CRPC PRACTICE EXAM 2
Which eof ethe efollowing eare ecorrect estatements eabout ethe ecapital eutilization
estrategy? e- ecorrect eanswers-I. eIt eproduces ean eannual eretirement eincome
eover ea efinite enumber eof eyears.
II. eAssuming ethe eyield eremains ethe esame, ethe elarger ethe eretirement eincome
ethat eis epaid, ethe eshorter ethe enumber eof eyears eover ewhich eit ewill ebe
epaid.
III. eWhen ethe ecapital eutilization eapproach eis eused, ethe eplanner emust ebe
ecareful ein emaking eassumptions eabout ethe elife eexpectancy eof ethe eclient.
IV. eThe eeffect eof etaxes eon eretirement esavings eand edistributions eshould ebe
econsidered ewhen ethe ebefore-tax eapproach eis eused eto ecalculate ethe efuture
evalue eof eretirement eassets.
Which eone eof ethe efollowing eis enot ea ekey eelement eof ean einvestment
epolicy? e- ecorrect eanswers-A) ea eprovision efor eperiodic ereview
B) ethe eacceptable erisk etolerance elevel
C) ea etarget easset eallocation
,D) enames eof especific estocks eto ebe ein ethe eportfolio
--D
The ekey eelements ein ean einvestment epolicy eare ea eclear estatement eof ethe
eclient's egoal, esuitable einvestment evehicles eand estrategies, ethe eacceptable
erisk etolerance elevel efor ethe eclient, easset eallocation eguidelines, eand ea
eprovision efor eperiodic ereview. eOne eway eto eremember ethe eessential
eelements eof ean einvestment epolicy eis ethe eacronym e"GRASP" e(Goals, eRisk,
eAsset eAllocation, eStrategies/Suitable eInvestment-meaning ethe einvestment
ecategories ethat emay eor emay enot ebe eused-and ePeriodic eReview). eSpecific
einvestments ewould ebe edetermined eafter ethe einvestment epolicy eis ecreated.
Which eone eof ethe efollowing eis ea echaracteristic eof eTreasury einflation-protected
esecurities e(TIPS)? e- ecorrect eanswers-A) eThey eare esold eat ea ediscount.
B) eThe eincrease ein eprincipal eis etaxable eeach eyear.
C) eTheir ereturns eare etied eto ethe eproducer eprice eindex.
D) eThey eare eissued ewith ematurities eup eto e40 eyears.
Your eclient eowns ea ebond efund ewith ea eduration eof e6.5. eIf einterest erates
eincrease e1.5%, ewhat eis ethe eexpected echange ein eprice efor ethis efund? e-
ecorrect eanswers-A) e6.5% edecrease
B) e9.75% eincrease
C) e9.75% edecrease
D) e6.5% eincrease
--C
1.5% e-6.5 e= e-9.75%. eRecall ethat eduration eneeds eto ehave ea enegative esign
ein eorder eto erepresent ethe einverse erelationship ebetween ebond eprices eand
einterest erates. eIn ethis ecase, ean eincrease ein erates emeans ethe ebonds eor
ebond efunds ewill efall ein eprice. eTherefore, ethis efund ewill edecrease ein eprice
eabout e9.75%. eAlso, eyou ecan eremember ethat ebond eprices emove eopposite eto
einterest erates. eAn eincrease ein einterest erates emeans ethe eprice eof ebonds
ewill ego edown.
The eprocess eof erebalancing eis ea ekey efactor ein e- ecorrect eanswers-Strategic
easset eallocation.
Strategic easset eallocation einvolves eobtaining ethe ebest easset emix efor ea eclient
eover ea elong eperiod. eFor eexample, ethis emight ebe e60% estocks eand e40%
ebonds. eWhen ethese epercentages echange edue eto emarket emovements, ethis
estrategic easset eallocation erequires ethe eportfolio eto ebe erebalanced eback eto
ethe etarget emix, ein ethis ecase e60/40 estocks/bonds.
What edoes eJensen's ealpha etell eyou? e- ecorrect eanswers-the epercentage ea
emanager eover- eor eunderperformed ebased eon ethe eamount eof erisk etaken
The epercentage eof ereturn ethat ecan ebe eattributed eto esystematic erisk eis
ereferred eto eas ethe e- ecorrect eanswers-coefficient eof edetermination e(R2).
, Which eof ethe efollowing eare enot eused ein etechnical eanalysis? e- ecorrect
eanswers-A) egraphs
B) efinancial estatement eratios
C) emoving eaverages
D) esupply eand edemand eof estocks
--B
Moving eaverages, egraphs, eand estatistics eregarding ethe esupply eand edemand
eof estocks eare eused eby etechnicians. e
Financial estatement eratios eare epart eof efundamental eanalysis.
