CRPC EXAM REVIEW NEWEST 2025 VERSION REAL
EXAM COMPLETE ALL 170+ QUESTIONS AND
CORRECT DETAILED ANSWERS ALREADY GRADED A+
Mary would like to retire and begin Social Security benefits at 63 years and six months.
Her FRA is 67. How much will her primary insurance amount (PIA) be reduced? -
answers-5/9% x 36 = 20% reduction for the first 36 months
5/12% x 6 = 2.5% reduction for the next six months
Total Reduction = 22.5%; she would receive 77.5% of her FRA payment. Again, this
reduction would apply to all future payments.
Designated Beneficiary - answers-A designated beneficiary is a person who has been
named to inherit an asset such as the balance of an individual retirement account (IRA),
annuity, or life insurance policy after the death of the asset's owner. It is also known as
a named beneficiary.
Eligible designated beneficiary (EDB) - answers-An eligible designated beneficiary
(EDB) is included in a unique classification of retirement account beneficiaries.
According to the Internal Revenue Service (IRS), EDBs are defined as a spouse, a
minor child of the deceased, a disabled person, a chronically ill individual, or an
individual not more than ten years younger than the retirement account owner or
participant.
Eligible designated beneficiary (EDB) terms - answers-Mrs. - Surviving spouse. "Mr.
T.D. McDonald" would not work
because a Mr. can be married or unmarried.
T - Ten years (someone not more than 10 years younger than the
decedent)
D - Disabled,
M - Minor child (until the child reaches the age of majority)
C - Chronically ill
B - answers-Over a period of 10 years, Mark contributed a total of $20,000 to a
nondeductible IRA. The current value of Mark's IRA is $50,000, and Mark, who is now
age 45, has decided to use $30,000 of his IRA assets for the down payment on a
second home. Assuming Mark's marginal tax bracket is 22%, how much does he owe in
taxes and penalties?
A)
$9,600
B)
$5,760
,C)
$3,960
D)
$4,760
Explanation
Mark's effective tax rate is 32%; i.e., 22% plus the 10% early withdrawal penalty. He has
a basis of $20,000 out of $50,000. Thus, 40% of the distribution will be tax-free, which
means it is also penalty-free. If 40% of the distribution is tax-free, then 60% is taxable
and also subject to the 10% EWP. 60% of $30,000 is $18,000. 32% of $18,000 is
$5,760.
LO 7-3
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? - answers-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? - answers-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 - answers-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? - answers-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? - answers-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 - answers-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)
EXAM COMPLETE ALL 170+ QUESTIONS AND
CORRECT DETAILED ANSWERS ALREADY GRADED A+
Mary would like to retire and begin Social Security benefits at 63 years and six months.
Her FRA is 67. How much will her primary insurance amount (PIA) be reduced? -
answers-5/9% x 36 = 20% reduction for the first 36 months
5/12% x 6 = 2.5% reduction for the next six months
Total Reduction = 22.5%; she would receive 77.5% of her FRA payment. Again, this
reduction would apply to all future payments.
Designated Beneficiary - answers-A designated beneficiary is a person who has been
named to inherit an asset such as the balance of an individual retirement account (IRA),
annuity, or life insurance policy after the death of the asset's owner. It is also known as
a named beneficiary.
Eligible designated beneficiary (EDB) - answers-An eligible designated beneficiary
(EDB) is included in a unique classification of retirement account beneficiaries.
According to the Internal Revenue Service (IRS), EDBs are defined as a spouse, a
minor child of the deceased, a disabled person, a chronically ill individual, or an
individual not more than ten years younger than the retirement account owner or
participant.
Eligible designated beneficiary (EDB) terms - answers-Mrs. - Surviving spouse. "Mr.
T.D. McDonald" would not work
because a Mr. can be married or unmarried.
T - Ten years (someone not more than 10 years younger than the
decedent)
D - Disabled,
M - Minor child (until the child reaches the age of majority)
C - Chronically ill
B - answers-Over a period of 10 years, Mark contributed a total of $20,000 to a
nondeductible IRA. The current value of Mark's IRA is $50,000, and Mark, who is now
age 45, has decided to use $30,000 of his IRA assets for the down payment on a
second home. Assuming Mark's marginal tax bracket is 22%, how much does he owe in
taxes and penalties?
A)
$9,600
B)
$5,760
,C)
$3,960
D)
$4,760
Explanation
Mark's effective tax rate is 32%; i.e., 22% plus the 10% early withdrawal penalty. He has
a basis of $20,000 out of $50,000. Thus, 40% of the distribution will be tax-free, which
means it is also penalty-free. If 40% of the distribution is tax-free, then 60% is taxable
and also subject to the 10% EWP. 60% of $30,000 is $18,000. 32% of $18,000 is
$5,760.
LO 7-3
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? - answers-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? - answers-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 - answers-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? - answers-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? - answers-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 - answers-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)
