CRPC YOU GOT THIS STUDY CARDS COMPREHENSIVE EXAM SCRIPT COMPLETE
QUESTIONS VERIFIED SOLUTIONS
Question:
Correlation
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
Question:
Asset allocation
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
Question:
Four steps in the asset allocation process
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
Question:
Strategic Asset Allocation
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
Question:
Tactical Asset Allocation
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
Question:
Core-Satellite asset allocation
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
Question:
Contrarian Strategy
Answer:
Question:
Dollar-Cost averaging
Answer:
- investing regular amounts at regular intervals reduce market timing risk, improve cost per share
Question:
,Low P/E strategy
Answer:
Ratio of 1= fair value Ratio > 1= overvalued Ratio < 1= undervalued ** The long-term average P/E
for stocks is 16
Question:
Bond Investment strategies (2)
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
Question:
Systematic Risk
Answer:
P-purchasing power risk R- reinvestment risk I- interest rate risk M- market risk E- exchange rate
risk
Question:
Social Security- Fully insured
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
Question:
Social Security- currently insured
Answer:
, - individual must has at least 6 quarters of coverage in the 13-quarter period proceeding the event for
which eligibility is sought child's benefit, mother/fathers benefits, and lump-sum death benefit are
available if a worker is only currently insured at death
Question:
Components of SS calculation
Answer:
- age he starts earnings history
Question:
SS calculation before full retirement age
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
Question:
SS calculation after full retirement age
Answer:
- Payment increases by about 8% each year they delay, until maximum year 70 actual math is 2/3 for
each month
Question:
Social Security milestones
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
QUESTIONS VERIFIED SOLUTIONS
Question:
Correlation
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
Question:
Asset allocation
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
Question:
Four steps in the asset allocation process
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
Question:
Strategic Asset Allocation
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
Question:
Tactical Asset Allocation
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
Question:
Core-Satellite asset allocation
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
Question:
Contrarian Strategy
Answer:
Question:
Dollar-Cost averaging
Answer:
- investing regular amounts at regular intervals reduce market timing risk, improve cost per share
Question:
,Low P/E strategy
Answer:
Ratio of 1= fair value Ratio > 1= overvalued Ratio < 1= undervalued ** The long-term average P/E
for stocks is 16
Question:
Bond Investment strategies (2)
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
Question:
Systematic Risk
Answer:
P-purchasing power risk R- reinvestment risk I- interest rate risk M- market risk E- exchange rate
risk
Question:
Social Security- Fully insured
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
Question:
Social Security- currently insured
Answer:
, - individual must has at least 6 quarters of coverage in the 13-quarter period proceeding the event for
which eligibility is sought child's benefit, mother/fathers benefits, and lump-sum death benefit are
available if a worker is only currently insured at death
Question:
Components of SS calculation
Answer:
- age he starts earnings history
Question:
SS calculation before full retirement age
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
Question:
SS calculation after full retirement age
Answer:
- Payment increases by about 8% each year they delay, until maximum year 70 actual math is 2/3 for
each month
Question:
Social Security milestones
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
