CRPC EXAM 2024-2025 ACTUAL EXAM
180 QUESTIONS AND CORRECT
DETAILED ANSWERS WITH
RATIONALES (VERIFIED ANSWERS) |
ALREADY GRADED A+
MaryjcGoodwin'sjcfinancialjcsituationjcisjcasjcfollows:
Cash/cashjcequivalents$15,000jc
Short-termjcdebts$8,000jc
Long-termjcdebts$133,000
Taxjcexpensejc$7,000
Autojcnotejcpaymentsjc$4,000jc
Investedjcassetsjc$60,000
Usejcassetsjc$188,000
Whatjcisjcherjcnetjcworth?jc-jcanswer--
Assetsjc=jc$263,000;jcliabilitiesjc=jc$141,000,jcsojcnetjcworthjcisjc$122,000.jcTaxesjcandjcaut
ojcnotejcpaymentsjcappearjconjcthejccashjcflowjcstatement.jc1-3
Salaries$70,000jc
Autojcpayments$5,000
Insurancejcpayments$3,800
Food$8,000
Creditjccardjcbalance$10,000
Dividends$1,100
Utilities$3,500
Mortgagejcpayments$14,000
Taxes$13,000
Clothing$9,000
Interestjcincome$2,100
Checkingjcaccount$4,000
Vacations$8,400
Donations$5,800
Whatjcisjcthejccashjcflowjcsurplusjcorjc(deficit)jcforjcBill?jc-jcanswer--
Incomejc=jc$70,000jc+jc$1,100jc+jc$2,100jc=jc$73,200.jcExpensesjc=jc$5,000jc+jc$3,800jc+jc$
8,000jc+jc$3,500jc+jc$14,000jc+jc$13,000jc+jc$9,000jc+jc$8,400jc+jc$5,800jc=jc$70,500,jcsojct
herejcisjcajcsurplusjcofjc$2,700.jcThejccheckingjcaccountjcandjccreditjccardjcbalancesjcwouldjc
bejconjcthejcstatementjcofjcfinancialjcposition.
LOjc1-3
correctjcstatementsjcaboutjcincomejcreplacementjcpercentagesjc-jcanswer--
Incomejcreplacementjcpercentagesjcarejctypicallyjcmuchjchigherjcforjcthosejcwithjclowerjcpr
eretirementjcincomes.
,Incomejcreplacementjcpercentagesjcvaryjcbetweenjclow-incomejcandjchigh-
incomejcretirees.
Incomejcreplacementjcratiosjcshouldjcnotjcbejcusedjcasjcthejconlyjcbasisjcforjcplanning.
Incomejcreplacementjcratiosjcarejcusefuljcforjcyoungerjcclientsjcasjcajcguidejctojctheirjclong-
rangejcplanningjcandjcinvesting.jc
ThejcinversejcofjcOptionjcIjcisjctrue.jcThosejcwithjcajclowerjcpreretirementjcincomejctypicallyjcn
eedjcajcmuchjchigherjcincomejcreplacementjcpercentagejcinjcretirement.
LOjc1-4
IfjcTomjcandjcJennyjcwantjctojcsavejcajcfixedjcamountjcannuallyjctojcaccumulatejc$2jcmillionjcb
yjctheirjcretirementjcdatejcinjc25jcyearsjc(ratherjcthanjcanjcamountjcthatjcgrowsjcwithjcinflationjc
eachjcyear),jcwhatjcleveljcannualjcend-of-
yearjcsavingsjcamountjcwilljctheyjcneedjctojcdepositjceachjcyear,jcassumingjctheirjcsavingsjce
arnjc7%jcannually?jc-jcanswer--Setjcyourjccalculatorjctojcthejc"End"jcmodejcandjc"1jcP/
Yr."jcInputs:jcFVjc=jc2000000,jcI/YRjc=jc7,jcNjc=jc25,jcPVjc=jc0,jcthenjcPMTjc=jc$31,621jc
1-4
BilljcandjcLisajcHahnjchavejcdeterminedjcthatjctheyjcwilljcneedjcajcmonthlyjcincomejcofjc$6,00
0jcduringjcretirement.jcTheyjcexpectjctojcreceivejcSocialjcSecurityjcretirementjcbenefitsjcam
ountingjctojc$3,500jcperjcmonthjcatjcthejcbeginningjcofjceachjcmonth.jcOverjcthejc12jcremainin
gjcyearsjcofjctheirjcpreretirementjcperiod,jctheyjcexpectjctojcgeneratejcanjcaveragejcannualjca
fter-taxjcinvestmentjcreturnjcofjc8%;jcduringjctheirjc25-
yearjcretirementjcperiod,jctheyjcwantjctojcassumejcajc6%jcannualjcafter-
taxjcinvestmentjcreturnjccompoundedjcmonthly.jcTheyjcwantjctojcstartjctheirjcmonthlyjcretire
mentjcwithdrawalsjconjcthejcfirstjcdayjctheyjcretire.
