3/27/25, 8:53
AM
CRPC EXAM QUESTIONS AND ANSWERS WITH COMPLETE
SOLUTIONS VERIFIED GRADED A++
Terms in this set (534)
Cindy wants to have an annual BEG Mode
retirement income of $50,000 # of Periods (1 P/YR in this
protected against 3% inflation. example) C ALL
Assuming an 8% after-tax rate of 50000, PMT
return and a retirement period of 25 4.8544, I/YR [(1.08 ÷ 1.03) - 1] × 100 = 4.8544 I/YR
years, how much money does Cindy 25,
need in N PV
order to provide the inflation-protected Solution: $749,812.61
$50,000 at the beginning of each
retirement year?
END Mode
# of Periods (1 P/YR in this
example) C ALL
380000, FV
10, I/YR
Frank will retire in 14 years, and he
14,
needs to save an additional
N
$380,000 to provide the retirement
PMT
income that he wants. Assume
Solution: $13,583.56 (The answer is actually -$13,583.56, as this represents
that inflation is 4% and after-tax
earnings an outflow to savings.)
are 10%. How much will Frank need
to save at the end of each year to In this case, we do not need to make the inflation adjustment. This problem
reach his goal? asks how much Frank needs to save at the end of each year, so the
savings will be level.
Remember, when the payment is level, the inflation adjustment is not called for.
Inflation should have already been taken into account to calculate the
need for an additional $380,000.
Dan and Barbara have saved BEG Mode
$850,000. Assume that inflation is # of Periods (1 P/YR in this
3% and after-tax earnings are 9%. example) C ALL
Also assume that their retirement 850000, PV
will last 26 years. How much 5.8252, I/YR [(1.09 ÷ 1.03) - 1] × 100 = 5.8252 I/YR
annual retirement income, 26,
protected N
against inflation, can the $850,000 PMT
provide for 26 years with payments Solution: $60,721.17
made at the
beginning of each year?
1/15
, 3/27/25, 8:53
AM
Step #1: Find the inflated value of $75,000 in 15 years # of Periods (1 P/YR
in this example)
C ALL
75000, PV
3.5, I/YR
15,
The Smiths are a 50-year-old couple
N
with an annual retirement budget of
FV
$75,000 (in today's dollars). They
Solution: $125,651.16 (This becomes our starting income payment in Step #2.)
want to plan for a
Step #2: Calculate the PVAD of 25 years of payments, using a first
retirement life expectancy of 25
payment amount of $125,651, and factoring both inflation (3.5%) and the
years (starting at age 65), and
rate of return (7%) (i.e., a serial payment).
assume a 3.5% average inflation
BEG Mode
rate and a 7% long-term rate of
# of Periods (1 P/YR in this
return. How much money will they
example) C ALL
need at age 65 to fund their
125651, PMT
retirement?
3.3816, I/YR [(1.07 ÷ 1.035) - 1] × 100 = 3.3816 I/YR
25,
N PV
Solution: $2,168,715.58
John Bennett wants to receive the BEG Mode# of Periods (1 P/YR in this
equivalent of $40,000 in today's example) C ALL
dollars at the beginning of each year 40000, PMT
for the next nine years. He assumes 9, N
that inflation will average 5% over the 4.7619, I/YR [(1.10 ÷ 1.05) - 1] x 100 =
long run and that he can earn a 10% 4.7619 PV
compound annual after-tax return on Solution: $301,035.15
investments.
What lump sum does John need to
invest today to fund his needs?
Karen Troy, age 51, wants to quit END Mode
working in six years. In terms of # of Periods (1 P/YR, in this
today's dollars, she needs an example) C ALL
additional $400,000 in six years to 400000, FV
have sufficient funds to finance this 6, N
goal. She assumes that inflation will 2.8571,
average 5% over the long run and that I/YR [(1.08 ÷ 1.05) - 1] x 100 = 2.8571
she can earn an 8% compound annual I/YR PMT = $62,061.19X 1.05=
after-tax return on investments. $65,164.25
What serial payment should Karen Solution: $65,164.25 (This answer is actually -$65,164.25 as it represents
invest at the end of the first year to an outflow to savings.)
fund this goal?
