CRPC Exams Questions With verified Answers| Grade
A+
All of the following are ways that a person can voluntarily transfer estate assets to another person or
entity at death except
A)
by probate.
B)
by will substitute.
C)
transfer on death (T.O.D.).
D)
by gift. - ✔✔✔D
Probate and will substitute are ways that a person can voluntarily transfer estate assets to another
person or entity at death. Gifting is one of the two ways that a person can voluntarily transfer estate
assets to another person or entity during life, not at death. Selling is the second way to transfer
property while alive. T.O.D. passes the brokerage account to the named person when the owner of
the account dies. P.O.D. (payable on death) transfers a bank account in the same way.
LO 8-8
All of the following assets would be included in a decedent's gross estate except
A)
life insurance proceeds from a policy on the decedent in which the decedent had assigned all
incidents of ownership two years before her death.
B)
an irrevocable trust established by the decedent five years before his death that paid all income to
him until death, then the corpus to his children.
C)
the proceeds from a life insurance policy on the decedent that was always owned by the decedent's
spouse, with the spouse as the named beneficiary.
D)
a residence that was owned by the decedent and his spouse as joint tenants with right of survivorship.
- ✔✔✔C
Because the decedent never owned this policy, and his estate is not the beneficiary, these proceeds
are not included in the decedent's gross estate. The decedent's retained right to income causes
inclusion. The decedent owned an interest in the residence at death, and therefore his interest must
be included in his gross estate. If the decedent assigned incidents of ownership in this policy within
three years of death, the proceeds must be included in the decedent's gross estate.
LO 8-9
All of these are examples of asset allocation strategies except
A)
alpha.
B)
tactical.
C)
core/satellite.
D)
strategic. - ✔✔✔Alpha is not an asset allocation strategy, but a way to measure a portfolio
manager's return relative to the amount of risk that has been taken. alpha
LO 2-5
,Although obligations may vary, what is the standard number of periods or units required for a
reservist to participate in drill annually?
A)
48
B)
12
C)
60
D)
24 - ✔✔✔A
Reservists need to drill for 48 periods or units per year. Most units drill one weekend per month. A
typical weekend drill has four periods (two per day). Some military units have additional drilling
requirements, which may include during the week. Reservists also need to participate in annual
training (AT) for two weeks per year.
LO 3-6
An income-tax-penalty-free distribution cannot be made from a tax-sheltered annuity (TSA) until the
employee does which of the following?
separates from service after attaining age 55
attains age 55
becomes disabled or dies
takes a distribution under most hardship withdrawal rules - ✔✔✔ALL OF THE FOLLOWING
Penalty-free distributions can be made from a TSA or 401(k) when an employee separates from
service after attaining age 55, attains age 59½, becomes disabled or dies, or takes a hardship
distribution for deductible medical expenses only. All other hardship withdrawals are subject to early
withdrawal penalty rules. Attaining age 55 means the worker is 55 on December 31 of the year of
separation-not that the worker was 55 on the day of separation.
LO 7-3
Annette, a single taxpayer, has lived in her principal residence for 18 months, and is relocating to
another part of the country due to health reasons. She will have a gain of $400,000 on the sale.
Which one of the following is correct with respect to the sale of her home?
A)
She will qualify for no exclusion because she did not use the home as the principal residence for two
of the last five years.
B)
She will qualify for an exclusion of $300,000 ($400,000 gain times 18/24).
C)
She will qualify for an exclusion of $187,500 ($250,000 maximum exclusion times 18/24) on the sale
of the home.
D)
She will qualify for an exclusion of $400,000, because the two-year rule is waived if the move is due to
health reasons. - ✔✔✔C
The general rule is that a single person may exclude up to $250,000 in the sale of the home, provided
the home has been used as the principal residence for two of the previous five years. A partial
exclusion is available if the two-year rule is not met due to health, job, or other unforeseen
circumstances. The exclusion is the percentage of the two-year period that the principal residence
test is met, times the full exclusion amount.
,LO 8-5
As a general rule, a Medigap insurance policy is designed to cover which one of the following
Medicare-approved charges that are not paid by Medicare?
A)
Medicare Part B excess amounts
B)
Medicare Part D deductibles
C)
100% of skilled nursing coinsurance
D)
deductibles or coinsurance amounts - ✔✔✔D
The costs not covered by either Part A or Part B of Medicare are referred to as Medicare gaps or
Medigaps.
Medigap insurance is designed to supplement Medicare's benefits by filling in some of what Medicare
does not cover. A Medigap policy pays for Medicare-approved charges that are not paid by Medicare
because of deductibles or coinsurance amounts for which the beneficiary is responsible.
The cost and services covered by Medigap policies varies from vendor to vendor and from plan to
plan. Some, but not all, Medigap policies cover such items as Part D deductibles, skilled nursing
coinsurance amounts, and Medicare Part B excess amounts.