Whatjcisjcthejclumpjcsumjcneededjcatjcthejcbeginningjcofjcretirementjctojcfundjcthisjcincomejcst
ream?jc-jcanswer--
Thejcmonthlyjcretirementjcincomejcneedjcisjcnotjcspecifiedjcasjc"today'sjcdollars,"jcandjcnojci
nflationjcratejcspecified;jctherefore,jcitjcmustjcbejcassumedjcthatjcthejc$2,500jcnetjcmonthlyjci
ncomejcneedjcrepresentsjcretirementjcdollars,jcandjcthejcretirementjcperiodjcincomejcstrea
mjcisjclevel.jcTojccalculatejcthejclumpjcsumjcneededjcatjcthejcbeginningjcofjcretirement,jcdisco
untjcthejcstreamjcofjcmonthlyjcincomejcpaymentsjcatjcthejcinvestmentjcreturnjcrate:
10BII+jcPVADjccalculation:
SetjccalculatorjconjcBEGjcandjc12jcperiodsjcperjcyear,jcthenjcinputjcthejcfollowing:
2,500jc[PMT]
25jc[SHIFT]jc[N]
6jc[I/YR]
0jc[FV]
SolvejcforjcPVjc=jc$389,957
LOjc1-4
ChrisjcandjcEvejcBronsonjchavejcanalyzedjctheirjccurrentjclivingjcexpensesjcandjcestimatedjc
theirjcretirementjcincomejcneed,jcnetjcofjcexpectedjcSocialjcSecurityjcbenefits,jctojcbejc$90,0
,00jcinjctoday'sjcdollars.jcTheyjcarejcconfidentjcthatjctheyjccanjcearnjcajc7%jcafter-
taxjcreturnjconjctheirjcinvestments,jcandjctheyjcexpectjcinflationjctojcaveragejc4%jcoverjcthejcl
ongjcterm.
DeterminejcthejclumpjcsumjcamountjcthejcBronsonsjcwilljcneedjcatjcthejcbeginningjcofjcretire
mentjctojcfundjctheirjcretirementjcincomejcneeds,jcusingjcthejcworksheetjcbelow.
(1)jcAdjustjcincomejcdeficitjcforjcinflationjcoverjcthejcpreretirementjcperiod:
$jc90,000presentjcvaluejcofjcretirementjcincomejcdeficit25numberjcofjcperiodsjcuntiljcretire
ment4%
%jcinflationjcrateFuturejcvaluejcofjcincomejcdeficitjcinjcfirstjcretirementjcyear$239,925
(2)jcDeterminejcretirementjcfundjcneededjctojcmeetjcincomejcdeficit:
$239,925paymentjc(futurejcvaluejcofjcincomejcdeficitjcinjcfirstjcretirementjcyear)30numberjc
ofjcperiodsjcinjcretirement
Thejclumpjcsumjcneededjcatjcthejcbeginningjcofjcthejc-jcanswer--
ThisjcPVADjccalculationjcrequiresjcthatjcthejccalculatorjcbejcsetjcforjcbeginning-of-
periodjcpayments.jcFirst,jcthejcannualjcretirementjcincomejcdeficitjcisjcexpressedjcinjcretirem
ent-year-
onejcdollars,jcresultingjcinjcajc$239,925jcincomejcdeficitjcinjcthejcfirstjcretirementjcyear.jcThisjc
incomejcdeficitjcgrowsjcwithjcinflationjcoverjcthejc30-
yearjcretirementjcperiod,jcandjcthejcretirementjcfundjcearnsjcajc7%jcreturn.jc
Thejccalculatorjcinputsjcarejc
$239,925,jc[PMT];jc
30,jc[N];jc
2.8846,jc[I/YR].jc(1.07/1.04)-1jcx100jc
Solvejcforjc[PV],jc
tojcdeterminejcthejcretirementjcfundjcthatjcwilljcgeneratejcthisjcincomejcstream.jcIfjcyoujcenterj
c2.8846jcdirectlyjcintojcthejccalculator,jcyoujcwilljcgetjc$4,911,265.jcIfjcyoujcusejcthejcequationj
ctojccomputejcI/YR,jcandjcthenjchitjcthejcI/
YRjcbuttonjcyoujcwilljcgetjc$4,911,256.jcEitherjcwayjcthejcanswerjcisjcclear.jcThejcdifferencejci
sjcthatjcwhenjcyoujccalculatejcthejcI/
YR,jcthejccalculatorjctakesjcthejcinterestjcratejcoutjctojcninejcdecimaljcplaces.jcIfjcyoujcenterjcin
jcthejc2.8846,jcthenjcthejccalculatorjconlyjctakesjcthejcinterestjcratejctojcfourjcdecimaljcplaces.