2/15
AM
CRPC EXAM QUESTIONS AND ANSWERS WITH COMPLETE
SOLUTIONS VERIFIED GRADED A++
Terms in this set (534)
Cindy wants to have an annual BEG Mode
retirement income of $50,000 # of Periods (1 P/YR in this
protected against 3% inflation. example) C ALL
Assuming an 8% after-tax rate of 50000, PMT
return and a retirement period of 25 4.8544, I/YR [(1.08 ÷ 1.03) - 1] × 100 = 4.8544 I/YR
years, how much money does Cindy 25,
need in N PV
order to provide the inflation-protected Solution: $749,812.61
$50,000 at the beginning of each
retirement year?
END Mode
# of Periods (1 P/YR in this
example) C ALL
380000, FV
10, I/YR
Frank will retire in 14 years, and he
14,
needs to save an additional
N
$380,000 to provide the retirement
PMT
income that he wants. Assume
Solution: $13,583.56 (The answer is actually -$13,583.56, as this represents
that inflation is 4% and after-tax
earnings an outflow to savings.)
are 10%. How much will Frank need
to save at the end of each year to In this case, we do not need to make the inflation adjustment. This problem
reach his goal? asks how much Frank needs to save at the end of each year, so the
savings will be level.
Remember, when the payment is level, the inflation adjustment is not called for.
Inflation should have already been taken into account to calculate the
need for an additional $380,000.
Dan and Barbara have saved BEG Mode
$850,000. Assume that inflation is # of Periods (1 P/YR in this
3% and after-tax earnings are 9%. example) C ALL
Also assume that their retirement 850000, PV
will last 26 years. How much 5.8252, I/YR [(1.09 ÷ 1.03) - 1] × 100 = 5.8252 I/YR
annual retirement income, 26,
protected N
against inflation, can the $850,000 PMT
provide for 26 years with payments Solution: $60,721.17
made at the
beginning of each year?
1/15
, 3/27/25, 8:53
AM
Step #1: Find the inflated value of $75,000 in 15 years # of Periods (1 P/YR
in this example)
C ALL
75000, PV
3.5, I/YR
15,
The Smiths are a 50-year-old couple
N
with an annual retirement budget of
FV
$75,000 (in today's dollars). They
Solution: $125,651.16 (This becomes our starting income payment in Step #2.)
want to plan for a
Step #2: Calculate the PVAD of 25 years of payments, using a first
retirement life expectancy of 25
payment amount of $125,651, and factoring both inflation (3.5%) and the
years (starting at age 65), and
rate of return (7%) (i.e., a serial payment).
assume a 3.5% average inflation
BEG Mode
rate and a 7% long-term rate of
# of Periods (1 P/YR in this
return. How much money will they
example) C ALL
need at age 65 to fund their
125651, PMT
retirement?
3.3816, I/YR [(1.07 ÷ 1.035) - 1] × 100 = 3.3816 I/YR
25,
N PV
Solution: $2,168,715.58
John Bennett wants to receive the BEG Mode# of Periods (1 P/YR in this
equivalent of $40,000 in today's example) C ALL
dollars at the beginning of each year 40000, PMT
for the next nine years. He assumes 9, N
that inflation will average 5% over the 4.7619, I/YR [(1.10 ÷ 1.05) - 1] x 100 =
long run and that he can earn a 10% 4.7619 PV
compound annual after-tax return on Solution: $301,035.15
investments.
What lump sum does John need to
invest today to fund his needs?
Karen Troy, age 51, wants to quit END Mode
working in six years. In terms of # of Periods (1 P/YR, in this
today's dollars, she needs an example) C ALL
additional $400,000 in six years to 400000, FV
have sufficient funds to finance this 6, N
goal. She assumes that inflation will 2.8571,
average 5% over the long run and that I/YR [(1.08 ÷ 1.05) - 1] x 100 = 2.8571
she can earn an 8% compound annual I/YR PMT = $62,061.19X 1.05=
after-tax return on investments. $65,164.25
What serial payment should Karen Solution: $65,164.25 (This answer is actually -$65,164.25 as it represents
invest at the end of the first year to an outflow to savings.)
fund this goal?
2/15
