Page 1 of 122
CRPC (CHARTERED RETIREMENT PLANNING
COUNSELOR) ALL 600 QUESTIONS AND
DETAILED SOLUTIONS LATEST UPDATE THIS
YEAR
QUESTION: When performing bond calculations, which of the following general assumptions
should be made unless stated otherwise? - A) The coupon rate is annualized but paid
semiannually for U.S. bonds.
B) On a financial calculator, bonds are calculated in the Begin mode.
C) The coupon payment used in bond calculations is the annual amount.
D) The face value of the bond is $10,000.
--A
The face value of the bond should be assumed to be $1,000, not $10,000. The coupon rate is
stated on an annual basis but is assumed to be paid semiannually for U.S. bonds and the
coupon payment is always made at the end of the period, not the beginning. All bonds, even
zero coupon bonds, are compounded semiannually in the End mode. This makes all bond YTM
quotes standardized for easy comparison.
QUESTION: 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) $1,010
1
,Page 2 of 122
B) $902
C) $925
D) $875
--B
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: 1,000 [FV], 25 [PMT], 3 [I/YR], 30 [N], 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].
QUESTION: Which of the following is correct regarding the additional payroll tax for high wage
earners that was brought about by the Affordable Care Act? - A) The tax applies to those with
an AGI in excess of $500,000.
B) The tax is 1.9%.
C) The tax is split between the employer and employee.
D) The tax was designed to provide additional funding for Medicare.
--D
This tax is an additional Medicare tax. The 0.9% tax is employee paid and applies to high
earners only (AGI in excess of $250,000 for joint filers and $200,000 for single filers, not
indexed).
QUESTION: Mark, a financial adviser, has a client who has worked in two positions during his
lifetime. The client's first position was a state or local government position that was not
2
,Page 3 of 122
covered by Social Security. The client is receiving a pension from that employment. His second
position was covered by Social Security and he is eligible for Social Security retirement benefits.
Mark should advise his client that - his eligibility for Social Security retirement benefits may be
reduced due to the windfall elimination provision (WEP).
QUESTION: Worked in a position that was not covered by Social Security, and the client is
receiving a pension from that employment, - If you have a client who has worked in a position
that was not covered by Social Security, and the client is receiving a pension from that
employment, his eligibility for Social Security benefits based on his own work history covered
by Social Security may be reduced due to the windfall elimination provision (WEP). The
government pension offset provision (GPO) impacts Social Security benefits owed to spouses,
ex-spouses, or to survivor benefits. If he has one or more survivors entitled to a benefit, the
Social Security Administration recalculates the benefit to omit the WEP, which results in a
higher survivor benefit. Reductions due to the WEP are NOT reflected in Social Security benefit
estimates. One way to differentiate between the two is focusing on the "W" in WEP. The "W"
can remind you of "worker." Thus, the WEP reduces Social Security retirement benefits based
on your own work history. That leaves the GPO as the one that reduces a spousal Social Security
benefit based on what the spouse is getting from a retirement plan based on employment that
did not pay into Social Security (such as public school teachers in several states).
Q; Which of the following are correct statements about the capital utilization strategy? - I. It
produces an annual retirement income over a finite number of years.
II. Assuming the yield remains the same, the larger the retirement income that is paid, the
shorter the number of years over which it will be paid.
III. When the capital utilization approach is used, the planner must be careful in making
assumptions about the life expectancy of the client.
3
, Page 4 of 122
IV. The effect of taxes on retirement savings and distributions should be considered when the
before-tax approach is used to calculate the future value of retirement assets.
QUESTION: Which one of the following is not a key element of an investment policy? - A) a
provision for periodic review
B) the acceptable risk tolerance level
C) a target asset allocation
D) names of specific stocks to be in the portfolio
--D
The key elements in an investment policy are a clear statement of the client's goal, suitable
investment vehicles and strategies, the acceptable risk tolerance level for the client, asset
allocation guidelines, and a provision for periodic review. One way to remember the essential
elements of an investment policy is the acronym "GRASP" (Goals, Risk, Asset Allocation,
Strategies/Suitable Investment-meaning the investment categories that may or may not be
used-and Periodic Review). Specific investments would be determined after the investment
policy is created.
QUESTION: Which one of the following is a characteristic of Treasury inflation-protected
securities (TIPS)? - A) They are sold at a discount.
B) The increase in principal is taxable each year.
C) Their returns are tied to the producer price index.
D) They are issued with maturities up to 40 years.
