CRPC EXAM 2025-2026 ACTUAL EXAM 200
QUESTIONS AND CORRECT DETAILED
ANSWERS WITH RATIONALES |ALREADY
GRADED A+ / GUARANTEED PASS
Mary Goodwin's financial situation is as follows:
Cash/cash equivalents$15,000
Short-term debts$8,000
Long-term debts$133,000
Tax expense $7,000
Auto note payments $4,000
Invested assets $60,000
Use assets $188,000
What is her net worth?
- answer-Assets = $263,000; liabilities = $141,000, so net worth is $122,000.
Taxes and auto note payments appear on the cash flow statement. 1-3
Salaries$70,000
Auto payments$5,000
Insurance payments$3,800
Food$8,000
Credit card balance$10,000
Dividends$1,100
Utilities$3,500
Mortgage payments$14,000
Taxes$13,000
Clothing$9,000
Interest income$2,100
Checking account$4,000
Vacations$8,400
Donations$5,800
What is the cash flow surplus or (deficit) for Bill?
- answer-Income = $70,000 + $1,100 + $2,100 = $73,200. Expenses = $5,000 +
$3,800 + $8,000 + $3,500 + $14,000 + $13,000 + $9,000 + $8,400 + $5,800 =
,$70,500, so there is a surplus of $2,700. The checking account and credit card
balances would be on the statement of financial position.
LO 1-3
correct statements about income replacement percentages
- answer-Income replacement percentages are typically much higher for those with
lower preretirement incomes.
Income replacement percentages vary between low-income and high-income
retirees.
Income replacement ratios should not be used as the only basis for planning.
Income replacement ratios are useful for younger clients as a guide to their long-
range planning and investing.
The inverse of Option I is true. Those with a lower preretirement income typically
need a much higher income replacement percentage in retirement.
LO 1-4
If Tom and Jenny want to save a fixed amount annually to accumulate $2 million
by their retirement date in 25 years (rather than an amount 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?
- answer-Set your calculator to the "End" mode and "1 P/Yr." Inputs: FV =
2000000, I/YR = 7, N = 25, PV = 0, then PMT = $31,621
1-4
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?
- answer-The monthly retirement income need is not specified as "today's dollars,"
and no inflation rate specified; therefore, it must be assumed that the $2,500 net
monthly income need represents retirement dollars, and the retirement period
income stream is level. To calculate the lump sum needed at the beginning of
retirement, discount the stream of monthly income payments at the investment
return rate:
10BII+ PVAD calculation:
Set calculator on BEG and 12 periods per year, then input the following:
2,500 [PMT]
25 [SHIFT] [N]
6 [I/YR]
0 [FV]
Solve for PV = $389,957
LO 1-4
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
- answer-This PVAD calculation requires that the calculator be set for beginning-
of-period payments. First, the annual retirement income deficit is expressed in
retirement-year-one dollars, resulting in a $239,925 income deficit in the first
retirement year. This income deficit grows with inflation over the 30-year
retirement period, and the retirement fund earns a 7% return.
, The calculator inputs are
$239,925, [PMT];
30, [N];
2.8846, [I/YR]. (1.07/1.04)-1 x100
Solve for [PV],
to determine the retirement fund that will generate this income stream. If you enter
2.8846 directly into the calculator, you will get $4,911,265. If you use the equation
to compute I/YR, and then hit the I/YR button you will get $4,911,256. Either way
the answer is clear. The difference is that when you calculate the I/YR, the
calculator takes the interest rate out to nine decimal places. If you enter in the
2.8846, then the calculator only takes the interest rate to four decimal places.
LO 1-4
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)
gather data
B)
analyze information
C)
make and implement recommendations
D)
monitor performance
- answer-When the client's circumstances change, the asset management process
goes back to the data gathering step in the process. A
LO 1-2
Which one of the following is not a key attribute of an investment policy?