LOjc1-4
Assumejcajcclientjcandjcinvestmentjcprofessionaljchavejcworkedjctogetherjcforjcseveraljcyea
rs.jcRecently,jcthejcclient'sjcpersonaljcandjcfinancialjccircumstancesjchavejcchanged.jcAcco
rdingjctojcthejccoursejcmaterials,jcwhatjcisjcthejcnextjcassetjcmanagementjcstepjcthatjcthejcinv
estmentjcprofessionaljcshouldjctake?jc
A)
gatherjcdata
B)
analyzejcinformation
C)
makejcandjcimplementjcrecommendations
D)
, monitorjcperformancejc-jcanswer--
Whenjcthejcclient'sjccircumstancesjcchange,jcthejcassetjcmanagementjcprocessjcgoesjcbac
kjctojcthejcdatajcgatheringjcstepjcinjcthejcprocess.jcA
LOjc1-2
Whichjconejcofjcthejcfollowingjcisjcnotjcajckeyjcattributejcofjcanjcinvestmentjcpolicy?
A)
clearlyjcdefined
B)
fluid
C)
realistic
D)
long-termjcperspectivejc-jcanswer--
Anjcinvestmentjcpolicyjcprovidesjcguidelinesjcthatjcarejcstandardsjctojcbejcfollowed.jcIfjctheyjc
arejcfluid,jctheyjcarejcever-
changingjcandjcthereforejcwouldjcbejcdifficultjctojcimplementjcandjcwouldjcprovidejcinconsist
encyjcinjcthejcmanagementjcofjcthejcportfolio.
LOjc2-1jc
Fluid
Alljcofjcthesejcarejcexamplesjcofjcassetjcallocationjcstrategiesjcexcept
A)
alpha.
B)
tactical.
C)
core/satellite.
D)
strategic.jc-jcanswer--
Alphajcisjcnotjcanjcassetjcallocationjcstrategy,jcbutjcajcwayjctojcmeasurejcajcportfoliojcmanage
r'sjcreturnjcrelativejctojcthejcamountjcofjcriskjcthatjchasjcbeenjctaken.jcalphajc
LOjc2-5
Assumejcthejcfollowingjcassetjcclassesjchavejcthejccorrelationsjctojclong-
termjcgovernmentjcbondsjcshownjcbelow:
Treasuryjcbills:.12
Gold:-.25
Largejcstocks:.22
Smalljcstocks:.17
Whichjconejcofjcthejcfollowingjcbestjcexemplifiesjcthejcimpactjcofjcdiversificationjconjclong-
termjcgovernmentjcbonds?jc-jcanswer--
Thejcassetjcwithjcthejclowestjccorrelationjcprovidesjcthejcmostjcdiversification.jcTherefore,jc
goldjcprovidesjcmorejcdiversificationjcthanjcanyjcofjcthejcotherjcassets.jcSmalljcstocksjcdojcpr
ovidejcmorejcdiversificationjcthanjcTreasuryjcbills,jcbutjc
goldjcprovidesjcthejcmostjcdiversification,jcsojcitjcisjcthejcbestjcoption.jc
LOjc2-3
180 QUESTIONS AND CORRECT
DETAILED ANSWERS WITH
RATIONALES (VERIFIED ANSWERS) |
ALREADY GRADED A+
MaryjcGoodwin'sjcfinancialjcsituationjcisjcasjcfollows:
Cash/cashjcequivalents$15,000jc
Short-termjcdebts$8,000jc
Long-termjcdebts$133,000
Taxjcexpensejc$7,000
Autojcnotejcpaymentsjc$4,000jc
Investedjcassetsjc$60,000
Usejcassetsjc$188,000
Whatjcisjcherjcnetjcworth?jc-jcanswer--
Assetsjc=jc$263,000;jcliabilitiesjc=jc$141,000,jcsojcnetjcworthjcisjc$122,000.jcTaxesjcandjcaut
ojcnotejcpaymentsjcappearjconjcthejccashjcflowjcstatement.jc1-3
