CRPC PRACTICE EXAM 2 VERSION B 2026-2027 ACTUAL EXAM
180 QUESTIONS AND CORRECT DETAILED ANSWERS WITH
RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+.
QUESTION
Which of the following are examples of the second step of the retirement planning
process?
I. Prioritize goals
II. Determine retirement budget
III. Examine a person's tax situation
IV. Determine important time horizons
a) I, II, and III
b) I, III, and IV
c) II, III, and IV
d) I, II, III, and IV
CORRECT ANS: b) I, III, and IV
Expert Rationale
The second step of the retirement planning process involves gathering and analyzing
data to develop a comprehensive understanding of the client's financial situation. This
includes prioritizing goals (I), examining the person's tax situation (III), and determining
important time horizons (IV) (option b). These elements are critical for developing a
tailored retirement strategy. Determining the retirement budget (II) is typically part of
the first step, which involves setting the overall framework for retirement planning.
Option a is incorrect because it excludes IV; option c is incorrect because it excludes I;
option d is incorrect because it includes II, which is not part of the second step.
DIF: Cognitive Level: Understand (Comprehension)
TOP: Retirement Planning Process
MSC: CRPC: Retirement Planning Process
,QUESTION
Which of the following personal expenses are likely to decrease following an individual's
retirement?
I. Travel
II. Education
III. Utilities
IV. Income taxes
a) I and II
b) II and IV
c) I and IV
d) II and III
CORRECT ANS: b) II and IV
Expert Rationale
Following retirement, certain personal expenses are likely to decrease. Education
expenses (II) typically decrease as children complete their education. Income taxes (IV)
often decrease because retirees are generally in a lower tax bracket and may have less
earned income (option b). Travel expenses (I) often increase during early retirement, and
utilities (III) may remain stable or even increase.
Option a, c, and d are incorrect because they include travel or utilities, which are not
expenses that typically decrease.
DIF: Cognitive Level: Understand (Comprehension)
TOP: Retirement Expense Planning
MSC: CRPC: Retirement Expense Planning
QUESTION
,Which of the following are correct statements about the capital utilization strategy?
I. It produces an annual retirement income over a finite number of years.
II. Assuming the yield remains the same, the larger the retirement income that is paid,
the shorter the number of years over which it will be paid.
III. When the capital utilization approach is used, the planner must be careful in making
assumptions about the life expectancy of the client.
IV. The effect of taxes on retirement savings and distributions should be considered
when the before-tax approach is used to calculate the future value of retirement assets.
a) I and II
b) III and IV
c) I, II, and III
d) I, II, III, and IV
CORRECT ANS: d) I, II, III, and IV
Expert Rationale
All four statements are correct regarding the capital utilization strategy. The capital
utilization strategy produces retirement income over a finite number of years (I). If the
yield remains constant, a larger annual income will deplete the capital more quickly,
resulting in a shorter payout period (II). Planners must be careful with life expectancy
assumptions (III) because underestimating or overestimating can lead to running out of
money or leaving an unintended legacy. Finally, the effect of taxes must be considered
when using a before-tax approach (IV) because taxes significantly impact the net
amount available for retirement.
Option a, b, and c are incorrect because they omit one or more correct statements.
DIF: Cognitive Level: Analyze (Application/Analysis)
TOP: Retirement Income Strategies
MSC: CRPC: Retirement Income Strategies
QUESTION
, Which one of the following is NOT a key element of an investment policy?
a) Names of stocks to be in the portfolio.
b) Goals and objectives.
c) Risk tolerance.
d) Asset allocation.
CORRECT ANS: a) Names of stocks to be in the portfolio.
Expert Rationale
The key elements of an investment policy are summarized by the acronym GRASP: Goals
(b), Risk (c), Asset Allocation (d), Strategies/Suitable Investment, and Periodic Review
(option a). The specific names of stocks to be in the portfolio are not a key element of
an investment policy; they are determined at the implementation level. An investment
policy sets the framework and guidelines, not the specific securities.
Option b, c, and d are incorrect; they are essential elements of an investment policy.
DIF: Cognitive Level: Understand (Comprehension)
TOP: Investment Policy
MSC: CRPC: Investment Policy
QUESTION
Which one of the following is a characteristic of Treasury Inflation-Protected Securities
(TIPS)?
a) The increase in principal is taxable each year.
b) The coupon rate adjusts with inflation.
c) The principal is protected from deflation.
d) The interest payments are tax-free.
