CRPC Practice Exam 1 (2025 updated) QUESTIONS AND ANSWERS
CRPC Practice Exam 1
(DETAILED & ELABORATED) fully solved
Study online at https://quizlet.com/_hgktc6
1. Mary Goodwin's financial situation is $122,000
as follows:
Cash/cash equivalents$15,000S Assets = $263,000; liabilities = $141,000, so net
hort-term debts$8,000 worth is $122,000. Taxes and auto note payments
Long-term debts$133,000 appear on the cash flow statement.
Tax expense$7,000
Auto note payments$4,000
Invested assets$60,000
Use assets$188,000
What is her net worth?
2. For the year ending December 31, $2,700
XXXX, Bill Greer has the following fi-
nancial information: Income = $70,000 + $1,100 + $2,100 = $73,200.
Salaries$70,000Auto Expenses = $5,000 + $3,800 + $8,000 + $3,500 +
payments$5,000Insur- $14,000 + $13,000 + $9,000 + $8,400 + $5,800 =
ance$3,800Food$8,000Credit card $70,500, so there is a surplus of $2,700. The check-
balance$10,000Dividends$1,100Utili- ing account and credit card balances would be on
ties$3,500Mortgage the statement of financial position.
payments$14,000Taxes$13,000Cloth-
ing$9,000Interest
income$2,100Checking
account$4,000Vacations$8,400Dona-
tions$5,800
What is the cash flow surplus or
(deficit) for Bill?
3. Which of the following are correct II, III, and IV
statements about income replace-
ment percentages? The inverse of Option I is true. Those with a lower
preretirement income typically need a much higher
income replacement percentage in retirement.
, CRPC Practice Exam 1
Study online at https://quizlet.com/_hgktc6
4. If Tom and Jenny want to save a $31,621
fixed amount annually to accumulate
$2 million by their retirement date Set calculator "End" and "1 P/Yr" Inputs: FV =
in 25 years (rather than an amount 2000000, i = 7, N = 25, PV = 0, then Pmt = $31,621
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?
5. Bill and Lisa Hahn have determined $389,957
that they will need a monthly income
of $6,000 during retirement. They ex- The monthly retirement income need is not specified
pect to receive Social Security retire- as "today's dollars," and no inflation rate specified;
ment benefits amounting to $3,500 therefore, it must be assumed that the $2,500 net
per month at the beginning of each monthly income need represents retirement dollars,
month. Over the 12 remaining years and the retirement period income stream is level. To
of their preretirement period, they ex- calculate the lump sum needed at the beginning of
pect to generate an average annu- retirement, discount the stream of monthly income
al after-tax investment return of 8%; payments at the investment return rate:
during their 25-year retirement peri- 10BII+ PVAD calculation:
od, they want to assume a 6% annu- Set calculator on BEG and 12 periods per year, then
al after-tax investment return com- input the following:
pounded monthly. 2,500 [PMT]
What is the lump sum needed at the 25 [SHIFT] [N]
beginning of retirement to fund this 6 [I/YR]
income stream? 0 [FV]
Solve for PV = $389,957
6. Chris and Eve Bronson have analyzed $4,911,256
their current living expenses and esti-
mated their retirement income need, This PVAD calculation requires that the calculator be
, CRPC Practice Exam 1
Study online at https://quizlet.com/_hgktc6
net of expected Social Security bene- set for beginning-of-period payments. First, the an-
fits, to be $90,000 in today's dollars. nual retirement income deficit is expressed in retire-
They are confident that they can earn ment-year-one dollars, resulting in a $239,925 in-
a 7% after-tax return on their invest- come deficit in the first retirement year. This income
ments, and they expect inflation to deficit grows with inflation over the 30-year retire-
average 4% over the long term. ment period, and the retirement fund earns a 7%
Determine the lump sum amount the return. The calculator inputs are $239,925, [PMT];
Bronsons will need at the beginning 30, [N]; 2.8846, [I/YR]. Solve for [PV], to determine
of retirement to fund their retirement the retirement fund that will generate this income
income needs, using the worksheet stream. If you enter 2.8846 directly into the calcula-
below. tor, you will get $4,911,265. If you use the equation
to compute I/YR, and then hit the I/YR button you will
(1) Adjust income deficit for infla- get $4,911,256. Either way the answer is clear. The
tion over the preretirement period:$ difference is that when you calculate the I/YR, the
90,000present value of retirement in- calculator takes the interest rate out to nine decimal
come deficit25number of periods un- places. If you enter in the 2.8846, then the calculator
til retirement4%% inflation rateFu- only takes the interest rate to four decimal places.