Salaries$70,000jc
Autojcpayments$5,000
Insurancejcpayments$3,800
Food$8,000
Creditjccardjcbalance$10,000
Dividends$1,100
Utilities$3,500
Mortgagejcpayments$14,000
Taxes$13,000
Clothing$9,000
Interestjcincome$2,100
Checkingjcaccount$4,000
Vacations$8,400
Donations$5,800
Whatjcisjcthejccashjcflowjcsurplusjcorjc(deficit)jcforjcBill?jc-jcanswer--
Incomejc=jc$70,000jc+jc$1,100jc+jc$2,100jc=jc$73,200.jcExpensesjc=jc$5,000jc+jc$3,800jc+jc$
8,000jc+jc$3,500jc+jc$14,000jc+jc$13,000jc+jc$9,000jc+jc$8,400jc+jc$5,800jc=jc$70,500,jcsojct
herejcisjcajcsurplusjcofjc$2,700.jcThejccheckingjcaccountjcandjccreditjccardjcbalancesjcwouldjc
bejconjcthejcstatementjcofjcfinancialjcposition.
LOjc1-3
correctjcstatementsjcaboutjcincomejcreplacementjcpercentagesjc-jcanswer--
Incomejcreplacementjcpercentagesjcarejctypicallyjcmuchjchigherjcforjcthosejcwithjclowerjcpr
eretirementjcincomes.
,Incomejcreplacementjcpercentagesjcvaryjcbetweenjclow-incomejcandjchigh-
incomejcretirees.
Incomejcreplacementjcratiosjcshouldjcnotjcbejcusedjcasjcthejconlyjcbasisjcforjcplanning.
Incomejcreplacementjcratiosjcarejcusefuljcforjcyoungerjcclientsjcasjcajcguidejctojctheirjclong-
rangejcplanningjcandjcinvesting.jc
ThejcinversejcofjcOptionjcIjcisjctrue.jcThosejcwithjcajclowerjcpreretirementjcincomejctypicallyjcn
eedjcajcmuchjchigherjcincomejcreplacementjcpercentagejcinjcretirement.
LOjc1-4
IfjcTomjcandjcJennyjcwantjctojcsavejcajcfixedjcamountjcannuallyjctojcaccumulatejc$2jcmillionjcb
yjctheirjcretirementjcdatejcinjc25jcyearsjc(ratherjcthanjcanjcamountjcthatjcgrowsjcwithjcinflationjc
eachjcyear),jcwhatjcleveljcannualjcend-of-
yearjcsavingsjcamountjcwilljctheyjcneedjctojcdepositjceachjcyear,jcassumingjctheirjcsavingsjce
arnjc7%jcannually?jc-jcanswer--Setjcyourjccalculatorjctojcthejc"End"jcmodejcandjc"1jcP/
Yr."jcInputs:jcFVjc=jc2000000,jcI/YRjc=jc7,jcNjc=jc25,jcPVjc=jc0,jcthenjcPMTjc=jc$31,621jc
1-4
BilljcandjcLisajcHahnjchavejcdeterminedjcthatjctheyjcwilljcneedjcajcmonthlyjcincomejcofjc$6,00
0jcduringjcretirement.jcTheyjcexpectjctojcreceivejcSocialjcSecurityjcretirementjcbenefitsjcam
ountingjctojc$3,500jcperjcmonthjcatjcthejcbeginningjcofjceachjcmonth.jcOverjcthejc12jcremainin
gjcyearsjcofjctheirjcpreretirementjcperiod,jctheyjcexpectjctojcgeneratejcanjcaveragejcannualjca
fter-taxjcinvestmentjcreturnjcofjc8%;jcduringjctheirjc25-
yearjcretirementjcperiod,jctheyjcwantjctojcassumejcajc6%jcannualjcafter-
taxjcinvestmentjcreturnjccompoundedjcmonthly.jcTheyjcwantjctojcstartjctheirjcmonthlyjcretire
mentjcwithdrawalsjconjcthejcfirstjcdayjctheyjcretire.
