CRPC PRACTICE EXAM #2
Richard swants sto shave san sannual sretirement sincome sof s$100,000 s(payable
sat sthe sbeginning sof seach syear) sprotected sagainst s3% sinflation.
Assuming sa s7% safter-tax srate sof sreturn sand sa sretirement speriod sof s30
syears, show smuch smoney sdoes sRichard sneed sin sorder sto smeet shis sgoal?
Explain show syou sneed sto sinput sthis son sthe scalculator sand swhy. s- scorrect
sanswers-Step sOne s- sSet sthe scalculator sto sBEGIN.
Step sTwo s- sCalculate sthe sinflation sadjusted srate sof sreturn s(One splus sthe
sRate sof sReturn sdivided sby sOne splus sthe sinterest srate, sminus sone,
smultiplied sby s100 s= sthe sinflation sadjusted srate sof sreturn) sPut sthis snumber
sin sthe sI/YR
Step sThree s- s100,000 sgoes sin sas sa sPMT
Step sFour s- s30 sgoes sin sas sN
Step sFive s-Press sPV
Richard sneeds s$1,822,042.88 sin stoday's sdollars sto smeet shis sneeds.
How sdo syou scalculate sthe sinflation-adjusted srate sof sreturn? s- scorrect
sanswers-1 splus sthe sRate sof sReturn
Divided sby
, 1 splus sthe sinterest srate
minus sone
multiplied sby s100
Tom shas sbeen spromised sa sstream sof s$40,000 sannual spayments sat sthe send
sof seach syear sfor s25 syears. sThe spresent svalue sof sthese spayments
sdiscounted sat sa srate sof s5% sis swhich sone sof sthe sfollowing samounts? s-
scorrect sanswers-Step sOne s- sThe sproblem ssays sEND sin sit sso syou shave sto
sset syour scalculator sto sthe sEND smode.
Step stwo s- sEnter sthe s$40000 sas sa sPMT
Step sThree s- sEnter s25 sas sthe sN.
Step sFour s- sEnter s5 sas sthe sI/R
Step sSix s- sHit sPV.
$563,758
Nick swants sto smaintain sthe spurchasing spower sof s$75,000 s(in stoday's sdollars)
sin sretirement. sIf sinflation scontinues sto saverage s3.5%, sapproximately swhat
samount swill sNick sneed sin s20 syears sto sequal sthe spurchasing spower sof
s$75,000 stoday? s(Round syour sanswer.) s- scorrect sanswers-If syou sknow sthe
sRule sof s72, sand syou sdivide s3.5 sinto s72, syou sarrive sat sthe snumber s20,
swhich sis sthe snumber sof syears sit swill stake sfor sa ssum sto sdouble. sWith sa
scalculator, syou scan ssolve sfor sthe sfuture svalue sof s$75,000 sover s20 syears
sat s3.5%.
sKeystrokes: s20 sN, s3.5 sI/YR, s75,000 sPV, sFV s= s$149,234; srounded s=
s$150,000
What sis sthe ssecond sstep sin sthe sretirement splanning sprocess? s- scorrect
sanswers-The ssecond sstep sin sthe sretirement splanning sprocess sis sto sgather
sclient sdata, sincluding sgoals sand sexpectations
What sis sthe sfirst sstep sin sthe sretirement splanning sprocess? s- scorrect
sanswers-The sfirst sstep sis sto sestablish sand sdefine sthe sclient-counselor
srelationship swhich sincludes sdisclosing sthe scounselor's scompensation
sarrangement
What sis sa scharacteristic sof sa sTIP? s- scorrect sanswers-The sincrease sin
sprincipal sis staxable seach syear. sAny sannual sincrease sin sprincipal sis ssubject
sto sfederal staxation s(unless sin sa stax-deferred saccount). sReturns sare stied sto
Richard swants sto shave san sannual sretirement sincome sof s$100,000 s(payable
sat sthe sbeginning sof seach syear) sprotected sagainst s3% sinflation.
Assuming sa s7% safter-tax srate sof sreturn sand sa sretirement speriod sof s30
syears, show smuch smoney sdoes sRichard sneed sin sorder sto smeet shis sgoal?
Explain show syou sneed sto sinput sthis son sthe scalculator sand swhy. s- scorrect
sanswers-Step sOne s- sSet sthe scalculator sto sBEGIN.
Step sTwo s- sCalculate sthe sinflation sadjusted srate sof sreturn s(One splus sthe
sRate sof sReturn sdivided sby sOne splus sthe sinterest srate, sminus sone,
smultiplied sby s100 s= sthe sinflation sadjusted srate sof sreturn) sPut sthis snumber
sin sthe sI/YR
Step sThree s- s100,000 sgoes sin sas sa sPMT
Step sFour s- s30 sgoes sin sas sN
Step sFive s-Press sPV
Richard sneeds s$1,822,042.88 sin stoday's sdollars sto smeet shis sneeds.
How sdo syou scalculate sthe sinflation-adjusted srate sof sreturn? s- scorrect
sanswers-1 splus sthe sRate sof sReturn
Divided sby
, 1 splus sthe sinterest srate
minus sone
multiplied sby s100
Tom shas sbeen spromised sa sstream sof s$40,000 sannual spayments sat sthe send
sof seach syear sfor s25 syears. sThe spresent svalue sof sthese spayments
sdiscounted sat sa srate sof s5% sis swhich sone sof sthe sfollowing samounts? s-
scorrect sanswers-Step sOne s- sThe sproblem ssays sEND sin sit sso syou shave sto
sset syour scalculator sto sthe sEND smode.
Step stwo s- sEnter sthe s$40000 sas sa sPMT
Step sThree s- sEnter s25 sas sthe sN.
Step sFour s- sEnter s5 sas sthe sI/R
Step sSix s- sHit sPV.
$563,758
Nick swants sto smaintain sthe spurchasing spower sof s$75,000 s(in stoday's sdollars)
sin sretirement. sIf sinflation scontinues sto saverage s3.5%, sapproximately swhat
samount swill sNick sneed sin s20 syears sto sequal sthe spurchasing spower sof
s$75,000 stoday? s(Round syour sanswer.) s- scorrect sanswers-If syou sknow sthe
sRule sof s72, sand syou sdivide s3.5 sinto s72, syou sarrive sat sthe snumber s20,
swhich sis sthe snumber sof syears sit swill stake sfor sa ssum sto sdouble. sWith sa
scalculator, syou scan ssolve sfor sthe sfuture svalue sof s$75,000 sover s20 syears
sat s3.5%.
sKeystrokes: s20 sN, s3.5 sI/YR, s75,000 sPV, sFV s= s$149,234; srounded s=
s$150,000
What sis sthe ssecond sstep sin sthe sretirement splanning sprocess? s- scorrect
sanswers-The ssecond sstep sin sthe sretirement splanning sprocess sis sto sgather
sclient sdata, sincluding sgoals sand sexpectations
What sis sthe sfirst sstep sin sthe sretirement splanning sprocess? s- scorrect
sanswers-The sfirst sstep sis sto sestablish sand sdefine sthe sclient-counselor
srelationship swhich sincludes sdisclosing sthe scounselor's scompensation
sarrangement
What sis sa scharacteristic sof sa sTIP? s- scorrect sanswers-The sincrease sin
sprincipal sis staxable seach syear. sAny sannual sincrease sin sprincipal sis ssubject
sto sfederal staxation s(unless sin sa stax-deferred saccount). sReturns sare stied sto