ture value of income deficit in first re-
tirement year$239,925(2) Determine
retirement fund needed to meet
income deficit:$239,925payment (fu-
ture value of income deficit in first
retirement year)30number of periods
in retirement
The lump sum needed at the begin-
ning of the Br
7. Assume a client and investment pro- A) analyze information
fessional have worked together for B) gather data
several years. Recently, the client's C) make and implement recommendations
personal and financial circumstances D) monitor performance
, CRPC Practice Exam 1
Study online at https://quizlet.com/_hgktc6
have changed. According to the
course materials, what is the next as- --B
set management step that the invest-
When the client's circumstances change, the asset
ment professional should take?
management process goes back to the data gather-
ing step in the process.
8. When the client's circumstances A) realistic
change, the asset management B) clearly defined
process goes back to the data gather- C) long-term perspective
ing step in the process. D) fluid
--D
An investment policy provides guidelines that are
standards to be followed. If they are fluid, they are
ever-changing and therefore would be difficult to
implement and would provide inconsistency in the
management of the portfolio.
9. An investment policy provides guide- A) tactical.
lines that are standards to be fol- B) alpha.
lowed. If they are fluid, they are C) core/satellite.
ever-changing and therefore would D) strategic.
be difficult to implement and would
provide inconsistency in the manage- --B
ment of the portfolio. Alpha is not an asset allocation strategy, but a way to
measure a portfolio manager's return relative to the
amount of risk that has been taken.
10. Assume the following asset classes A) Gold provides more diversification than large
have the correlations to long-term stocks.
government bonds shown below: B) Small stocks provide more diversification than
CRPC Practice Exam 1
(DETAILED & ELABORATED) fully solved
Study online at https://quizlet.com/_hgktc6
1. Mary Goodwin's financial situation is $122,000
as follows:
Cash/cash equivalents$15,000S Assets = $263,000; liabilities = $141,000, so net
hort-term debts$8,000 worth is $122,000. Taxes and auto note payments
Long-term debts$133,000 appear on the cash flow statement.
Tax expense$7,000
Auto note payments$4,000
Invested assets$60,000
Use assets$188,000
What is her net worth?
2. For the year ending December 31, $2,700
XXXX, Bill Greer has the following fi-
nancial information: Income = $70,000 + $1,100 + $2,100 = $73,200.
Salaries$70,000Auto Expenses = $5,000 + $3,800 + $8,000 + $3,500 +
payments$5,000Insur- $14,000 + $13,000 + $9,000 + $8,400 + $5,800 =
ance$3,800Food$8,000Credit card $70,500, so there is a surplus of $2,700. The check-
balance$10,000Dividends$1,100Utili- ing account and credit card balances would be on
ties$3,500Mortgage the statement of financial position.
payments$14,000Taxes$13,000Cloth-
ing$9,000Interest
income$2,100Checking
account$4,000Vacations$8,400Dona-
tions$5,800
What is the cash flow surplus or
(deficit) for Bill?
3. Which of the following are correct II, III, and IV
statements about income replace-
ment percentages? The inverse of Option I is true. Those with a lower
preretirement income typically need a much higher
income replacement percentage in retirement.
, CRPC Practice Exam 1
Study online at https://quizlet.com/_hgktc6
4. If Tom and Jenny want to save a $31,621
fixed amount annually to accumulate
$2 million by their retirement date Set calculator "End" and "1 P/Yr" Inputs: FV =
in 25 years (rather than an amount 2000000, i = 7, N = 25, PV = 0, then Pmt = $31,621
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?