Whatjcisjcthejclumpjcsumjcneededjcatjcthejcbeginningjcofjcretirementjctojcfundjcthisjcincomejcst
ream?jc-jcanswer--
Thejcmonthlyjcretirementjcincomejcneedjcisjcnotjcspecifiedjcasjc"today'sjcdollars,"jcandjcnojci
nflationjcratejcspecified;jctherefore,jcitjcmustjcbejcassumedjcthatjcthejc$2,500jcnetjcmonthlyjci
ncomejcneedjcrepresentsjcretirementjcdollars,jcandjcthejcretirementjcperiodjcincomejcstrea
mjcisjclevel.jcTojccalculatejcthejclumpjcsumjcneededjcatjcthejcbeginningjcofjcretirement,jcdisco
untjcthejcstreamjcofjcmonthlyjcincomejcpaymentsjcatjcthejcinvestmentjcreturnjcrate:
10BII+jcPVADjccalculation:
SetjccalculatorjconjcBEGjcandjc12jcperiodsjcperjcyear,jcthenjcinputjcthejcfollowing:
2,500jc[PMT]
25jc[SHIFT]jc[N]
6jc[I/YR]
0jc[FV]
SolvejcforjcPVjc=jc$389,957
LOjc1-4
ChrisjcandjcEvejcBronsonjchavejcanalyzedjctheirjccurrentjclivingjcexpensesjcandjcestimatedjc
theirjcretirementjcincomejcneed,jcnetjcofjcexpectedjcSocialjcSecurityjcbenefits,jctojcbejc$90,0
,00jcinjctoday'sjcdollars.jcTheyjcarejcconfidentjcthatjctheyjccanjcearnjcajc7%jcafter-
taxjcreturnjconjctheirjcinvestments,jcandjctheyjcexpectjcinflationjctojcaveragejc4%jcoverjcthejcl
ongjcterm.
DeterminejcthejclumpjcsumjcamountjcthejcBronsonsjcwilljcneedjcatjcthejcbeginningjcofjcretire
mentjctojcfundjctheirjcretirementjcincomejcneeds,jcusingjcthejcworksheetjcbelow.
(1)jcAdjustjcincomejcdeficitjcforjcinflationjcoverjcthejcpreretirementjcperiod:
$jc90,000presentjcvaluejcofjcretirementjcincomejcdeficit25numberjcofjcperiodsjcuntiljcretire
ment4%
%jcinflationjcrateFuturejcvaluejcofjcincomejcdeficitjcinjcfirstjcretirementjcyear$239,925
(2)jcDeterminejcretirementjcfundjcneededjctojcmeetjcincomejcdeficit:
$239,925paymentjc(futurejcvaluejcofjcincomejcdeficitjcinjcfirstjcretirementjcyear)30numberjc
ofjcperiodsjcinjcretirement
Thejclumpjcsumjcneededjcatjcthejcbeginningjcofjcthejc-jcanswer--
ThisjcPVADjccalculationjcrequiresjcthatjcthejccalculatorjcbejcsetjcforjcbeginning-of-
periodjcpayments.jcFirst,jcthejcannualjcretirementjcincomejcdeficitjcisjcexpressedjcinjcretirem
ent-year-
onejcdollars,jcresultingjcinjcajc$239,925jcincomejcdeficitjcinjcthejcfirstjcretirementjcyear.jcThisjc
incomejcdeficitjcgrowsjcwithjcinflationjcoverjcthejc30-
yearjcretirementjcperiod,jcandjcthejcretirementjcfundjcearnsjcajc7%jcreturn.jc
Thejccalculatorjcinputsjcarejc
$239,925,jc[PMT];jc
30,jc[N];jc
2.8846,jc[I/YR].jc(1.07/1.04)-1jcx100jc
Solvejcforjc[PV],jc
tojcdeterminejcthejcretirementjcfundjcthatjcwilljcgeneratejcthisjcincomejcstream.jcIfjcyoujcenterj
c2.8846jcdirectlyjcintojcthejccalculator,jcyoujcwilljcgetjc$4,911,265.jcIfjcyoujcusejcthejcequationj
ctojccomputejcI/YR,jcandjcthenjchitjcthejcI/
YRjcbuttonjcyoujcwilljcgetjc$4,911,256.jcEitherjcwayjcthejcanswerjcisjcclear.jcThejcdifferencejci
sjcthatjcwhenjcyoujccalculatejcthejcI/
YR,jcthejccalculatorjctakesjcthejcinterestjcratejcoutjctojcninejcdecimaljcplaces.jcIfjcyoujcenterjcin
jcthejc2.8846,jcthenjcthejccalculatorjconlyjctakesjcthejcinterestjcratejctojcfourjcdecimaljcplaces.
