CRPC Practice Exam 1 Questions with verified
answers
A fundamental duty owed to a client is to always look out for what is in the
client's best interest. Which fiduciary duty best personifies this?
A) duty to diagnose
B) duty to consult
C) duty of care
D) duty of loyalty Ans✓✓✓ D) duty of loyalty
The fiduciary duty that best personifies looking out for the client's best interest
first is the fiduciary duty of loyalty. This duty requires being loyal to the client first
and foremost, and always looking out for what is in their best interest. The duty of
care is analogous to medical care. It looks at the degree of skill and diligence, not
the adviser's feelings about the client's situation
A lump sum payment of the proceeds of a life insurance policy that is made to the
beneficiary upon the insured's death
A) is generally exempt from income taxation.
B) is exempt from estate taxation.
C) is taxable if from a modified endowment contract (MEC).
D) is typically taxable. Ans✓✓✓ A) is generally exempt from income taxation.
A Medicare Part A patient must pay
A) the approved costs of care in a skilled nursing facility for the first 10 days.
B) all costs above the hospital deductible for a 30-day stay in a hospital.
C) the annual deductible for out-of-hospital doctor's services.
,D) all costs for a hospital stay beyond 150 days. Ans✓✓✓ D) all costs for a
hospital stay beyond 150 days.
A springing durable power of attorney
A) is usually created in a person's revocable trust.
B) remains effective after the principal's death.
C) remains effective until the principal becomes incapacitated.
D) gives the attorney-in-fact authority only when the principal is deemed
incompetent. Ans✓✓✓ D) gives the attorney-in-fact authority only when the
principal is deemed incompetent.
All of the following are reasons reverse mortgages may become more common in
the future EXCEPT
A) reverse mortgages are a potential tool for combating sequence of return risk.
B) government regulatory changes in 2013 standardized Home Equity Conversion
Mortgage (HECM) rules to a great extent.
C) many older Americans have large amounts of equity in their homes but lack
liquid assets capable of sustaining their lifestyle.
D) reverse mortgage fees must be rolled into the loan. Ans✓✓✓ D) reverse
mortgage fees must be rolled into the loan.
All of the following are ways that a person can voluntarily transfer estate assets to
another person or entity at death except
A) by gift.
B) transfer on death (T.O.D.).
C) by probate.
D) by will substitute. Ans✓✓✓ A) by gift.
,All of the following assets would be included in a decedent's gross estate except
A) an irrevocable trust established by the decedent five years before his death
that paid all income to him until death, then the corpus to his children.
B) a residence that was owned by the decedent and his spouse as joint tenants
with right of survivorship.
C) life insurance proceeds from a policy on the decedent in which the decedent
had assigned all incidents of ownership two years before her death.
D) the proceeds from a life insurance policy on the decedent that was always
owned by the decedent's spouse, with the spouse as the named beneficiary.
Ans✓✓✓ D) the proceeds from a life insurance policy on the decedent that was
always owned by the decedent's spouse, with the spouse as the named
beneficiary.
All of these are examples of asset allocation strategies except
A) strategic.
B) tactical.
C) alpha.
D) core/satellite. Ans✓✓✓ C) alpha.
Alpha is not an asset allocation strategy, but a way to measure a portfolio
manager's return relative to the amount of risk that has been taken
An income-tax-penalty-free distribution cannot be made from a tax-sheltered
annuity (TSA) until the employee does which of the following?
I. separates from service after attaining age 55
II. attains age 55
, III. becomes disabled or dies
IV. takes a distribution under most hardship withdrawal rules
A) II and IV
B) I and II
C) I, II, III, and IV
D) I and III Ans✓✓✓ D) I and III
Assume a client and investment professional have worked together for several
years. Recently, the client's personal and financial circumstances have changed.
According to the course materials, what is the next asset management step that
the investment professional should take?
A) gather data
B) monitor performance
C) make and implement recommendations
D) analyze information Ans✓✓✓ A) gather data
Assume the following asset classes have the correlations to long-term
government bonds shown below:
Treasury bills:.12
Gold:-.25
Large stocks:.22
Small stocks:.17
Which one of the following best exemplifies the impact of diversification on long-
term government bonds?
