CEBS RPA 2 PRACTICE TEST EXAM 2025/2026 QUESTIONS
WITH SOLUTIONS GRADED A+
✔✔A change or modification to a plan document that alters the operation of a retirement
plan is known as: - ✔✔An amendment
✔✔Following risk is deemed as the most important in affecting price movements of
common stocks? - ✔✔Market Risk
✔✔Diversification reduces portfolio risk most effectively when the correlation coefficient
is: - ✔✔-1, i.e., perfect negative correlation
✔✔Following has found be to correct regarding retirement planning of most investors -
✔✔Engaged investors tend to overreact to information about companies.
✔✔The term used to describe a condition that occurs because of different accrual
patterns when a traditional defined benefit plan is converted to a cash balance plan is: -
✔✔Pension Wear Away
✔✔The following plan offers participants the greater benefit of either a traditional
defined benefit plan or the benefit accumulated by a cash balance plan - ✔✔Minimum
Balance Pension Plan
✔✔Portfolio risk is not simply a weighted average of the risks of individual securities
included in the portfolio because it is necessary to recognize: - ✔✔The covariances
between the returns on securities
✔✔If a death benefit is being provided outside a qualified plan by a nondiscriminatory
group term life insurance contract issued to the employer, the employee is not required
to consider any part of the premium paid by the employer as taxable income, unless the
employee's coverage exceeds: - ✔✔$50,000
✔✔All qualified retirement plans are required to have a fidelity bond covering what
minimal percentage of plan assets? - ✔✔Ten percent (10%)
✔✔Shareholders in an open-end investment company may sell their shares: - ✔✔Back
to the fund at any time, but at a price not known until the close of the next business day.
✔✔What are the two approaches used in transition from stocks to bonds in a targeted-
maturity fund? - ✔✔Tactical and Glide Path
✔✔The following is the most commonly used measure of dispersion for investment
returns over a cumulative period of years: - ✔✔Standard Deviation
, ✔✔A mutual fund is an "open-end" investment company because: - ✔✔it constantly
issues new shares to investors and stands ready to buy back shares from shareholders
✔✔Assume that a fiduciary has acted prudently in selecting and monitoring a duly
appointed investment manager for a retirement plan. If the performance of the plan is
materially below its benchmark, then the fiduciary is: - ✔✔Not liable since investment
management services have been delegated.
✔✔If a defined contribution plan fails to comply with Section 404(c) requirements, then:
- ✔✔Statutory relief from fiduciary liability is not available to the plan's fiduciaries.
✔✔What is the condition known as bounded rationality when it comes to retirement
planning? - ✔✔Individuals have limitations regarding their mental capabilities to deal
with complexity inherent in retirement planning.
✔✔Most equity funds can be divided into two categories of investment styles; -
✔✔Growth and Value Funds
✔✔The penalty for failure to make a required distribution of at least the correct amount
from a qualified retirement plan (before pursuing remedial action) is a: -
✔✔nondeductible excise tax of 25 percent (25%)
✔✔Individuals who espouse to the contrarian investing approach are more likely to: -
✔✔Prefer low price/earnings (P/E) ratio stocks rather than the often popular high P/E
ratio stocks
✔✔Which of the following items should be included in an investment policy statement
for a qualified retirement plan when investments are participant-directed?
I. The number of fund options permitted
II. The range of investment options allowed
III. The frequency of rebalancing - ✔✔I and II only
I. The number of fund options permitted
II. The range of investment options allowed
✔✔Which of the following statements regarding the weak form of market efficiency is
(are) correct?
I. the weak form of efficiency is tested on the basis of the predictive value of past stock
price movements
WITH SOLUTIONS GRADED A+
✔✔A change or modification to a plan document that alters the operation of a retirement
plan is known as: - ✔✔An amendment
✔✔Following risk is deemed as the most important in affecting price movements of
common stocks? - ✔✔Market Risk
✔✔Diversification reduces portfolio risk most effectively when the correlation coefficient
is: - ✔✔-1, i.e., perfect negative correlation
✔✔Following has found be to correct regarding retirement planning of most investors -
✔✔Engaged investors tend to overreact to information about companies.
✔✔The term used to describe a condition that occurs because of different accrual
patterns when a traditional defined benefit plan is converted to a cash balance plan is: -
✔✔Pension Wear Away
✔✔The following plan offers participants the greater benefit of either a traditional
defined benefit plan or the benefit accumulated by a cash balance plan - ✔✔Minimum
Balance Pension Plan
✔✔Portfolio risk is not simply a weighted average of the risks of individual securities
included in the portfolio because it is necessary to recognize: - ✔✔The covariances
between the returns on securities
✔✔If a death benefit is being provided outside a qualified plan by a nondiscriminatory
group term life insurance contract issued to the employer, the employee is not required
to consider any part of the premium paid by the employer as taxable income, unless the
employee's coverage exceeds: - ✔✔$50,000
✔✔All qualified retirement plans are required to have a fidelity bond covering what
minimal percentage of plan assets? - ✔✔Ten percent (10%)
✔✔Shareholders in an open-end investment company may sell their shares: - ✔✔Back
to the fund at any time, but at a price not known until the close of the next business day.
✔✔What are the two approaches used in transition from stocks to bonds in a targeted-
maturity fund? - ✔✔Tactical and Glide Path
✔✔The following is the most commonly used measure of dispersion for investment
returns over a cumulative period of years: - ✔✔Standard Deviation
, ✔✔A mutual fund is an "open-end" investment company because: - ✔✔it constantly
issues new shares to investors and stands ready to buy back shares from shareholders
✔✔Assume that a fiduciary has acted prudently in selecting and monitoring a duly
appointed investment manager for a retirement plan. If the performance of the plan is
materially below its benchmark, then the fiduciary is: - ✔✔Not liable since investment
management services have been delegated.
✔✔If a defined contribution plan fails to comply with Section 404(c) requirements, then:
- ✔✔Statutory relief from fiduciary liability is not available to the plan's fiduciaries.
✔✔What is the condition known as bounded rationality when it comes to retirement
planning? - ✔✔Individuals have limitations regarding their mental capabilities to deal
with complexity inherent in retirement planning.
✔✔Most equity funds can be divided into two categories of investment styles; -
✔✔Growth and Value Funds
✔✔The penalty for failure to make a required distribution of at least the correct amount
from a qualified retirement plan (before pursuing remedial action) is a: -
✔✔nondeductible excise tax of 25 percent (25%)
✔✔Individuals who espouse to the contrarian investing approach are more likely to: -
✔✔Prefer low price/earnings (P/E) ratio stocks rather than the often popular high P/E
ratio stocks
✔✔Which of the following items should be included in an investment policy statement
for a qualified retirement plan when investments are participant-directed?
I. The number of fund options permitted
II. The range of investment options allowed
III. The frequency of rebalancing - ✔✔I and II only
I. The number of fund options permitted
II. The range of investment options allowed
✔✔Which of the following statements regarding the weak form of market efficiency is
(are) correct?
I. the weak form of efficiency is tested on the basis of the predictive value of past stock
price movements
