CRPC Exam Questions and Answers
Graded A+
Cindy wants to have an annual retirement income of $50,000 protected against 3%
inflation. Assuming an 8% after-tax rate of return and a retirement period of 25
years, how much money does Cindy need in order to provide the inflation-
protected $50,000 at the beginning of each retirement year? - Correct answer-BEG
Mode
# of Periods (1 P/YR in this example)
C ALL
50000, PMT
4.8544, I/YR [(1.08 ÷ 1.03) - 1] × 100 = 4.8544 I/YR
25, N
PV
Solution: $749,812.61
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,Frank will retire in 14 years, and he needs to save an additional $380,000 to
provide the retirement income that he wants. Assume that inflation is 4% and after-
tax earnings are 10%. How much will Frank need to save at the end of each year to
reach his goal? - Correct answer-END Mode
# of Periods (1 P/YR in this example)
C ALL
380000, FV
10, I/YR
14, N
PMT
Solution: $13,583.56 (The answer is actually -$13,583.56, as this represents an
outflow to savings.)
In this case, we do not need to make the inflation adjustment. This problem 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.
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,Dan and Barbara have saved $850,000. Assume that inflation is 3% and after-tax
earnings are 9%. Also assume that their retirement will last 26 years. How much
annual retirement income, protected against inflation, can the $850,000 provide for
26 years with payments made at the beginning of each year? - Correct answer-BEG
Mode
# of Periods (1 P/YR in this example)
C ALL
850000, PV
5.8252, I/YR [(1.09 ÷ 1.03) - 1] × 100 = 5.8252 I/YR
26, N
PMT
Solution: $60,721.17
The Smiths are a 50-year-old couple with an annual retirement budget of $75,000
(in today's dollars). They want to plan for a retirement life expectancy of 25 years
(starting at age 65), and assume a 3.5% average inflation rate and a 7% long-term
rate of return. How much money will they need at age 65 to fund their retirement?
- Correct answer-Step #1: Find the inflated value of $75,000 in 15 years # of
Periods (1 P/YR in this example)
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, C ALL
75000, PV
3.5, I/YR
15, N
FV
Solution: $125,651.16 (This becomes our starting income payment in Step #2.)
Step #2: Calculate the PVAD of 25 years of payments, using a first payment
amount of $125,651, and factoring both inflation (3.5%) and the rate of return
(7%) (i.e., a serial payment).
BEG Mode
# of Periods (1 P/YR in this example)
C ALL
125651, PMT
3.3816, I/YR [(1.07 ÷ 1.035) - 1] × 100 = 3.3816 I/YR
25, N
PV
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Graded A+
Cindy wants to have an annual retirement income of $50,000 protected against 3%
inflation. Assuming an 8% after-tax rate of return and a retirement period of 25
years, how much money does Cindy need in order to provide the inflation-
protected $50,000 at the beginning of each retirement year? - Correct answer-BEG
Mode
# of Periods (1 P/YR in this example)
C ALL
50000, PMT
4.8544, I/YR [(1.08 ÷ 1.03) - 1] × 100 = 4.8544 I/YR
25, N
PV
Solution: $749,812.61
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,Frank will retire in 14 years, and he needs to save an additional $380,000 to
provide the retirement income that he wants. Assume that inflation is 4% and after-
tax earnings are 10%. How much will Frank need to save at the end of each year to
reach his goal? - Correct answer-END Mode
# of Periods (1 P/YR in this example)
C ALL
380000, FV
10, I/YR
14, N
PMT
Solution: $13,583.56 (The answer is actually -$13,583.56, as this represents an
outflow to savings.)
In this case, we do not need to make the inflation adjustment. This problem 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.
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,Dan and Barbara have saved $850,000. Assume that inflation is 3% and after-tax
earnings are 9%. Also assume that their retirement will last 26 years. How much
annual retirement income, protected against inflation, can the $850,000 provide for
26 years with payments made at the beginning of each year? - Correct answer-BEG
Mode
# of Periods (1 P/YR in this example)
C ALL
850000, PV
5.8252, I/YR [(1.09 ÷ 1.03) - 1] × 100 = 5.8252 I/YR
26, N
PMT
Solution: $60,721.17
The Smiths are a 50-year-old couple with an annual retirement budget of $75,000
(in today's dollars). They want to plan for a retirement life expectancy of 25 years
(starting at age 65), and assume a 3.5% average inflation rate and a 7% long-term
rate of return. How much money will they need at age 65 to fund their retirement?
- Correct answer-Step #1: Find the inflated value of $75,000 in 15 years # of
Periods (1 P/YR in this example)
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, C ALL
75000, PV
3.5, I/YR
15, N
FV
Solution: $125,651.16 (This becomes our starting income payment in Step #2.)
Step #2: Calculate the PVAD of 25 years of payments, using a first payment
amount of $125,651, and factoring both inflation (3.5%) and the rate of return
(7%) (i.e., a serial payment).
BEG Mode
# of Periods (1 P/YR in this example)
C ALL
125651, PMT
3.3816, I/YR [(1.07 ÷ 1.035) - 1] × 100 = 3.3816 I/YR
25, N
PV
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