A) Large stocks provide more diversification than small stocks.
answers
A fundamental duty owed to a client is to always look out for what is in the
client's best interest. Which fiduciary duty best personifies this?
A) duty to diagnose
B) duty to consult
C) duty of care
D) duty of loyalty Ans✓✓✓ D) duty of loyalty
The fiduciary duty that best personifies looking out for the client's best interest
first is the fiduciary duty of loyalty. This duty requires being loyal to the client first
and foremost, and always looking out for what is in their best interest. The duty of
care is analogous to medical care. It looks at the degree of skill and diligence, not
the adviser's feelings about the client's situation
A lump sum payment of the proceeds of a life insurance policy that is made to the
beneficiary upon the insured's death
A) is generally exempt from income taxation.
B) is exempt from estate taxation.
C) is taxable if from a modified endowment contract (MEC).
D) is typically taxable. Ans✓✓✓ A) is generally exempt from income taxation.
A Medicare Part A patient must pay
A) the approved costs of care in a skilled nursing facility for the first 10 days.
B) all costs above the hospital deductible for a 30-day stay in a hospital.
C) the annual deductible for out-of-hospital doctor's services.
,D) all costs for a hospital stay beyond 150 days. Ans✓✓✓ D) all costs for a
hospital stay beyond 150 days.
A springing durable power of attorney
A) is usually created in a person's revocable trust.
B) remains effective after the principal's death.
C) remains effective until the principal becomes incapacitated.
D) gives the attorney-in-fact authority only when the principal is deemed
incompetent. Ans✓✓✓ D) gives the attorney-in-fact authority only when the
principal is deemed incompetent.
All of the following are reasons reverse mortgages may become more common in
the future EXCEPT
A) reverse mortgages are a potential tool for combating sequence of return risk.
B) government regulatory changes in 2013 standardized Home Equity Conversion
Mortgage (HECM) rules to a great extent.
C) many older Americans have large amounts of equity in their homes but lack
liquid assets capable of sustaining their lifestyle.
D) reverse mortgage fees must be rolled into the loan. Ans✓✓✓ D) reverse
mortgage fees must be rolled into the loan.
All of the following are ways that a person can voluntarily transfer estate assets to
another person or entity at death except
A) by gift.
B) transfer on death (T.O.D.).
C) by probate.
D) by will substitute. Ans✓✓✓ A) by gift.
,All of the following assets would be included in a decedent's gross estate except
A) an irrevocable trust established by the decedent five years before his death
that paid all income to him until death, then the corpus to his children.
B) a residence that was owned by the decedent and his spouse as joint tenants
with right of survivorship.
C) life insurance proceeds from a policy on the decedent in which the decedent
had assigned all incidents of ownership two years before her death.
D) the proceeds from a life insurance policy on the decedent that was always
owned by the decedent's spouse, with the spouse as the named beneficiary.
Ans✓✓✓ D) the proceeds from a life insurance policy on the decedent that was
always owned by the decedent's spouse, with the spouse as the named
beneficiary.
All of these are examples of asset allocation strategies except
A) strategic.
B) tactical.
C) alpha.
D) core/satellite. Ans✓✓✓ C) alpha.
Alpha is not an asset allocation strategy, but a way to measure a portfolio
manager's return relative to the amount of risk that has been taken
An income-tax-penalty-free distribution cannot be made from a tax-sheltered
annuity (TSA) until the employee does which of the following?
I. separates from service after attaining age 55
II. attains age 55
, III. becomes disabled or dies
IV. takes a distribution under most hardship withdrawal rules
A) II and IV
B) I and II
C) I, II, III, and IV
D) I and III Ans✓✓✓ D) I and III
Assume a client and investment professional have worked together for several
years. Recently, the client's personal and financial circumstances have changed.
According to the course materials, what is the next asset management step that
the investment professional should take?
A) gather data
B) monitor performance
C) make and implement recommendations
D) analyze information Ans✓✓✓ A) gather data
Assume the following asset classes have the correlations to long-term
government bonds shown below:
Treasury bills:.12
Gold:-.25
Large stocks:.22
Small stocks:.17
Which one of the following best exemplifies the impact of diversification on long-
term government bonds?
A) Large stocks provide more diversification than small stocks.
