3/27/25, 8:52 CRPC Flashcards |
AM
CRPC EXAM QUESTIONS AND ANSWERS WITH COMPLETE
SOLUTIONS VERIFIED LATEST UPDATE
Terms in this set (331)
Acquiring assets with low or negative correlations to each other with the goal of
Diversification
lowering overall risk
- a relative measure of the degree to which the returns of two assets move together
- range from +1.0 to -1.0
Correlation
- in practice negative correlations are rare
- the further a correlation is from +1.0, the more diversified
- the apportioning of available funds among a number of asset classes in a way that
Asset allocation meets the needs of a particular client, dampens the effects of periodic market
fluctuations, and meets investment goals
1) select asset classes to be represented
2)determine the percentage that each asset class should represent in the
Four steps in the asset allocation process total portfolio
3) Select individual securities
4) Review and rebalance
- determine asset mix that provides optimal balance of expected risk and ROR
- asset classes selected and % weight determined
Strategic Asset Allocation
- Used to develop long-term allocation policy
- utilizes rebalancing to maintain targeted weight
- used to develop short term strategies to exploit changes in market conditions
- ofter viewed as a contrarian strategy
Tactical Asset Allocation - periodic revisions of asset mix; moving funds from over valued investments
to undervalued investments
- market timing strategy
70-80% invested in broad index fund or etfs
Core-Satellite asset allocation - remaining satellite consists of actively managed MF's in niches such as sector
funds or alt investments like hedge funds
Contrarian Strategy
- investing regular amounts at regular intervals
Dollar-Cost averaging
- reduce market timing risk, improve cost per share
Ratio of 1= fair value
Ratio > 1=
Low P/E strategy overvalued Ratio < 1=
undervalued
** The long-term average P/E for stocks is 16
1) Ladder: Owning equal amounts of bonds along with maturities of equal
intervals; ex. 50k of bonds with 10k each in 2,4,6,8,10 year maturities
Bond Investment strategies (2)
2)Barbell: Owning short-term and long-term bonds, each with a ladder; ex. 100k
of bonds with 10k each in 1,2,3,4,5 year maturities and in 16,17,18,19,20 year
maturities
1/
8
, 3/27/25, 8:52 CRPC Flashcards |
AM
P-purchasing power risk
R- reinvestment risk
Systematic Risk I- interest rate risk
M- market risk
E- exchange rate risk
- having 10 years of employment covered by social security; expressed as
"40 quarters of coverage"
Social Security- Fully insured - Must be fully insured for retirement benefits
- fully insured workers are also eligible for disability if he has earned at least 20
work credits in last 10 years
- individual must has at least 6 quarters of coverage in the 13-quarter
period proceeding the event for which eligibility is sought
Social Security- currently insured
- child's benefit, mother/fathers benefits, and lump-sum death benefit are available if
a worker is only currently insured at death
- age he starts
Components of SS calculation
- earnings history
- Payment reduced by 5/9th of 1% for each month filed before FRA, up to 36 months
SS calculation before full retirement age - Payment is reduced by 5/12ths of 1% for each month filed early in excess of 36
months
- Payment increases by about 8% each year they delay, until maximum year 70
SS calculation after full retirement age
- actual math is 2/3 for each month
Ages
50: disabled survivors can start receiving
benefits 60: nondisabled survivors can start
Social Security milestones
receiving
62: earliest one can start receiving benefits at reduced
rate 65-67: FRA, depending on birth year
70: delayed retirement age
$15,720
- Those who are under FRA and working will lose $1 SS benefit for every $2 they
Social Security income cap earn above $15,720
- At FRA it is reduced to $1 for every $3
earned After FRA there is no reduction
Single or head of househouse:
Tax-free if provisional income is less than 25k
Max provisional income for SS
Filing jointly:
Tax free if provisional income is less than 32k
Provisional income=AGI(excluding SS) +Nontaxable interest(muni bonds) + 1/2(SS
Provisional income
benefit)
25k-34k: 50%
Single provisional income SS taxable %
34k+: 85%
32k-44k: 50%
Jointly provisional income SS taxable %
44k+:85%
maximum taxable SS amount 85% of Total SS benefit
Spousal benefit - Pay spouse a maximum of 50% of earners PIA
What tax funds the Social Security Trust Payroll taxes; FICA