LOjc1-4
Assumejcajcclientjcandjcinvestmentjcprofessionaljchavejcworkedjctogetherjcforjcseveraljcyea
rs.jcRecently,jcthejcclient'sjcpersonaljcandjcfinancialjccircumstancesjchavejcchanged.jcAcco
rdingjctojcthejccoursejcmaterials,jcwhatjcisjcthejcnextjcassetjcmanagementjcstepjcthatjcthejcinv
estmentjcprofessionaljcshouldjctake?jc
A)
gatherjcdata
B)
analyzejcinformation
C)
makejcandjcimplementjcrecommendations
D)
, monitorjcperformancejc-jcanswer--
Whenjcthejcclient'sjccircumstancesjcchange,jcthejcassetjcmanagementjcprocessjcgoesjcbac
kjctojcthejcdatajcgatheringjcstepjcinjcthejcprocess.jcA
LOjc1-2
Whichjconejcofjcthejcfollowingjcisjcnotjcajckeyjcattributejcofjcanjcinvestmentjcpolicy?
A)
clearlyjcdefined
B)
fluid
C)
realistic
D)
long-termjcperspectivejc-jcanswer--
Anjcinvestmentjcpolicyjcprovidesjcguidelinesjcthatjcarejcstandardsjctojcbejcfollowed.jcIfjctheyjc
arejcfluid,jctheyjcarejcever-
changingjcandjcthereforejcwouldjcbejcdifficultjctojcimplementjcandjcwouldjcprovidejcinconsist
encyjcinjcthejcmanagementjcofjcthejcportfolio.
LOjc2-1jc
Fluid
Alljcofjcthesejcarejcexamplesjcofjcassetjcallocationjcstrategiesjcexcept
A)
alpha.
B)
tactical.
C)
core/satellite.
D)
strategic.jc-jcanswer--
Alphajcisjcnotjcanjcassetjcallocationjcstrategy,jcbutjcajcwayjctojcmeasurejcajcportfoliojcmanage
r'sjcreturnjcrelativejctojcthejcamountjcofjcriskjcthatjchasjcbeenjctaken.jcalphajc
LOjc2-5
Assumejcthejcfollowingjcassetjcclassesjchavejcthejccorrelationsjctojclong-
termjcgovernmentjcbondsjcshownjcbelow:
Treasuryjcbills:.12
Gold:-.25
Largejcstocks:.22
Smalljcstocks:.17
Whichjconejcofjcthejcfollowingjcbestjcexemplifiesjcthejcimpactjcofjcdiversificationjconjclong-
termjcgovernmentjcbonds?jc-jcanswer--
Thejcassetjcwithjcthejclowestjccorrelationjcprovidesjcthejcmostjcdiversification.jcTherefore,jc
goldjcprovidesjcmorejcdiversificationjcthanjcanyjcofjcthejcotherjcassets.jcSmalljcstocksjcdojcpr
ovidejcmorejcdiversificationjcthanjcTreasuryjcbills,jcbutjc
goldjcprovidesjcthejcmostjcdiversification,jcsojcitjcisjcthejcbestjcoption.jc
LOjc2-3