CORRECT ANS: a) The increase in principal is taxable each year.
180 QUESTIONS AND CORRECT DETAILED ANSWERS WITH
RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+.
QUESTION
Which of the following are examples of the second step of the retirement planning
process?
I. Prioritize goals
II. Determine retirement budget
III. Examine a person's tax situation
IV. Determine important time horizons
a) I, II, and III
b) I, III, and IV
c) II, III, and IV
d) I, II, III, and IV
CORRECT ANS: b) I, III, and IV
Expert Rationale
The second step of the retirement planning process involves gathering and analyzing
data to develop a comprehensive understanding of the client's financial situation. This
includes prioritizing goals (I), examining the person's tax situation (III), and determining
important time horizons (IV) (option b). These elements are critical for developing a
tailored retirement strategy. Determining the retirement budget (II) is typically part of
the first step, which involves setting the overall framework for retirement planning.
Option a is incorrect because it excludes IV; option c is incorrect because it excludes I;
option d is incorrect because it includes II, which is not part of the second step.
DIF: Cognitive Level: Understand (Comprehension)
TOP: Retirement Planning Process
MSC: CRPC: Retirement Planning Process
,QUESTION
Which of the following personal expenses are likely to decrease following an individual's
retirement?
I. Travel
II. Education
III. Utilities
IV. Income taxes
a) I and II
b) II and IV
c) I and IV
d) II and III
CORRECT ANS: b) II and IV
Expert Rationale
Following retirement, certain personal expenses are likely to decrease. Education
expenses (II) typically decrease as children complete their education. Income taxes (IV)
often decrease because retirees are generally in a lower tax bracket and may have less
earned income (option b). Travel expenses (I) often increase during early retirement, and
utilities (III) may remain stable or even increase.
Option a, c, and d are incorrect because they include travel or utilities, which are not
expenses that typically decrease.
DIF: Cognitive Level: Understand (Comprehension)
TOP: Retirement Expense Planning
MSC: CRPC: Retirement Expense Planning
QUESTION
,Which of the following are correct statements about the capital utilization strategy?
I. It produces an annual retirement income over a finite number of years.
II. Assuming the yield remains the same, the larger the retirement income that is paid,
the shorter the number of years over which it will be paid.
III. When the capital utilization approach is used, the planner must be careful in making
assumptions about the life expectancy of the client.
IV. The effect of taxes on retirement savings and distributions should be considered
when the before-tax approach is used to calculate the future value of retirement assets.
a) I and II
b) III and IV
c) I, II, and III
d) I, II, III, and IV
CORRECT ANS: d) I, II, III, and IV
Expert Rationale
All four statements are correct regarding the capital utilization strategy. The capital
utilization strategy produces retirement income over a finite number of years (I). If the
yield remains constant, a larger annual income will deplete the capital more quickly,
resulting in a shorter payout period (II). Planners must be careful with life expectancy
assumptions (III) because underestimating or overestimating can lead to running out of
money or leaving an unintended legacy. Finally, the effect of taxes must be considered
when using a before-tax approach (IV) because taxes significantly impact the net
amount available for retirement.
Option a, b, and c are incorrect because they omit one or more correct statements.
DIF: Cognitive Level: Analyze (Application/Analysis)
TOP: Retirement Income Strategies
MSC: CRPC: Retirement Income Strategies
QUESTION
, Which one of the following is NOT a key element of an investment policy?
a) Names of stocks to be in the portfolio.
b) Goals and objectives.
c) Risk tolerance.
d) Asset allocation.
CORRECT ANS: a) Names of stocks to be in the portfolio.
Expert Rationale
The key elements of an investment policy are summarized by the acronym GRASP: Goals
(b), Risk (c), Asset Allocation (d), Strategies/Suitable Investment, and Periodic Review
(option a). The specific names of stocks to be in the portfolio are not a key element of
an investment policy; they are determined at the implementation level. An investment
policy sets the framework and guidelines, not the specific securities.
Option b, c, and d are incorrect; they are essential elements of an investment policy.
DIF: Cognitive Level: Understand (Comprehension)
TOP: Investment Policy
MSC: CRPC: Investment Policy
QUESTION
Which one of the following is a characteristic of Treasury Inflation-Protected Securities
(TIPS)?
a) The increase in principal is taxable each year.
b) The coupon rate adjusts with inflation.
c) The principal is protected from deflation.
d) The interest payments are tax-free.
CORRECT ANS: a) The increase in principal is taxable each year.