Fund
2/
8
AM
CRPC EXAM QUESTIONS AND ANSWERS WITH COMPLETE
SOLUTIONS VERIFIED LATEST UPDATE
Terms in this set (331)
Acquiring assets with low or negative correlations to each other with the goal of
Diversification
lowering overall risk
- a relative measure of the degree to which the returns of two assets move together
- range from +1.0 to -1.0
Correlation
- in practice negative correlations are rare
- the further a correlation is from +1.0, the more diversified
- the apportioning of available funds among a number of asset classes in a way that
Asset allocation meets the needs of a particular client, dampens the effects of periodic market
fluctuations, and meets investment goals
1) select asset classes to be represented
2)determine the percentage that each asset class should represent in the
Four steps in the asset allocation process total portfolio
3) Select individual securities
4) Review and rebalance
- determine asset mix that provides optimal balance of expected risk and ROR
- asset classes selected and % weight determined
Strategic Asset Allocation
- Used to develop long-term allocation policy
- utilizes rebalancing to maintain targeted weight
- used to develop short term strategies to exploit changes in market conditions
- ofter viewed as a contrarian strategy
Tactical Asset Allocation - periodic revisions of asset mix; moving funds from over valued investments
to undervalued investments
- market timing strategy
70-80% invested in broad index fund or etfs
Core-Satellite asset allocation - remaining satellite consists of actively managed MF's in niches such as sector
funds or alt investments like hedge funds
Contrarian Strategy
- investing regular amounts at regular intervals
Dollar-Cost averaging
- reduce market timing risk, improve cost per share
Ratio of 1= fair value
Ratio > 1=
Low P/E strategy overvalued Ratio < 1=
undervalued
** The long-term average P/E for stocks is 16
1) Ladder: Owning equal amounts of bonds along with maturities of equal
intervals; ex. 50k of bonds with 10k each in 2,4,6,8,10 year maturities
Bond Investment strategies (2)
2)Barbell: Owning short-term and long-term bonds, each with a ladder; ex. 100k
of bonds with 10k each in 1,2,3,4,5 year maturities and in 16,17,18,19,20 year
maturities
1/
8
, 3/27/25, 8:52 CRPC Flashcards |
AM
P-purchasing power risk
R- reinvestment risk
Systematic Risk I- interest rate risk
M- market risk
E- exchange rate risk
- having 10 years of employment covered by social security; expressed as
"40 quarters of coverage"
Social Security- Fully insured - Must be fully insured for retirement benefits
- fully insured workers are also eligible for disability if he has earned at least 20
work credits in last 10 years
- individual must has at least 6 quarters of coverage in the 13-quarter
period proceeding the event for which eligibility is sought
Social Security- currently insured
- child's benefit, mother/fathers benefits, and lump-sum death benefit are available if
a worker is only currently insured at death
- age he starts
Components of SS calculation
- earnings history
- Payment reduced by 5/9th of 1% for each month filed before FRA, up to 36 months
SS calculation before full retirement age - Payment is reduced by 5/12ths of 1% for each month filed early in excess of 36
months
- Payment increases by about 8% each year they delay, until maximum year 70
SS calculation after full retirement age
- actual math is 2/3 for each month
Ages
50: disabled survivors can start receiving
benefits 60: nondisabled survivors can start
Social Security milestones
receiving
62: earliest one can start receiving benefits at reduced
rate 65-67: FRA, depending on birth year
70: delayed retirement age
$15,720
- Those who are under FRA and working will lose $1 SS benefit for every $2 they
Social Security income cap earn above $15,720
- At FRA it is reduced to $1 for every $3
earned After FRA there is no reduction
Single or head of househouse:
Tax-free if provisional income is less than 25k
Max provisional income for SS
Filing jointly:
Tax free if provisional income is less than 32k
Provisional income=AGI(excluding SS) +Nontaxable interest(muni bonds) + 1/2(SS
Provisional income
benefit)
25k-34k: 50%
Single provisional income SS taxable %
34k+: 85%
32k-44k: 50%
Jointly provisional income SS taxable %
44k+:85%
maximum taxable SS amount 85% of Total SS benefit
Spousal benefit - Pay spouse a maximum of 50% of earners PIA
What tax funds the Social Security Trust Payroll taxes; FICA
Fund
2/
8