4
CRPC (CHARTERED RETIREMENT PLANNING
COUNSELOR) ALL 600 QUESTIONS AND
DETAILED SOLUTIONS LATEST UPDATE THIS
YEAR
QUESTION: When performing bond calculations, which of the following general assumptions
should be made unless stated otherwise? - A) The coupon rate is annualized but paid
semiannually for U.S. bonds.
B) On a financial calculator, bonds are calculated in the Begin mode.
C) The coupon payment used in bond calculations is the annual amount.
D) The face value of the bond is $10,000.
--A
The face value of the bond should be assumed to be $1,000, not $10,000. The coupon rate is
stated on an annual basis but is assumed to be paid semiannually for U.S. bonds and the
coupon payment is always made at the end of the period, not the beginning. All bonds, even
zero coupon bonds, are compounded semiannually in the End mode. This makes all bond YTM
quotes standardized for easy comparison.
QUESTION: 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) $1,010
1
,Page 2 of 122
B) $902
C) $925
D) $875
--B
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: 1,000 [FV], 25 [PMT], 3 [I/YR], 30 [N], 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].
QUESTION: Which of the following is correct regarding the additional payroll tax for high wage
earners that was brought about by the Affordable Care Act? - A) The tax applies to those with
an AGI in excess of $500,000.
B) The tax is 1.9%.
C) The tax is split between the employer and employee.
D) The tax was designed to provide additional funding for Medicare.
--D
This tax is an additional Medicare tax. The 0.9% tax is employee paid and applies to high
earners only (AGI in excess of $250,000 for joint filers and $200,000 for single filers, not
indexed).
QUESTION: Mark, a financial adviser, has a client who has worked in two positions during his
lifetime. The client's first position was a state or local government position that was not
2
,Page 3 of 122
covered by Social Security. The client is receiving a pension from that employment. His second
position was covered by Social Security and he is eligible for Social Security retirement benefits.
Mark should advise his client that - his eligibility for Social Security retirement benefits may be
reduced due to the windfall elimination provision (WEP).
QUESTION: Worked in a position that was not covered by Social Security, and the client is
receiving a pension from that employment, - If you have a client who has worked in a position
that was not covered by Social Security, and the client is receiving a pension from that
employment, his eligibility for Social Security benefits based on his own work history covered
by Social Security may be reduced due to the windfall elimination provision (WEP). The
government pension offset provision (GPO) impacts Social Security benefits owed to spouses,
ex-spouses, or to survivor benefits. If he has one or more survivors entitled to a benefit, the
Social Security Administration recalculates the benefit to omit the WEP, which results in a
higher survivor benefit. Reductions due to the WEP are NOT reflected in Social Security benefit
estimates. One way to differentiate between the two is focusing on the "W" in WEP. The "W"
can remind you of "worker." Thus, the WEP reduces Social Security retirement benefits based
on your own work history. That leaves the GPO as the one that reduces a spousal Social Security
benefit based on what the spouse is getting from a retirement plan based on employment that
did not pay into Social Security (such as public school teachers in several states).
Q; Which of the following are correct statements about the capital utilization strategy? - I. It
produces an annual retirement income over a finite number of years.
II. Assuming the yield remains the same, the larger the retirement income that is paid, the
shorter the number of years over which it will be paid.
III. When the capital utilization approach is used, the planner must be careful in making
assumptions about the life expectancy of the client.
3
, Page 4 of 122
IV. The effect of taxes on retirement savings and distributions should be considered when the
before-tax approach is used to calculate the future value of retirement assets.
QUESTION: Which one of the following is not a key element of an investment policy? - A) a
provision for periodic review
B) the acceptable risk tolerance level
C) a target asset allocation
D) names of specific stocks to be in the portfolio
--D
The key elements in an investment policy are a clear statement of the client's goal, suitable
investment vehicles and strategies, the acceptable risk tolerance level for the client, asset
allocation guidelines, and a provision for periodic review. One way to remember the essential
elements of an investment policy is the acronym "GRASP" (Goals, Risk, Asset Allocation,
Strategies/Suitable Investment-meaning the investment categories that may or may not be
used-and Periodic Review). Specific investments would be determined after the investment
policy is created.
QUESTION: Which one of the following is a characteristic of Treasury inflation-protected
securities (TIPS)? - A) They are sold at a discount.
B) The increase in principal is taxable each year.
C) Their returns are tied to the producer price index.
D) They are issued with maturities up to 40 years.
4
