CRPC TEST 1 EXAM Questions and Answers Complete and Detailed with Rationales| Already Graded and Passed A+|

CRPC TEST 1 EXAM Questions and Answers Complete and Detailed with Rationales| Already Graded and Passed A+| At the end of last year, Bill Greer has the following financial information: 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? The checking account and credit card balances would be on the statement of financial position. $2,700 Which of the following are correct statements about income replacement percentages? 1) Income replacement percentages are typically much higher for those with higher pre-retirement incomes. 2) Income replacement percentages vary between low-income and high-income retirees. 3) Income replacement ratios should not be used as the only basis for planning. 4) Income replacement ratios are useful for younger clients as a guide to their long-range planning and investing. 2,3, & 4 If Tom and Jenny want to save a fixed amount annually to accumulate $2 million by their retirement date in 25 years, what level annual end-of-year savings amount will they need to deposit each year, assuming their savings earn 7% annually? 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 Bill and Lisa 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? 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 Chris and Eve Bronson have analyzed their current living expenses and estimated their retirement income need, net of expected Social Security benefits, to be $90,000 in today's dollars. They are confident that they can earn a 7% after-tax return on their investments, and they expect inflation to average 4% over the long term. Determine the lump sum amount the Bronsons will need at the beginning of retirement to fund their retirement income needs, using the worksheet below. (1) Adjust income deficit for inflation over the pre retirement period:-$ 90,000 present value of retirement income deficit 25 number of periods until retirement 4%% inflation rate Future value of income deficit in first retirement year$239,925(2) Determine retirement fund needed to meet income deficit: $239,925 payment (future value of income deficit in first retirement year)30 number of periods in retirement 2.8846% I/YR computed using 4% inflation and a 7% growth rate The lump sum needed at the beginning of the Bronson's' retirement period is ? 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]. 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 Answer 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?