CRPC EXAM 2024-2025 ACTUAL EXAM 180 QUESTIONS
AND CORRECT DETAILED ANSWERS WITH RATIONALES
(VERIFIED ANSWERS) |ALREADY GRADED A+
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 longrange planning
correct statements about income replacement and investing.
percentages
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
Mary Goodwin's financial situation is as follows: Assets = $263,000; liabilities = $141,000, so net worth is $122,000. Taxes and auto note payments
Cash/cash equivalents$15,000 appear on the cash flow statement. 1-3
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?
Salaries$70,000 Income = $70,000 + $1,100 + $2,100 = $73,200. Expenses = $5,000 + $3,800 + $8,000 + $3,500
Auto payments$5,000 + $14,000 + $13,000 + $9,000 + $8,400 + $5,800 = $70,500, so there is a surplus of $2,700. The
Insurance payments$3,800 checking account and credit card balances would be on the statement of financial position.
Food$8,000 LO 1-3
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?
WHATSAPP ME FOR MORE FILES: +254798176093
,If Tom and Jenny want to save a fixed amount Set your calculator to the "End" mode and "1 P/Yr." Inputs: FV = 2000000, I/YR = 7, N =
annually to accumulate $2 million by their 25, PV = 0, then PMT = $31,621
retirement date in 25 years (rather than an
amount that grows with inflation each year),
what level annual end-of-year savings amount 1-4
will they need to deposit each year, assuming
their savings earn 7% annually?
Bill and Lisa Hahn have determined that they The monthly retirement income need is not specified as "today's dollars," and no inflation rate
will need a monthly income of $6,000 during specified; therefore, it must be assumed that the $2,500 net monthly income need represents
retirement. They expect to receive Social retirement dollars, and the retirement period income stream is level. To calculate the lump
Security retirement benefits amounting to sum needed at the beginning of retirement, discount the stream of monthly income payments
$3,500 per month at the beginning of each at the investment return rate:
month. Over the 12 remaining years of their 10BII+ PVAD calculation:
preretirement period, they expect to generate Set calculator on BEG and 12 periods per year, then input the following:
an average annual after-tax investment return 2,500 [PMT]
of 8%; during their 25-year retirement period, 25 [SHIFT] [N]
they want to assume a 6% annual after-tax 6 [I/YR]
investment return compounded monthly. They 0 [FV]
want to start their monthly retirement Solve for PV = $389,957
withdrawals on the first day they retire. LO 1-4
What is the lump sum needed at the beginning
of retirement to fund this income stream?
WHATSAPP ME FOR MORE FILES: +254798176093
,Chris and Eve Bronson have analyzed their This PVAD calculation requires that the calculator be set for beginning-of-period payments.
current living expenses and estimated their First, the annual retirement income deficit is expressed in retirement-yearone dollars,
retirement income need, net of expected Social resulting in a $239,925 income deficit in the first retirement year. This income deficit grows
Security benefits, to be $90,000 in today's with inflation over the 30-year retirement period, and the retirement fund earns a 7% return.
dollars. They are confident that they can earn a The calculator inputs are
7% after-tax return on their investments, and
they expect inflation to average 4% over the $239,925, [PMT];
long term. Determine the lump sum amount the 30, [N];
Bronsons will need at the beginning of 2.8846, [I/YR]. (1.07/1.04)-1 x100 Solve
retirement to fund their retirement income for [PV],
needs, using the worksheet below.
to determine the retirement fund that will generate this income stream. If you enter 2.8846
(1) Adjust income deficit for inflation directly into the calculator, you will get $4,911,265. If you use the equation to compute I/YR,
overthe preretirement period:$ 90,000present and then hit the I/YR button you will get $4,911,256. Either way the answer is clear. The
value of retirement income deficit25number of difference is that when you calculate the I/YR, the calculator takes the interest rate out to nine
periods until retirement4%% inflation decimal places. If you enter in the 2.8846, then the calculator only takes the interest rate to
rateFuture value of income deficit in first four decimal places.
retirement year$239,925 LO 1-4
(2) Determine retirement fund needed
tomeet 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
Assume a client and investment professional When the client's circumstances change, the asset management process goes back to the data
have worked together for several years. gathering step in the process. A
Recently, the client's personal and financial LO 1-2
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)
make and implement recommendations D)
monitor performance
WHATSAPP ME FOR MORE FILES: +254798176093
, Which one of the following is not a key An investment policy provides guidelines that are standards to be followed. If they are fluid,
attribute of an investment policy? A) they are ever-changing and therefore would be difficult to implement and would provide
clearly defined inconsistency in the management of the portfolio. LO 2-1
B) fluid C)
realistic Fluid
D) long-term perspective
All of these are examples of asset Alpha is not an asset allocation strategy, but a way to measure a portfolio manager's return relative
allocation strategies except A) alpha. to the amount of risk that has been taken. alpha
B) tactical. LO 2-5
C)
core/satellite. D)
strategic.
Assume the following asset classes have the The asset with the lowest correlation provides the most diversification. Therefore, gold
correlations to long-term government bonds provides more diversification than any of the other assets. Small stocks do provide more
shown below: diversification than Treasury bills, but
Treasury bills:.12
Gold:-.25
Large stocks:.22 gold provides the most diversification, so it is the best option.
Small stocks:.17 LO 2-3
Which one of the following best exemplifies the
impact of diversification on long-term
government bonds?
