CRPC Practice Exam Questions with Detailed Verified Answers

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CRPC Practice Exam Questions with
Detailed Verified Answers

Question: 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?
A)$111,000
B)$137,000
C)$122,000
D)$263,000
Answer: C


Question:At the end of last year, Bill Greer has the following financial
information:
Salaries$70,000Auto payments$5,000Insurance
payments$3,800Food$8,000Credit card
balance$10,000Dividends$1,100Utilities$3,500Mortgage
payments$14,000Taxes$13,000Clothing$9,000Interest
income$2,100Checking account$4,000Vacations$8,400Donations$5,800

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What is the cash flow surplus or (deficit) for Bill?
A)
$2,700
B)
$6,500
C)
$10,700
D)
($500)
Answer: A


Question:Which of the following are correct statements about income
replacement percentages?
I.Income replacement percentages are typically much higher for those with
higher preretirement incomes.
II.Income replacement percentages vary between low-income and high-
income retirees.
III.Income replacement ratios should not be used as the only basis for
planning.
IV.Income replacement ratios are useful for younger clients as a guide to their
long-range planning and investing.
A)
I and IV
B)
I and II
C)
II and III

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D)
II, III, and IV
Answer: D


Question: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?
A)
$55,692
B)
$31,621
C)
$29,552
D)
$54,130
Answer: B


Question: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.

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What is the lump sum needed at the beginning of retirement to fund this
income stream?
A)
$931,241
B)
$388,017
C)
$389,957
D)
$598,504
Answer: C


Question: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) Adjust income deficit for inflation over the preretirement period:$
90,000present value of retirement income deficit25number of periods until
retirement4%% inflation rateFuture value of income deficit in first retirement
year$239,925(2) Determine retirement fund needed to meet income
deficit:$239,925payment (future value of income deficit in first retirement
year)30number of periods in retirement