CRPC Practice Exam 1 (Latest update) QUESTIONS
AND Complete ANSWERS (DETAILED &
ELABORATED) fully solved| A+ Grade | Already
Passed!!
Course: CRPC Practice
1. Nick wants to maintain the purchasing power of $75,000 (in today's
dollars) in retirement. If inflation continues to average 3.5%,
approximately what amount will Nick need in 20 years to equal the
purchasing power of $75,000 today? (Round your answer.) - ANSWER
✓ If you know the Rule of 72, and you divide 3.5 into 72, you arrive at
the number 20, which is the number of years it will take for a sum to
double. With a calculator, you can solve for the future value of $75,000
over 20 years at 3.5%.
Keystrokes: 20 N, 3.5 I/YR, 75,000 PV, FV = $149,234; rounded =
$150,000
2. What is the second step in the retirement planning process? -
ANSWER ✓ The second step in the retirement planning process is to
gather client data, including goals and expectations
3. What is the first step in the retirement planning process? - ANSWER
✓ The first step is to establish and define the client-counselor
relationship which includes disclosing the counselor's compensation
arrangement
,4. What is a characteristic of a TIP? - ANSWER ✓ The increase in
principal is taxable each year. Any annual increase in principal is subject
to federal taxation (unless in a tax-deferred account). Returns are tied to
the consumer price index. TIPS are sold at par value and have maturities
up to 30 years.
5. How you calculate the weighted beta of a portfolio? - ANSWER ✓
You multiply the weight times the beta for each stock, then you add
those numbers up together.
6. What does Jensen's alpha tell you - ANSWER ✓ The percentage a
manager over or underperformed based on the amount of risk taken.
7. Moving averages, graphs and statistics regarding the supply and
demand of stocks are an example of what kind of analysis? - ANSWER
✓ Technical analysis.
8. Financial statement ratios are part of what kind of analysis? -
ANSWER ✓ Fundamental analysis.
9. When performing bond calculations, what general assumptions
should be made unless stated otherwise? - ANSWER ✓ The coupon rate
is annualized but paid semiannually for U.S. bonds. The face value of
the bond should be assumed to be $1,000, not $10,000. The coupon rate
is stated on an annual basis but is assumed to be paid semiannually for
U.S. bonds and the coupon payment is always made at the end of the
period, not the beginning.
,10. Which is correct regarding the additional payroll tax for high wage
earners that was brought about by the Patient Protection and Affordable
Care Act - ANSWER ✓ The tax was designed to provide additional
funding for Medicare. This tax is an additional Medicare tax. The 0.9%
tax is employee paid and applies to high earners only.
11. Assume that a worker's Social Security full retirement age is 66.
What percentage of the worker's full retirement age benefits will be paid
to her at age 62? - ANSWER ✓ A worker can begin receiving Social
Security retirement benefits at age 62, but at a 25% reduction from the
full amount that would be received at full retirement age 66. So 100%
benefits minus the reduction of 25% = 75%.
Remember 62 = 25% reduction!
12. What is a correct statement about the effect that income and asset
ownership have on Social Security benefit payments? - ANSWER ✓
Unearned income, such as income from investment assets, has no effect
on the amount of Social Security benefits that will be paid to a worker.
Similarly, the value of assets owned by the worker does not affect
eligibility for Social Security benefits.
13. What should have no impact on your decision of when to receive
Social Security benefits? - ANSWER ✓ The earnings of your
dependents. Their income has no impact on your Social Security
Benefits.
, 14. What SHOULD have an impact on your decision of when to receive
Social Security benefits? - ANSWER ✓ The income benefit provided,
additional sources of income and condition of health.
15. Over a period of 10 years, Mike contributed a total of $20,000 to a
non deductible IRA. The current value of his IRA is $32,000 and Mike,
who is 50 years old, has decided to use his IRA assets to purchase a
second home. Assuming his tax bracket is 35%, how much will he owe
in taxes and penalties? - ANSWER ✓ What do you do first?
You have to remember that penalties in a non deductible IRA apply
ONLY to the earnings. So $32000 - $20000 = $12000.
Mike is only 50, so that's a 10% penalty.
Add that to his tax bracket so 35% + 10% = 45%.
$12000 x 45% = $5400 in taxes.
17. When deciding how much to contribute to a Roth IRA, what is
something you must always remember to consider about your client? -
ANSWER ✓ Their AGI. When deciding to contribute to a Roth IRA,
you must consider only your AGI.
You do not need to consider active participant status. That is only
considered when calculating the amount of a TRADITIONAL IRA
contribution that is deductible.
