermineHretirementHfundHneededHtoHmeetHincomeHdeficit:$239,925paymentH(futureHvalueH
ofHincomeHdeficitHinHfirstHretirementHyear)30numberHofHperiodsHinHretirement
TheHlumpHsumHneededHatHtheHbeginningHofHtheH-HHCORRECTHANSWERS-
ThisHPVADHcalculationHrequiresHthatHtheHcalculatorHbeHsetHforHbeginning-of-
periodHpayments.HFirst,HtheHannualHretirementHincomeHdeficitHisHexpressedHinHretirement-year-
oneHdollars,HresultingHinHaH$239,925HincomeHdeficitHinHtheHfirstHretirementHyear.HThisHincomeHdefi
citHgrowsHwithHinflationHoverHtheH30-
yearHretirementHperiod,HandHtheHretirementHfundHearnsHaH7%Hreturn.H
TheHcalculatorHinputsHareH
$239,925,H[PMT];H
30,H[N];H
2.8846,H[I/YR].H(1.07/1.04)-1Hx100H
SolveHforH[PV],H
toHdetermineHtheHretirementHfundHthatHwillHgenerateHthisHincomeHstream.HIfHyouHenterH2.8846Hdir
ectlyHintoHtheHcalculator,HyouHwillHgetH$4,911,265.HIfHyouHuseHtheHequationHtoHcomputeHI/YR,HandH
