Paul King is ready to have his clients, Nick and Faith, implement their financial plan. Which of the
following is the most appropriate at this stage of the financial planning process?
a. Paul will prepare a list of the professionals he has specified to prepare the necessary documents.
b. Paul will hand the plan to Nick and Faith and tell them to contact him if they have any questions
regarding the implementation process outlined in the plan.
c. Paul will guide Nick and Faith through the steps required to put the plan in motion.
d. Paul will establish priorities for Nick and Faith, clearly mapping out the order in which each facet
of the plan is to be implemented. - CORRECT ANS - c. Paul will guide Nick and Faith through the
steps required to put the plan in motion.
You are working with Henry and Catherine Caldwell in developing their financial plan. You have
collected the documents necessary, and reviewed and analyzed the data to gain an understanding of
the Caldwell's financial situation.Which of the following would NOT be part of the next step in the
financial planning process?
a. developing the recommendations
b. selecting the products
c. identifying alternatives
d. presenting the plan. - CORRECT ANS - b. selecting the products
The Simpsons need to save an additional $300k (in dollars for the first year of retirement). They
expect to earn 7% after-tax return on their retirement savings, and want to assume a 5% long term
inflation rate.What level annual savings amount will the Simpsons need to deposit at the end of each
year during their 20-year preretirement period. - CORRECT ANS - 1. # of periods (1 P/YR)
2. Beg/End
3. C All
4. 300,000 FV
5. 20 N
, 6. 7 I/YR
7. Solution: PMT =-7,317.88
Bill and Mary Parker are projected to need an additional $353,036 at the start of their retirement in 25
years.
Assuming an inflation rate of 4% and an after-tax return of 6% calculate the Parkers' annual serial
(increasing) savings requirement. - CORRECT ANS - Step 1: Discount Lump Sum by rate of inflation
25 N
4 I/YR
353036 FV
Solution PV=132,430
Step 2: Solve for payment using inflation adjusted yield
25 N
1.9231 I/YR
132430 FV
Solution PMT=4,174.33
Step 3: Inflation Adjustment
4174.33 x 1.04 = $4,342
The Smiths, both age 40, estimated a retirement income need of $22,000 in today's dollars. They
expect a 6% after-tax return on their investments, and inflation to average 4% over the long term.They
want to plan for a 30 year retirement period beginning at age 65.Determine the lump sum amount the
Smiths will need at the beginning of retirement to fund their retirement income needs. - CORRECT
ANS - Step 1:
1. # of periods (1 P/YR)
2. C All
3. 22000 (+/-) PV
4. 25 N
5. 4 I/YR
6. Solution: FV =$58,648.40
following is the most appropriate at this stage of the financial planning process?
a. Paul will prepare a list of the professionals he has specified to prepare the necessary documents.
b. Paul will hand the plan to Nick and Faith and tell them to contact him if they have any questions
regarding the implementation process outlined in the plan.
c. Paul will guide Nick and Faith through the steps required to put the plan in motion.
d. Paul will establish priorities for Nick and Faith, clearly mapping out the order in which each facet
of the plan is to be implemented. - CORRECT ANS - c. Paul will guide Nick and Faith through the
steps required to put the plan in motion.
You are working with Henry and Catherine Caldwell in developing their financial plan. You have
collected the documents necessary, and reviewed and analyzed the data to gain an understanding of
the Caldwell's financial situation.Which of the following would NOT be part of the next step in the
financial planning process?
a. developing the recommendations
b. selecting the products
c. identifying alternatives
d. presenting the plan. - CORRECT ANS - b. selecting the products
The Simpsons need to save an additional $300k (in dollars for the first year of retirement). They
expect to earn 7% after-tax return on their retirement savings, and want to assume a 5% long term
inflation rate.What level annual savings amount will the Simpsons need to deposit at the end of each
year during their 20-year preretirement period. - CORRECT ANS - 1. # of periods (1 P/YR)
2. Beg/End
3. C All
4. 300,000 FV
5. 20 N
, 6. 7 I/YR
7. Solution: PMT =-7,317.88
Bill and Mary Parker are projected to need an additional $353,036 at the start of their retirement in 25
years.
Assuming an inflation rate of 4% and an after-tax return of 6% calculate the Parkers' annual serial
(increasing) savings requirement. - CORRECT ANS - Step 1: Discount Lump Sum by rate of inflation
25 N
4 I/YR
353036 FV
Solution PV=132,430
Step 2: Solve for payment using inflation adjusted yield
25 N
1.9231 I/YR
132430 FV
Solution PMT=4,174.33
Step 3: Inflation Adjustment
4174.33 x 1.04 = $4,342
The Smiths, both age 40, estimated a retirement income need of $22,000 in today's dollars. They
expect a 6% after-tax return on their investments, and inflation to average 4% over the long term.They
want to plan for a 30 year retirement period beginning at age 65.Determine the lump sum amount the
Smiths will need at the beginning of retirement to fund their retirement income needs. - CORRECT
ANS - Step 1:
1. # of periods (1 P/YR)
2. C All
3. 22000 (+/-) PV
4. 25 N
5. 4 I/YR
6. Solution: FV =$58,648.40