AND Complete ANSWERS (DETAILED &
ELABORATED) fully solved| A+ Grade | Already
Passed!!
Course: CRPC Practice
1. Nick wants to maintain the purchasing power of $75,000 (in today's
dollars) in retirement. If inflation continues to average 3.5%,
approximately what amount will Nick need in 20 years to equal the
purchasing power of $75,000 today? (Round your answer.) - ANSWER
✓ If you know the Rule of 72, and you divide 3.5 into 72, you arrive at
the number 20, which is the number of years it will take for a sum to
double. With a calculator, you can solve for the future value of $75,000
over 20 years at 3.5%.
Keystrokes: 20 N, 3.5 I/YR, 75,000 PV, FV = $149,234; rounded =
$150,000
2. What is the second step in the retirement planning process? -
ANSWER ✓ The second step in the retirement planning process is to
gather client data, including goals and expectations
3. What is the first step in the retirement planning process? - ANSWER
✓ The first step is to establish and define the client-counselor
relationship which includes disclosing the counselor's compensation
arrangement
,4. What is a characteristic of a TIP? - ANSWER ✓ The increase in
principal is taxable each year. Any annual increase in principal is subject
to federal taxation (unless in a tax-deferred account). Returns are tied to
the consumer price index. TIPS are sold at par value and have maturities
up to 30 years.
5. How you calculate the weighted beta of a portfolio? - ANSWER ✓
You multiply the weight times the beta for each stock, then you add
those numbers up together.
6. What does Jensen's alpha tell you - ANSWER ✓ The percentage a
manager over or underperformed based on the amount of risk taken.
7. Moving averages, graphs and statistics regarding the supply and
demand of stocks are an example of what kind of analysis? - ANSWER
✓ Technical analysis.
8. Financial statement ratios are part of what kind of analysis? -
ANSWER ✓ Fundamental analysis.
9. When performing bond calculations, what general assumptions
should be made unless stated otherwise? - ANSWER ✓ The coupon rate
is annualized but paid semiannually for U.S. bonds. The face value of
the bond should be assumed to be $1,000, not $10,000. The coupon rate
is stated on an annual basis but is assumed to be paid semiannually for
U.S. bonds and the coupon payment is always made at the end of the
period, not the beginning.
,10. Which is correct regarding the additional payroll tax for high wage
earners that was brought about by the Patient Protection and Affordable
Care Act - ANSWER ✓ The tax was designed to provide additional
funding for Medicare. This tax is an additional Medicare tax. The 0.9%
tax is employee paid and applies to high earners only.
11. Assume that a worker's Social Security full retirement age is 66.
What percentage of the worker's full retirement age benefits will be paid
to her at age 62? - ANSWER ✓ A worker can begin receiving Social
Security retirement benefits at age 62, but at a 25% reduction from the
full amount that would be received at full retirement age 66. So 100%
benefits minus the reduction of 25% = 75%.
Remember 62 = 25% reduction!
12. What is a correct statement about the effect that income and asset
ownership have on Social Security benefit payments? - ANSWER ✓
Unearned income, such as income from investment assets, has no effect
on the amount of Social Security benefits that will be paid to a worker.
Similarly, the value of assets owned by the worker does not affect
eligibility for Social Security benefits.
13. What should have no impact on your decision of when to receive
Social Security benefits? - ANSWER ✓ The earnings of your
dependents. Their income has no impact on your Social Security
Benefits.
, 14. What SHOULD have an impact on your decision of when to receive
Social Security benefits? - ANSWER ✓ The income benefit provided,
additional sources of income and condition of health.
15. Over a period of 10 years, Mike contributed a total of $20,000 to a
non deductible IRA. The current value of his IRA is $32,000 and Mike,
who is 50 years old, has decided to use his IRA assets to purchase a
second home. Assuming his tax bracket is 35%, how much will he owe
in taxes and penalties? - ANSWER ✓ What do you do first?
You have to remember that penalties in a non deductible IRA apply
ONLY to the earnings. So $32000 - $20000 = $12000.
Mike is only 50, so that's a 10% penalty.
Add that to his tax bracket so 35% + 10% = 45%.
$12000 x 45% = $5400 in taxes.
17. When deciding how much to contribute to a Roth IRA, what is
something you must always remember to consider about your client? -
ANSWER ✓ Their AGI. When deciding to contribute to a Roth IRA,
you must consider only your AGI.
You do not need to consider active participant status. That is only
considered when calculating the amount of a TRADITIONAL IRA
contribution that is deductible.
