CRPC Practice Exam 1 QUESTIONS AND Complete
Solutions | A+ Grade| Latest Update | Sure To Pass!!
Course: CRPC Practice
1. Bill and Lisa Hahn have determined that they will need a monthly
income of $6,000 during retirement. They expect to receive Social
Security retirement benefits amounting to $3,500 per month at the
beginning of each month. Over the 12 remaining years of their
preretirement period, they expect to generate an average annual after-tax
investment return of 8%; during their 25-year retirement period, they
want to assume a 6% annual after-tax investment return compounded
monthly. They want to start their monthly retirement withdrawals on the
first day they retire.
What is the lump sum needed at the beginning of retirement to fund this
income stream?
A)
$931,241
B)
$388,017
C)
$389,957
D)
$598,504 - ANSWER ✓ C
,2. Chris and Eve Bronson have analyzed their current living expenses
and estimated their retirement income need, net of expected Social
Security benefits, to be $90,000 in today's dollars. They are confident
that they can earn a 7% after-tax return on their investments, and they
expect inflation to average 4% over the long term.
Determine the lump sum amount the Bronsons will need at the
beginning of retirement to fund their retirement income needs, using the
worksheet below.
(1) Adjust income deficit for inflation over the preretirement period:$
90,000present value of retirement income deficit25number of periods
until retirement4%% inflation rateFuture value of income deficit in first
retirement year$239,925(2) Determine retirement fund needed to meet
income deficit:$239,925payment (future value of income deficit in first
retirement year)30number of periods in retirement
The lump sum needed at the beginning of the Br - ANSWER ✓ D
3. Assume a client and investment professional have worked together
for several years. Recently, the client's personal and financial
circumstances have changed. According to the course materials, what is
the next asset management step that the investment professional should
take?
A)
make and implement recommendations
B)
,gather data
C)
monitor performance
D)
analyze information - ANSWER ✓ B
4. Which one of the following is not a key attribute of an investment
policy?
A)
clearly defined
B)
realistic
C)
fluid
D)
long-term perspective - ANSWER ✓ C
5. All of these are examples of asset allocation strategies except
A)
tactical.
B)
core/satellite.
C)
, strategic.
D)
alpha. - ANSWER ✓ D
6. Assume the following asset classes have the correlations to long-term
government bonds shown below:
Treasury bills:.12Gold:-.25Large stocks:.22Small stocks:.17
Which one of the following best exemplifies the impact of
diversification on long-term government bonds?
A)
Large stocks provide more diversification than small stocks.
B)
Small stocks provide more diversification than Treasury bills.
C)
Gold provides more diversification than large stocks.
D)
Treasury bills provide more diversification than gold. - ANSWER ✓ C
7. The two major risks associated with individual common stocks are
A)
interest rate risk and purchasing power risk.
B)
market risk and business risk.
Solutions | A+ Grade| Latest Update | Sure To Pass!!
Course: CRPC Practice
1. Bill and Lisa Hahn have determined that they will need a monthly
income of $6,000 during retirement. They expect to receive Social
Security retirement benefits amounting to $3,500 per month at the
beginning of each month. Over the 12 remaining years of their
preretirement period, they expect to generate an average annual after-tax
investment return of 8%; during their 25-year retirement period, they
want to assume a 6% annual after-tax investment return compounded
monthly. They want to start their monthly retirement withdrawals on the
first day they retire.
What is the lump sum needed at the beginning of retirement to fund this
income stream?
A)
$931,241
B)
$388,017
C)
$389,957
D)
$598,504 - ANSWER ✓ C
,2. Chris and Eve Bronson have analyzed their current living expenses
and estimated their retirement income need, net of expected Social
Security benefits, to be $90,000 in today's dollars. They are confident
that they can earn a 7% after-tax return on their investments, and they
expect inflation to average 4% over the long term.
Determine the lump sum amount the Bronsons will need at the
beginning of retirement to fund their retirement income needs, using the
worksheet below.
(1) Adjust income deficit for inflation over the preretirement period:$
90,000present value of retirement income deficit25number of periods
until retirement4%% inflation rateFuture value of income deficit in first
retirement year$239,925(2) Determine retirement fund needed to meet
income deficit:$239,925payment (future value of income deficit in first
retirement year)30number of periods in retirement
The lump sum needed at the beginning of the Br - ANSWER ✓ D
3. Assume a client and investment professional have worked together
for several years. Recently, the client's personal and financial
circumstances have changed. According to the course materials, what is
the next asset management step that the investment professional should
take?
A)
make and implement recommendations
B)
,gather data
C)
monitor performance
D)
analyze information - ANSWER ✓ B
4. Which one of the following is not a key attribute of an investment
policy?
A)
clearly defined
B)
realistic
C)
fluid
D)
long-term perspective - ANSWER ✓ C
5. All of these are examples of asset allocation strategies except
A)
tactical.
B)
core/satellite.
C)
, strategic.
D)
alpha. - ANSWER ✓ D
6. Assume the following asset classes have the correlations to long-term
government bonds shown below:
Treasury bills:.12Gold:-.25Large stocks:.22Small stocks:.17
Which one of the following best exemplifies the impact of
diversification on long-term government bonds?
A)
Large stocks provide more diversification than small stocks.
B)
Small stocks provide more diversification than Treasury bills.
C)
Gold provides more diversification than large stocks.
D)
Treasury bills provide more diversification than gold. - ANSWER ✓ C
7. The two major risks associated with individual common stocks are
A)
interest rate risk and purchasing power risk.
B)
market risk and business risk.