The two major risks associated with The primary risks associated with common stock are business risk and market risk.
individual common stocks are A)
default risk and business risk. B) Interest rate risk, default risk, and purchasing power risk are the major risks of bonds.
market risk and business risk. C)
interest rate risk and exchange rate risk. D) B
interest rate risk and purchasing power risk. LO 2-2
WHATSAPP ME FOR MORE FILES: +254798176093
AND CORRECT DETAILED ANSWERS WITH RATIONALES
(VERIFIED ANSWERS) |ALREADY GRADED A+
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 longrange planning
correct statements about income replacement and investing.
percentages
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
Mary Goodwin's financial situation is as follows: Assets = $263,000; liabilities = $141,000, so net worth is $122,000. Taxes and auto note payments
Cash/cash equivalents$15,000 appear on the cash flow statement. 1-3
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?
Salaries$70,000 Income = $70,000 + $1,100 + $2,100 = $73,200. Expenses = $5,000 + $3,800 + $8,000 + $3,500
Auto payments$5,000 + $14,000 + $13,000 + $9,000 + $8,400 + $5,800 = $70,500, so there is a surplus of $2,700. The
Insurance payments$3,800 checking account and credit card balances would be on the statement of financial position.
Food$8,000 LO 1-3
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?
WHATSAPP ME FOR MORE FILES: +254798176093
,If Tom and Jenny want to save a fixed amount Set your calculator to the "End" mode and "1 P/Yr." Inputs: FV = 2000000, I/YR = 7, N =
annually to accumulate $2 million by their 25, PV = 0, then PMT = $31,621
retirement date in 25 years (rather than an
amount that grows with inflation each year),
what level annual end-of-year savings amount 1-4
will they need to deposit each year, assuming
their savings earn 7% annually?
Bill and Lisa Hahn have determined that they The monthly retirement income need is not specified as "today's dollars," and no inflation rate
will need a monthly income of $6,000 during specified; therefore, it must be assumed that the $2,500 net monthly income need represents
retirement. They expect to receive Social retirement dollars, and the retirement period income stream is level. To calculate the lump
Security retirement benefits amounting to sum needed at the beginning of retirement, discount the stream of monthly income payments
$3,500 per month at the beginning of each at the investment return rate:
month. Over the 12 remaining years of their 10BII+ PVAD calculation:
preretirement period, they expect to generate Set calculator on BEG and 12 periods per year, then input the following:
an average annual after-tax investment return 2,500 [PMT]
of 8%; during their 25-year retirement period, 25 [SHIFT] [N]
they want to assume a 6% annual after-tax 6 [I/YR]
investment return compounded monthly. They 0 [FV]
want to start their monthly retirement Solve for PV = $389,957
withdrawals on the first day they retire. LO 1-4
What is the lump sum needed at the beginning
of retirement to fund this income stream?
WHATSAPP ME FOR MORE FILES: +254798176093
,Chris and Eve Bronson have analyzed their This PVAD calculation requires that the calculator be set for beginning-of-period payments.
current living expenses and estimated their First, the annual retirement income deficit is expressed in retirement-yearone dollars,
retirement income need, net of expected Social resulting in a $239,925 income deficit in the first retirement year. This income deficit grows
Security benefits, to be $90,000 in today's with inflation over the 30-year retirement period, and the retirement fund earns a 7% return.
dollars. They are confident that they can earn a The calculator inputs are
7% after-tax return on their investments, and
they expect inflation to average 4% over the $239,925, [PMT];
long term. Determine the lump sum amount the 30, [N];
Bronsons will need at the beginning of 2.8846, [I/YR]. (1.07/1.04)-1 x100 Solve
retirement to fund their retirement income for [PV],
needs, using the worksheet below.
to determine the retirement fund that will generate this income stream. If you enter 2.8846
(1) Adjust income deficit for inflation directly into the calculator, you will get $4,911,265. If you use the equation to compute I/YR,
overthe preretirement period:$ 90,000present and then hit the I/YR button you will get $4,911,256. Either way the answer is clear. The
value of retirement income deficit25number of difference is that when you calculate the I/YR, the calculator takes the interest rate out to nine
periods until retirement4%% inflation decimal places. If you enter in the 2.8846, then the calculator only takes the interest rate to
rateFuture value of income deficit in first four decimal places.
retirement year$239,925 LO 1-4
(2) Determine retirement fund needed
tomeet 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
Assume a client and investment professional When the client's circumstances change, the asset management process goes back to the data
have worked together for several years. gathering step in the process. A
Recently, the client's personal and financial LO 1-2
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)
make and implement recommendations D)
monitor performance
WHATSAPP ME FOR MORE FILES: +254798176093
, Which one of the following is not a key An investment policy provides guidelines that are standards to be followed. If they are fluid,
attribute of an investment policy? A) they are ever-changing and therefore would be difficult to implement and would provide
clearly defined inconsistency in the management of the portfolio. LO 2-1
B) fluid C)
realistic Fluid
D) long-term perspective
All of these are examples of asset Alpha is not an asset allocation strategy, but a way to measure a portfolio manager's return relative
allocation strategies except A) alpha. to the amount of risk that has been taken. alpha
B) tactical. LO 2-5
C)
core/satellite. D)
strategic.
Assume the following asset classes have the The asset with the lowest correlation provides the most diversification. Therefore, gold
correlations to long-term government bonds provides more diversification than any of the other assets. Small stocks do provide more
shown below: diversification than Treasury bills, but
Treasury bills:.12
Gold:-.25
Large stocks:.22 gold provides the most diversification, so it is the best option.
Small stocks:.17 LO 2-3
Which one of the following best exemplifies the
impact of diversification on long-term
government bonds?
The two major risks associated with The primary risks associated with common stock are business risk and market risk.
individual common stocks are A)
default risk and business risk. B) Interest rate risk, default risk, and purchasing power risk are the major risks of bonds.
market risk and business risk. C)
interest rate risk and exchange rate risk. D) B
interest rate risk and purchasing power risk. LO 2-2
WHATSAPP ME FOR MORE FILES: +254798176093