5. Bill and Lisa Hahn have determined $389,957
that they will need a monthly income
of $6,000 during retirement. They ex- The monthly retirement income need is not specified
pect to receive Social Security retire- as "today's dollars," and no inflation rate specified;
ment benefits amounting to $3,500 therefore, it must be assumed that the $2,500 net
per month at the beginning of each monthly income need represents retirement dollars,
month. Over the 12 remaining years and the retirement period income stream is level. To
of their preretirement period, they ex- calculate the lump sum needed at the beginning of
pect to generate an average annu- retirement, discount the stream of monthly income
al after-tax investment return of 8%; payments at the investment return rate:
during their 25-year retirement peri- 10BII+ PVAD calculation:
od, they want to assume a 6% annu- Set calculator on BEG and 12 periods per year, then
al after-tax investment return com- input the following:
pounded monthly. 2,500 [PMT]
What is the lump sum needed at the 25 [SHIFT] [N]
beginning of retirement to fund this 6 [I/YR]
income stream? 0 [FV]
Solve for PV = $389,957
6. Chris and Eve Bronson have analyzed $4,911,256
their current living expenses and esti-
mated their retirement income need, This PVAD calculation requires that the calculator be
, CRPC Practice Exam 1
Study online at https://quizlet.com/_hgktc6
net of expected Social Security bene- set for beginning-of-period payments. First, the an-
fits, to be $90,000 in today's dollars. nual retirement income deficit is expressed in retire-
They are confident that they can earn ment-year-one dollars, resulting in a $239,925 in-
a 7% after-tax return on their invest- come deficit in the first retirement year. This income
ments, and they expect inflation to deficit grows with inflation over the 30-year retire-
average 4% over the long term. ment period, and the retirement fund earns a 7%
Determine the lump sum amount the return. The calculator inputs are $239,925, [PMT];
Bronsons will need at the beginning 30, [N]; 2.8846, [I/YR]. Solve for [PV], to determine
of retirement to fund their retirement the retirement fund that will generate this income
income needs, using the worksheet stream. If you enter 2.8846 directly into the calcula-
below. tor, you will get $4,911,265. If you use the equation
to compute I/YR, and then hit the I/YR button you will
(1) Adjust income deficit for infla- get $4,911,256. Either way the answer is clear. The
tion over the preretirement period:$ difference is that when you calculate the I/YR, the
90,000present value of retirement in- calculator takes the interest rate out to nine decimal
come deficit25number of periods un- places. If you enter in the 2.8846, then the calculator
til retirement4%% inflation rateFu- only takes the interest rate to four decimal places.
ture value of income deficit in first re-
tirement year$239,925(2) Determine
retirement fund needed to meet
income deficit:$239,925payment (fu-
ture value of income deficit in first
retirement year)30number of periods
in retirement
The lump sum needed at the begin-
ning of the Br
7. Assume a client and investment pro- A) analyze information
fessional have worked together for B) gather data
several years. Recently, the client's C) make and implement recommendations
personal and financial circumstances D) monitor performance
, CRPC Practice Exam 1
Study online at https://quizlet.com/_hgktc6
have changed. According to the
course materials, what is the next as- --B
set management step that the invest-
When the client's circumstances change, the asset
ment professional should take?
management process goes back to the data gather-
ing step in the process.
8. When the client's circumstances A) realistic
change, the asset management B) clearly defined
process goes back to the data gather- C) long-term perspective
ing step in the process. D) fluid
--D
An investment policy provides guidelines that are
standards to be followed. If they are fluid, they are
ever-changing and therefore would be difficult to
implement and would provide inconsistency in the
management of the portfolio.
9. An investment policy provides guide- A) tactical.
lines that are standards to be fol- B) alpha.
lowed. If they are fluid, they are C) core/satellite.
ever-changing and therefore would D) strategic.
be difficult to implement and would
provide inconsistency in the manage- --B
ment of the portfolio. Alpha is not an asset allocation strategy, but a way to
measure a portfolio manager's return relative to the
amount of risk that has been taken.
10. Assume the following asset classes A) Gold provides more diversification than large
have the correlations to long-term stocks.
government bonds shown below: B) Small stocks provide more diversification than