A)
clearly defined
B)
fluid
C)
realistic
D)
QUESTIONS AND CORRECT DETAILED
ANSWERS WITH RATIONALES |ALREADY
GRADED A+ / GUARANTEED PASS
Mary Goodwin's financial situation is as follows:
Cash/cash equivalents$15,000
Short-term debts$8,000
Long-term debts$133,000
Tax expense $7,000
Auto note payments $4,000
Invested assets $60,000
Use assets $188,000
What is her net worth?
- answer-Assets = $263,000; liabilities = $141,000, so net worth is $122,000.
Taxes and auto note payments appear on the cash flow statement. 1-3
Salaries$70,000
Auto payments$5,000
Insurance payments$3,800
Food$8,000
Credit card balance$10,000
Dividends$1,100
Utilities$3,500
Mortgage payments$14,000
Taxes$13,000
Clothing$9,000
Interest income$2,100
Checking account$4,000
Vacations$8,400
Donations$5,800
What is the cash flow surplus or (deficit) for Bill?
- answer-Income = $70,000 + $1,100 + $2,100 = $73,200. Expenses = $5,000 +
$3,800 + $8,000 + $3,500 + $14,000 + $13,000 + $9,000 + $8,400 + $5,800 =
,$70,500, so there is a surplus of $2,700. The checking account and credit card
balances would be on the statement of financial position.
LO 1-3
correct statements about income replacement percentages
- answer-Income replacement percentages are typically much higher for those with
lower preretirement incomes.
Income replacement percentages vary between low-income and high-income
retirees.
Income replacement ratios should not be used as the only basis for planning.
Income replacement ratios are useful for younger clients as a guide to their long-
range planning and investing.
The inverse of Option I is true. Those with a lower preretirement income typically
need a much higher income replacement percentage in retirement.
LO 1-4
If Tom and Jenny want to save a fixed amount annually to accumulate $2 million
by their retirement date in 25 years (rather than an amount 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?
- answer-Set your calculator to the "End" mode and "1 P/Yr." Inputs: FV =
2000000, I/YR = 7, N = 25, PV = 0, then PMT = $31,621
1-4
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?
- answer-The monthly retirement income need is not specified as "today's dollars,"
and no inflation rate specified; therefore, it must be assumed that the $2,500 net
monthly income need represents retirement dollars, and the retirement period
income stream is level. To calculate the lump sum needed at the beginning of
retirement, discount the stream of monthly income payments at the investment
return rate:
10BII+ PVAD calculation:
Set calculator on BEG and 12 periods per year, then input the following:
2,500 [PMT]
25 [SHIFT] [N]
6 [I/YR]
0 [FV]
Solve for PV = $389,957
LO 1-4
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
- answer-This PVAD calculation requires that the calculator be set for beginning-
of-period payments. First, the annual retirement income deficit is expressed in
retirement-year-one dollars, resulting in a $239,925 income deficit in the first
retirement year. This income deficit grows with inflation over the 30-year
retirement period, and the retirement fund earns a 7% return.
, The calculator inputs are
$239,925, [PMT];
30, [N];
2.8846, [I/YR]. (1.07/1.04)-1 x100
Solve for [PV],
to determine the retirement fund that will generate this income stream. If you enter
2.8846 directly into the calculator, you will get $4,911,265. If you use the equation
to compute I/YR, and then hit the I/YR button you will get $4,911,256. Either way
the answer is clear. The difference is that when you calculate the I/YR, the
calculator takes the interest rate out to nine decimal places. If you enter in the
2.8846, then the calculator only takes the interest rate to four decimal places.
LO 1-4
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)
gather data
B)
analyze information
C)
make and implement recommendations
D)
monitor performance
- answer-When the client's circumstances change, the asset management process
goes back to the data gathering step in the process. A
LO 1-2
Which one of the following is not a key attribute of an investment policy?
A)
clearly defined
B)
fluid
C)
realistic
D)
