CRPC Practice Exam #2
Study online at https://quizlet.com/_hvrtmc
1. Richard wants to have an annual retirement income of $100,000 (payable at
the beginning of each year) protected against 3% inflation.
Assuming a 7% after-tax rate of return and a retirement period of 30 years, how
much money does Richard need in order to meet his goal?
Explain how you need to input this on the calculator and why.: Step One - Set the
calculator to BEGIN.
Step Two - Calculate the inflation adjusted rate of return (One plus the Rate of Return divided by One plus the interest
rate, minus one, multiplied by 100 = the inflation adjusted rate of return) Put this number in the I/YR
Step Three - 100,000 goes in as a PMT
Step Four - 30 goes in as N
Step Five -Press PV
Richard needs $1,822,042.88 in today's dollars to meet his needs.
2. How do you calculate the inflation-adjusted rate of return?: 1 plus the Rate of Return
Divided by
1 plus the interest rate
minus one
multiplied by 100
3. Tom has been promised a stream of $40,000 annual payments at the end of
each year for 25 years. The present value of these payments discounted at a
rate of 5% is which one of the following amounts?: Step One - The problem says END in it so
you have to set your calculator to the END mode.
Step two - Enter the $40000 as a PMT
1/7
, CRPC Practice Exam #2
Study online at https://quizlet.com/_hvrtmc
Step Three - Enter 25 as the N.
Step Four - Enter 5 as the I/R
Step Six - Hit PV.
$563,758
4. Nick wants to maintain the purchasing power of $75,000 (in today's dollars) in
retirement. If inflation continues to average 3.5%, approximately what amount
will Nick need in 20 years to equal the purchasing power of $75,000 today?
(Round your answer.): If you know the Rule of 72, and you divide 3.5 into 72, you arrive at the number 20,
which is the number of years it will take for a sum to double. With a calculator, you can solve for the future value of
$75,000 over 20 years at 3.5%.
Keystrokes: 20 N, 3.5 I/YR, 75,000 PV, FV = $149,234; rounded = $150,000
5. What is the second step in the retirement planning process?: The second step in the
retirement planning process is to gather client data, including goals and expectations
6. What is the first step in the retirement planning process?: The first step is to establish
and define the client-counselor relationship which includes disclosing the counselor's compensation arrangement
7. What is a characteristic of a TIP?: The increase in principal is taxable each year. Any annual increase
in principal is subject to federal taxation (unless in a tax-deferred account). Returns are tied to the consumer price
index. TIPS are sold at par value and have maturities up to 30 years.
8. How you calculate the weighted beta of a portfolio?: You multiply the weight times the
beta for each stock, then you add those numbers up together.
9. What does Jensen's alpha tell you: The percentage a manager over or underperformed based on
the amount of risk taken.
10. Moving averages, graphs and statistics regarding the supply and demand of
stocks are an example of what kind of analysis?: Technical analysis.
11. Financial statement ratios are part of what kind of analysis?: Fundamental analysis.
12. When performing bond calculations, what general assumptions should be
made unless stated otherwise?: The coupon rate is annualized but paid semiannually for U.S. bonds.
The face value of the bond should be assumed to be $1,000, not $10,000. The coupon rate is stated on an annual
2/7
Study online at https://quizlet.com/_hvrtmc
1. Richard wants to have an annual retirement income of $100,000 (payable at
the beginning of each year) protected against 3% inflation.
Assuming a 7% after-tax rate of return and a retirement period of 30 years, how
much money does Richard need in order to meet his goal?
Explain how you need to input this on the calculator and why.: Step One - Set the
calculator to BEGIN.
Step Two - Calculate the inflation adjusted rate of return (One plus the Rate of Return divided by One plus the interest
rate, minus one, multiplied by 100 = the inflation adjusted rate of return) Put this number in the I/YR
Step Three - 100,000 goes in as a PMT
Step Four - 30 goes in as N
Step Five -Press PV
Richard needs $1,822,042.88 in today's dollars to meet his needs.
2. How do you calculate the inflation-adjusted rate of return?: 1 plus the Rate of Return
Divided by
1 plus the interest rate
minus one
multiplied by 100
3. Tom has been promised a stream of $40,000 annual payments at the end of
each year for 25 years. The present value of these payments discounted at a
rate of 5% is which one of the following amounts?: Step One - The problem says END in it so
you have to set your calculator to the END mode.
Step two - Enter the $40000 as a PMT
1/7
, CRPC Practice Exam #2
Study online at https://quizlet.com/_hvrtmc
Step Three - Enter 25 as the N.
Step Four - Enter 5 as the I/R
Step Six - Hit PV.
$563,758
4. Nick wants to maintain the purchasing power of $75,000 (in today's dollars) in
retirement. If inflation continues to average 3.5%, approximately what amount
will Nick need in 20 years to equal the purchasing power of $75,000 today?
(Round your answer.): If you know the Rule of 72, and you divide 3.5 into 72, you arrive at the number 20,
which is the number of years it will take for a sum to double. With a calculator, you can solve for the future value of
$75,000 over 20 years at 3.5%.
Keystrokes: 20 N, 3.5 I/YR, 75,000 PV, FV = $149,234; rounded = $150,000
5. What is the second step in the retirement planning process?: The second step in the
retirement planning process is to gather client data, including goals and expectations
6. What is the first step in the retirement planning process?: The first step is to establish
and define the client-counselor relationship which includes disclosing the counselor's compensation arrangement
7. What is a characteristic of a TIP?: The increase in principal is taxable each year. Any annual increase
in principal is subject to federal taxation (unless in a tax-deferred account). Returns are tied to the consumer price
index. TIPS are sold at par value and have maturities up to 30 years.
8. How you calculate the weighted beta of a portfolio?: You multiply the weight times the
beta for each stock, then you add those numbers up together.
9. What does Jensen's alpha tell you: The percentage a manager over or underperformed based on
the amount of risk taken.
10. Moving averages, graphs and statistics regarding the supply and demand of
stocks are an example of what kind of analysis?: Technical analysis.
11. Financial statement ratios are part of what kind of analysis?: Fundamental analysis.
12. When performing bond calculations, what general assumptions should be
made unless stated otherwise?: The coupon rate is annualized but paid semiannually for U.S. bonds.
The face value of the bond should be assumed to be $1,000, not $10,000. The coupon rate is stated on an annual
2/7
