CRPC EXAM PRACTICE EXAM ACTUAL EXAM
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?
A)$111,000
B)$137,000
C)$122,000
D)$263,000 - ANSWER: C
At the end of last year, Bill Greer has the following financial information:
Salaries$70,000Auto payments$5,000Insurance payments$3,800Food$8,000Credit
card balance$10,000Dividends$1,100Utilities$3,500Mortgage
payments$14,000Taxes$13,000Clothing$9,000Interest income$2,100Checking
account$4,000Vacations$8,400Donations$5,800
What is the cash flow surplus or (deficit) for Bill?
A)
$2,700
B)
$6,500
C)
$10,700
D)
($500) - ANSWER: A
Which of the following are correct statements about income replacement
percentages?
I.Income replacement percentages are typically much higher for those with higher
preretirement incomes.
II.Income replacement percentages vary between low-income and high-income
retirees.
III.Income replacement ratios should not be used as the only basis for planning.
IV.Income replacement ratios are useful for younger clients as a guide to their long-
range planning and investing.
A)
I and IV
B)
I and II
C)
II and III
,D)
II, III, and IV - ANSWER: D
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?
A)
$55,692
B)
$31,621
C)
$29,552
D)
$54,130 - ANSWER: B
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?
A)
$931,241
B)
$388,017
C)
$389,957
D)
$598,504 - ANSWER: C
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)
make and implement recommendations
B)
gather data
C)
monitor performance
D)
analyze information - ANSWER: B
, Which one of the following is not a key attribute of an investment policy?
A)
clearly defined
B)
realistic
C)
fluid
D)
long-term perspective - ANSWER: C
All of these are examples of asset allocation strategies except
A)
tactical.
B)
core/satellite.
C)
strategic.
D)
alpha. - ANSWER: D
Assume the following asset classes have the correlations to long-term government
bonds shown below:
Treasury bills:.12Gold:-.25Large stocks:.22Small stocks:.17
Which one of the following best exemplifies the impact of diversification on long-
term government bonds?
A)
Large stocks provide more diversification than small stocks.
B)
Small stocks provide more diversification than Treasury bills.
C)
Gold provides more diversification than large stocks.
D)
Treasury bills provide more diversification than gold. - ANSWER: C
The two major risks associated with individual common stocks are
A)
interest rate risk and purchasing power risk.
B)
market risk and business risk.
C)
default risk and business risk.
D)
interest rate risk and exchange rate risk. - ANSWER: B
What is the price of a bond with a 7% coupon, a $1,000 par value, and a maturity of
20 years if the market interest rate for similar bonds is 6%?
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?
A)$111,000
B)$137,000
C)$122,000
D)$263,000 - ANSWER: C
At the end of last year, Bill Greer has the following financial information:
Salaries$70,000Auto payments$5,000Insurance payments$3,800Food$8,000Credit
card balance$10,000Dividends$1,100Utilities$3,500Mortgage
payments$14,000Taxes$13,000Clothing$9,000Interest income$2,100Checking
account$4,000Vacations$8,400Donations$5,800
What is the cash flow surplus or (deficit) for Bill?
A)
$2,700
B)
$6,500
C)
$10,700
D)
($500) - ANSWER: A
Which of the following are correct statements about income replacement
percentages?
I.Income replacement percentages are typically much higher for those with higher
preretirement incomes.
II.Income replacement percentages vary between low-income and high-income
retirees.
III.Income replacement ratios should not be used as the only basis for planning.
IV.Income replacement ratios are useful for younger clients as a guide to their long-
range planning and investing.
A)
I and IV
B)
I and II
C)
II and III
,D)
II, III, and IV - ANSWER: D
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?
A)
$55,692
B)
$31,621
C)
$29,552
D)
$54,130 - ANSWER: B
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?
A)
$931,241
B)
$388,017
C)
$389,957
D)
$598,504 - ANSWER: C
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)
make and implement recommendations
B)
gather data
C)
monitor performance
D)
analyze information - ANSWER: B
, Which one of the following is not a key attribute of an investment policy?
A)
clearly defined
B)
realistic
C)
fluid
D)
long-term perspective - ANSWER: C
All of these are examples of asset allocation strategies except
A)
tactical.
B)
core/satellite.
C)
strategic.
D)
alpha. - ANSWER: D
Assume the following asset classes have the correlations to long-term government
bonds shown below:
Treasury bills:.12Gold:-.25Large stocks:.22Small stocks:.17
Which one of the following best exemplifies the impact of diversification on long-
term government bonds?
A)
Large stocks provide more diversification than small stocks.
B)
Small stocks provide more diversification than Treasury bills.
C)
Gold provides more diversification than large stocks.
D)
Treasury bills provide more diversification than gold. - ANSWER: C
The two major risks associated with individual common stocks are
A)
interest rate risk and purchasing power risk.
B)
market risk and business risk.
C)
default risk and business risk.
D)
interest rate risk and exchange rate risk. - ANSWER: B
What is the price of a bond with a 7% coupon, a $1,000 par value, and a maturity of
20 years if the market interest rate for similar bonds is 6%?
