CRPC ACTUAL EXAM WITH QUESTIONS AND CORRECT VERIFIED ANSWERS
WITH RATIONALE |ALREADY GRADED A+
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 $2,700. The checking account
and credit card balances would be on the statement of financial position.
LO 1-3
,CRPC ACTUAL EXAM WITH QUESTIONS AND CORRECT VERIFIED ANSWERS
WITH RATIONALE |ALREADY GRADED A+
correct statements about income replacement percentages - (ANSWER)Income
replacement percentages are typically much higher for those with lower preretirement
incomes.
Income replacement percentages vary between low-income and high-income retirees.
Income replacement ratios should not be used as the only basis for planning. #$
%
^
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.
,CRPC ACTUAL EXAM WITH QUESTIONS AND CORRECT VERIFIED ANSWERS
WITH RATIONALE |ALREADY GRADED A+
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.
, CRPC ACTUAL EXAM WITH QUESTIONS AND CORRECT VERIFIED ANSWERS
WITH RATIONALE |ALREADY GRADED A+
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)
WITH RATIONALE |ALREADY GRADED A+
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 $2,700. The checking account
and credit card balances would be on the statement of financial position.
LO 1-3
,CRPC ACTUAL EXAM WITH QUESTIONS AND CORRECT VERIFIED ANSWERS
WITH RATIONALE |ALREADY GRADED A+
correct statements about income replacement percentages - (ANSWER)Income
replacement percentages are typically much higher for those with lower preretirement
incomes.
Income replacement percentages vary between low-income and high-income retirees.
Income replacement ratios should not be used as the only basis for planning. #$
%
^
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.
,CRPC ACTUAL EXAM WITH QUESTIONS AND CORRECT VERIFIED ANSWERS
WITH RATIONALE |ALREADY GRADED A+
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.
, CRPC ACTUAL EXAM WITH QUESTIONS AND CORRECT VERIFIED ANSWERS
WITH RATIONALE |ALREADY GRADED A+
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)
