CRPC Practice Exam 2 | Questions And Answers Latest {2024- 2025} A+ Graded | 100%
Verified
Richard wants to have an annual retirement income of $100,000 (payable at the beginning of each year)
protected against 3% inflation.
Assuming a 7% after-tax rate of return and a retirement period of 30 years, how much money does
Richard need in order to meet his goal?
Explain how you need to input this on the calculator and why. - Step One - Set the calculator to BEGIN.
Step Two - Calculate the inflation adjusted rate of return (One plus the Rate of Return divided by One
plus the interest rate, minus one, multiplied by 100 = the inflation adjusted rate of return) Put this
number in the I/YR
Step Three - 100,000 goes in as a PMT
Step Four - 30 goes in as N
Step Five -Press PV
Richard needs $1,822,042.88 in today's dollars to meet his needs.
How do you calculate the inflation-adjusted rate of return? - 1 plus the Rate of Return
Divided by
1 plus the interest rate
minus one
, multiplied by 100
Tom has been promised a stream of $40,000 annual payments at the end of each year for 25 years. The
present value of these payments discounted at a rate of 5% is which one of the following amounts? -
Step One - The problem says END in it so you have to set your calculator to the END mode.
Step two - Enter the $40000 as a PMT
Step Three - Enter 25 as the N.
Step Four - Enter 5 as the I/R
Step Six - Hit PV.
$563,758
Nick wants to maintain the purchasing power of $75,000 (in today's dollars) in retirement. If inflation
continues to average 3.5%, approximately what amount will Nick need in 20 years to equal the
purchasing power of $75,000 today? (Round your answer.) - If you know the Rule of 72, and you divide
3.5 into 72, you arrive at the number 20, which is the number of years it will take for a sum to double.
With a calculator, you can solve for the future value of $75,000 over 20 years at 3.5%.
Keystrokes: 20 N, 3.5 I/YR, 75,000 PV, FV = $149,234; rounded = $150,000
What is the second step in the retirement planning process? - The second step in the retirement
planning process is to gather client data, including goals and expectations
What is the first step in the retirement planning process? - The first step is to establish and define the
client-counselor relationship which includes disclosing the counselor's compensation arrangement
What is a characteristic of a TIP? - The increase in principal is taxable each year. Any annual increase in
principal is subject to federal taxation (unless in a tax-deferred account). Returns are tied to the
consumer price index. TIPS are sold at par value and have maturities up to 30 years.
Verified
Richard wants to have an annual retirement income of $100,000 (payable at the beginning of each year)
protected against 3% inflation.
Assuming a 7% after-tax rate of return and a retirement period of 30 years, how much money does
Richard need in order to meet his goal?
Explain how you need to input this on the calculator and why. - Step One - Set the calculator to BEGIN.
Step Two - Calculate the inflation adjusted rate of return (One plus the Rate of Return divided by One
plus the interest rate, minus one, multiplied by 100 = the inflation adjusted rate of return) Put this
number in the I/YR
Step Three - 100,000 goes in as a PMT
Step Four - 30 goes in as N
Step Five -Press PV
Richard needs $1,822,042.88 in today's dollars to meet his needs.
How do you calculate the inflation-adjusted rate of return? - 1 plus the Rate of Return
Divided by
1 plus the interest rate
minus one
, multiplied by 100
Tom has been promised a stream of $40,000 annual payments at the end of each year for 25 years. The
present value of these payments discounted at a rate of 5% is which one of the following amounts? -
Step One - The problem says END in it so you have to set your calculator to the END mode.
Step two - Enter the $40000 as a PMT
Step Three - Enter 25 as the N.
Step Four - Enter 5 as the I/R
Step Six - Hit PV.
$563,758
Nick wants to maintain the purchasing power of $75,000 (in today's dollars) in retirement. If inflation
continues to average 3.5%, approximately what amount will Nick need in 20 years to equal the
purchasing power of $75,000 today? (Round your answer.) - If you know the Rule of 72, and you divide
3.5 into 72, you arrive at the number 20, which is the number of years it will take for a sum to double.
With a calculator, you can solve for the future value of $75,000 over 20 years at 3.5%.
Keystrokes: 20 N, 3.5 I/YR, 75,000 PV, FV = $149,234; rounded = $150,000
What is the second step in the retirement planning process? - The second step in the retirement
planning process is to gather client data, including goals and expectations
What is the first step in the retirement planning process? - The first step is to establish and define the
client-counselor relationship which includes disclosing the counselor's compensation arrangement
What is a characteristic of a TIP? - The increase in principal is taxable each year. Any annual increase in
principal is subject to federal taxation (unless in a tax-deferred account). Returns are tied to the
consumer price index. TIPS are sold at par value and have maturities up to 30 years.