When eperforming ebond ecalculations, ewhich eof ethe efollowing egeneral
eassumptions eshould ebe emade eunless estated eotherwise? e- ecorrect eanswers-
A) eThe ecoupon erate eis eannualized ebut epaid esemiannually efor eU.S. ebonds.
B) eOn ea efinancial ecalculator, ebonds eare ecalculated ein ethe eBegin emode.
C) eThe ecoupon epayment eused ein ebond ecalculations eis ethe eannual eamount.
D) eThe eface evalue eof ethe ebond eis e$10,000.
--A
The eface evalue eof ethe ebond eshould ebe eassumed eto ebe e$1,000, enot
e$10,000. eThe ecoupon erate eis estated eon ean eannual ebasis ebut eis eassumed
eto ebe epaid esemiannually efor eU.S. ebonds eand ethe ecoupon epayment eis
ealways emade eat ethe eend eof ethe eperiod, enot ethe ebeginning. eAll ebonds,
eeven ezero ecoupon ebonds, eare ecompounded esemiannually ein ethe eEnd
emode. eThis emakes eall ebond eYTM equotes estandardized efor eeasy
ecomparison.
Assume eyour eclient ehas ea e5% ebond, epar evalue eof e$1,000, eand e15 eyears
eto ematurity. eComparable ebonds eare eyielding e6%. eWhat eis ethe evalue eof
ethis ebond? e- ecorrect eanswers-A) e$1,010
B) e$902
C) e$925
D) e$875
--B
If ethe ecalculator eis eset efor e1 eP/YR, ethen eall efactors, eother ethan eFV, eneed
eto ebe eadjusted efor esemiannual epayments. eThe ekeystrokes ewould ebe: e1,000
e[FV], e25 e[PMT], e3 e[I/YR], e30 e[N], ethen esolve efor e[PV] e= e-902. eIf ethe
ecalculator eis eset eat e2 eP/YR, ethen e[I/YR] eis e6 eand e[N] eis eentered eas e15
e[SHIFT] e[N].
Which eof ethe efollowing eis ecorrect eregarding ethe eadditional epayroll etax efor
ehigh ewage eearners ethat ewas ebrought eabout eby ethe eAffordable eCare eAct?
Which eof ethe efollowing eare ecorrect estatements eabout ethe ecapital eutilization
estrategy? e- ecorrect eanswers-I. eIt eproduces ean eannual eretirement eincome
eover ea efinite enumber eof eyears.
II. eAssuming ethe eyield eremains ethe esame, ethe elarger ethe eretirement eincome
ethat eis epaid, ethe eshorter ethe enumber eof eyears eover ewhich eit ewill ebe
epaid.
III. eWhen ethe ecapital eutilization eapproach eis eused, ethe eplanner emust ebe
ecareful ein emaking eassumptions eabout ethe elife eexpectancy eof ethe eclient.
IV. eThe eeffect eof etaxes eon eretirement esavings eand edistributions eshould ebe
econsidered ewhen ethe ebefore-tax eapproach eis eused eto ecalculate ethe efuture
evalue eof eretirement eassets.
Which eone eof ethe efollowing eis enot ea ekey eelement eof ean einvestment
epolicy? e- ecorrect eanswers-A) ea eprovision efor eperiodic ereview
B) ethe eacceptable erisk etolerance elevel
C) ea etarget easset eallocation
,D) enames eof especific estocks eto ebe ein ethe eportfolio
--D
The ekey eelements ein ean einvestment epolicy eare ea eclear estatement eof ethe
eclient's egoal, esuitable einvestment evehicles eand estrategies, ethe eacceptable
erisk etolerance elevel efor ethe eclient, easset eallocation eguidelines, eand ea
eprovision efor eperiodic ereview. eOne eway eto eremember ethe eessential
eelements eof ean einvestment epolicy eis ethe eacronym e"GRASP" e(Goals, eRisk,
eAsset eAllocation, eStrategies/Suitable eInvestment-meaning ethe einvestment
ecategories ethat emay eor emay enot ebe eused-and ePeriodic eReview). eSpecific
einvestments ewould ebe edetermined eafter ethe einvestment epolicy eis ecreated.
Which eone eof ethe efollowing eis ea echaracteristic eof eTreasury einflation-protected
esecurities e(TIPS)? e- ecorrect eanswers-A) eThey eare esold eat ea ediscount.
B) eThe eincrease ein eprincipal eis etaxable eeach eyear.
C) eTheir ereturns eare etied eto ethe eproducer eprice eindex.