LO 5-4
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 - ✔✔✔When the client's circumstances change, the asset management
process goes back to the data gathering step in the process. A
LO 1-2
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?'
A)
65%
B)
80%
C)
50%
D)
75% - ✔✔✔D
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. The percentage of this worker's
full retirement age benefits that will be paid to her at age 62 is 75% [(5/9 of 1% per month for each of
, the first 36 months prior to full retirement age = 20%) + (5/12 of 1% * 12 months = 5%); 20% + 5% =
25%].
LO 3-2
Assume that you would receive $20,000/year at your FRA of 67. If you opted to instead begin benefits
at age 63 and 4 months, you would only receive 76.7% of your full benefit, or $15,340/year or
$1,278/month. - ✔✔✔Calculation:
67 - 63 = 4 years; 4 years is 48 months. However, you must subtract the 4 months since you have
been 63, so your reduction is actually 44 months.
5/9% x 36 = 20% reduction for the first 36 months (3 years)
5/12% x 8 = 3.3% reduction for the next 8 months (44 months - 36 months)
Total Reduction = 23.3%; you would receive 76.7% of your PIA. This reduction would apply to all
future payments.
Assume the following asset classes have the correlations to long-term government bonds shown
below:
Treasury bills:.12
Gold:-.25
Large stocks:.22
Small stocks:.17
Which one of the following best exemplifies the impact of diversification on long-term government
bonds? - ✔✔✔The asset with the lowest correlation provides the most diversification. Therefore,
gold provides more diversification than any of the other assets. Small stocks do provide more
diversification than Treasury bills, but
gold provides the most diversification, so it is the best option.
LO 2-3
Assume your client has a 5% bond, par value of $1,000, and 15 years to maturity. Comparable bonds
are yielding 6%. What is the value of this bond?
A)
$925
B)
$875
C)
$902
D)
$1,010 - ✔✔✔C
If the calculator is set for 1 P/YR, then all factors, other than FV, need to be adjusted for semiannual
payments. The keystrokes would be: END
1,000 [FV],
25 [PMT], 5%=50/2=25
3 [I/YR],
30 [N], 15*2
then solve for [PV] = -902. If the calculator is set at 2 P/YR, then [I/YR] is 6 and [N] is entered as 15
[SHIFT] [N].
LO 2-8
Assume your client has the following portfolio:
A+
All of the following are ways that a person can voluntarily transfer estate assets to another person or
entity at death except
A)
by probate.
B)
by will substitute.
C)
transfer on death (T.O.D.).
D)
by gift. - ✔✔✔D
Probate and will substitute are ways that a person can voluntarily transfer estate assets to another
person or entity at death. Gifting is one of the two ways that a person can voluntarily transfer estate
assets to another person or entity during life, not at death. Selling is the second way to transfer
property while alive. T.O.D. passes the brokerage account to the named person when the owner of
the account dies. P.O.D. (payable on death) transfers a bank account in the same way.
LO 8-8
All of the following assets would be included in a decedent's gross estate except
A)
life insurance proceeds from a policy on the decedent in which the decedent had assigned all
incidents of ownership two years before her death.
B)
an irrevocable trust established by the decedent five years before his death that paid all income to
him until death, then the corpus to his children.
C)
the proceeds from a life insurance policy on the decedent that was always owned by the decedent's
spouse, with the spouse as the named beneficiary.
D)
a residence that was owned by the decedent and his spouse as joint tenants with right of survivorship.
- ✔✔✔C
Because the decedent never owned this policy, and his estate is not the beneficiary, these proceeds
are not included in the decedent's gross estate. The decedent's retained right to income causes
inclusion. The decedent owned an interest in the residence at death, and therefore his interest must
be included in his gross estate. If the decedent assigned incidents of ownership in this policy within
three years of death, the proceeds must be included in the decedent's gross estate.
LO 8-9
All of these are examples of asset allocation strategies except
A)
alpha.
B)
tactical.
C)
core/satellite.
D)
strategic. - ✔✔✔Alpha is not an asset allocation strategy, but a way to measure a portfolio
manager's return relative to the amount of risk that has been taken. alpha
LO 2-5
,Although obligations may vary, what is the standard number of periods or units required for a
reservist to participate in drill annually?
A)
48
B)
12
C)
60
D)
24 - ✔✔✔A
Reservists need to drill for 48 periods or units per year. Most units drill one weekend per month. A
typical weekend drill has four periods (two per day). Some military units have additional drilling
requirements, which may include during the week. Reservists also need to participate in annual
training (AT) for two weeks per year.