D) eThey eare eissued ewith ematurities eup eto e40 eyears.
Your eclient eowns ea ebond efund ewith ea eduration eof e6.5. eIf einterest erates
eincrease e1.5%, ewhat eis ethe eexpected echange ein eprice efor ethis efund? e-
ecorrect eanswers-A) e6.5% edecrease
B) e9.75% eincrease
C) e9.75% edecrease
D) e6.5% eincrease
--C
1.5% e-6.5 e= e-9.75%. eRecall ethat eduration eneeds eto ehave ea enegative esign
ein eorder eto erepresent ethe einverse erelationship ebetween ebond eprices eand
einterest erates. eIn ethis ecase, ean eincrease ein erates emeans ethe ebonds eor
ebond efunds ewill efall ein eprice. eTherefore, ethis efund ewill edecrease ein eprice
eabout e9.75%. eAlso, eyou ecan eremember ethat ebond eprices emove eopposite eto
einterest erates. eAn eincrease ein einterest erates emeans ethe eprice eof ebonds
ewill ego edown.
The eprocess eof erebalancing eis ea ekey efactor ein e- ecorrect eanswers-Strategic
easset eallocation.
Strategic easset eallocation einvolves eobtaining ethe ebest easset emix efor ea eclient
eover ea elong eperiod. eFor eexample, ethis emight ebe e60% estocks eand e40%
ebonds. eWhen ethese epercentages echange edue eto emarket emovements, ethis
estrategic easset eallocation erequires ethe eportfolio eto ebe erebalanced eback eto
ethe etarget emix, ein ethis ecase e60/40 estocks/bonds.
What edoes eJensen's ealpha etell eyou? e- ecorrect eanswers-the epercentage ea
emanager eover- eor eunderperformed ebased eon ethe eamount eof erisk etaken
The epercentage eof ereturn ethat ecan ebe eattributed eto esystematic erisk eis
ereferred eto eas ethe e- ecorrect eanswers-coefficient eof edetermination e(R2).
, Which eof ethe efollowing eare enot eused ein etechnical eanalysis? e- ecorrect
eanswers-A) egraphs
B) efinancial estatement eratios
C) emoving eaverages
D) esupply eand edemand eof estocks
--B
Moving eaverages, egraphs, eand estatistics eregarding ethe esupply eand edemand
eof estocks eare eused eby etechnicians. e
Financial estatement eratios eare epart eof efundamental eanalysis.
When eperforming ebond ecalculations, ewhich eof ethe efollowing egeneral
eassumptions eshould ebe emade eunless estated eotherwise? e- ecorrect eanswers-
A) eThe ecoupon erate eis eannualized ebut epaid esemiannually efor eU.S. ebonds.
B) eOn ea efinancial ecalculator, ebonds eare ecalculated ein ethe eBegin emode.
C) eThe ecoupon epayment eused ein ebond ecalculations eis ethe eannual eamount.
D) eThe eface evalue eof ethe ebond eis e$10,000.
--A
The eface evalue eof ethe ebond eshould ebe eassumed eto ebe e$1,000, enot
e$10,000. eThe ecoupon erate eis estated eon ean eannual ebasis ebut eis eassumed
eto ebe epaid esemiannually efor eU.S. ebonds eand ethe ecoupon epayment eis
ealways emade eat ethe eend eof ethe eperiod, enot ethe ebeginning. eAll ebonds,
eeven ezero ecoupon ebonds, eare ecompounded esemiannually ein ethe eEnd
emode. eThis emakes eall ebond eYTM equotes estandardized efor eeasy
ecomparison.
Assume eyour eclient ehas ea e5% ebond, epar evalue eof e$1,000, eand e15 eyears
eto ematurity. eComparable ebonds eare eyielding e6%. eWhat eis ethe evalue eof
ethis ebond? e- ecorrect eanswers-A) e$1,010
B) e$902
C) e$925
D) e$875
--B
If ethe ecalculator eis eset efor e1 eP/YR, ethen eall efactors, eother ethan eFV, eneed
eto ebe eadjusted efor esemiannual epayments. eThe ekeystrokes ewould ebe: e1,000
e[FV], e25 e[PMT], e3 e[I/YR], e30 e[N], ethen esolve efor e[PV] e= e-902. eIf ethe
ecalculator eis eset eat e2 eP/YR, ethen e[I/YR] eis e6 eand e[N] eis eentered eas e15
e[SHIFT] e[N].
Which eof ethe efollowing eis ecorrect eregarding ethe eadditional epayroll etax efor
ehigh ewage eearners ethat ewas ebrought eabout eby ethe eAffordable eCare eAct?