LO 3-6
An income-tax-penalty-free distribution cannot be made from a tax-sheltered annuity (TSA) until the
employee does which of the following?
separates from service after attaining age 55
attains age 55
becomes disabled or dies
takes a distribution under most hardship withdrawal rules - ✔✔✔ALL OF THE FOLLOWING
Penalty-free distributions can be made from a TSA or 401(k) when an employee separates from
service after attaining age 55, attains age 59½, becomes disabled or dies, or takes a hardship
distribution for deductible medical expenses only. All other hardship withdrawals are subject to early
withdrawal penalty rules. Attaining age 55 means the worker is 55 on December 31 of the year of
separation-not that the worker was 55 on the day of separation.
LO 7-3
Annette, a single taxpayer, has lived in her principal residence for 18 months, and is relocating to
another part of the country due to health reasons. She will have a gain of $400,000 on the sale.
Which one of the following is correct with respect to the sale of her home?
A)
She will qualify for no exclusion because she did not use the home as the principal residence for two
of the last five years.
B)
She will qualify for an exclusion of $300,000 ($400,000 gain times 18/24).
C)
She will qualify for an exclusion of $187,500 ($250,000 maximum exclusion times 18/24) on the sale
of the home.
D)
She will qualify for an exclusion of $400,000, because the two-year rule is waived if the move is due to
health reasons. - ✔✔✔C
The general rule is that a single person may exclude up to $250,000 in the sale of the home, provided
the home has been used as the principal residence for two of the previous five years. A partial
exclusion is available if the two-year rule is not met due to health, job, or other unforeseen
circumstances. The exclusion is the percentage of the two-year period that the principal residence
test is met, times the full exclusion amount.
,LO 8-5
As a general rule, a Medigap insurance policy is designed to cover which one of the following
Medicare-approved charges that are not paid by Medicare?
A)
Medicare Part B excess amounts
B)
Medicare Part D deductibles
C)
100% of skilled nursing coinsurance
D)
deductibles or coinsurance amounts - ✔✔✔D
The costs not covered by either Part A or Part B of Medicare are referred to as Medicare gaps or
Medigaps.
Medigap insurance is designed to supplement Medicare's benefits by filling in some of what Medicare
does not cover. A Medigap policy pays for Medicare-approved charges that are not paid by Medicare
because of deductibles or coinsurance amounts for which the beneficiary is responsible.
The cost and services covered by Medigap policies varies from vendor to vendor and from plan to
plan. Some, but not all, Medigap policies cover such items as Part D deductibles, skilled nursing
coinsurance amounts, and Medicare Part B excess amounts.
LO 5-4
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 - ✔✔✔When the client's circumstances change, the asset management
process goes back to the data gathering step in the process. A
LO 1-2
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?'
A)
65%
B)
80%
C)
50%
D)
75% - ✔✔✔D
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. The percentage of this worker's
full retirement age benefits that will be paid to her at age 62 is 75% [(5/9 of 1% per month for each of
, the first 36 months prior to full retirement age = 20%) + (5/12 of 1% * 12 months = 5%); 20% + 5% =
25%].
LO 3-2
Assume that you would receive $20,000/year at your FRA of 67. If you opted to instead begin benefits
at age 63 and 4 months, you would only receive 76.7% of your full benefit, or $15,340/year or
$1,278/month. - ✔✔✔Calculation:
67 - 63 = 4 years; 4 years is 48 months. However, you must subtract the 4 months since you have
been 63, so your reduction is actually 44 months.
5/9% x 36 = 20% reduction for the first 36 months (3 years)
5/12% x 8 = 3.3% reduction for the next 8 months (44 months - 36 months)
Total Reduction = 23.3%; you would receive 76.7% of your PIA. This reduction would apply to all
future payments.
Assume the following asset classes have the correlations to long-term government bonds shown
below:
Treasury bills:.12
Gold:-.25
Large stocks:.22
Small stocks:.17
Which one of the following best exemplifies the impact of diversification on long-term government
bonds? - ✔✔✔The asset with the lowest correlation provides the most diversification. Therefore,
gold provides more diversification than any of the other assets. Small stocks do provide more
diversification than Treasury bills, but
gold provides the most diversification, so it is the best option.
LO 2-3
Assume your client has a 5% bond, par value of $1,000, and 15 years to maturity. Comparable bonds
are yielding 6%. What is the value of this bond?
A)
$925
B)
$875
C)
$902
D)
$1,010 - ✔✔✔C
If the calculator is set for 1 P/YR, then all factors, other than FV, need to be adjusted for semiannual
payments. The keystrokes would be: END
1,000 [FV],
25 [PMT], 5%=50/2=25
3 [I/YR],
30 [N], 15*2
then solve for [PV] = -902. If the calculator is set at 2 P/YR, then [I/YR] is 6 and [N] is entered as 15
[SHIFT] [N].
LO 2-8
Assume your client has the following portfolio:
