CRPC YOU GOT THIS STUDY CARDS
PRACTICE SCRIPT 2026 QUESTIONS WITH
ANSWERS GRADED A+
⫸ Salaries$70,000
Auto payments$5,000
Insurance payments$3,800
Food$8,000
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? Answer: Income =
$70,000 + $1,100 + $2,100 = $73,200. Expenses = $5,000 + $3,800 +
$8,000 + $3,500 + $14,000 + $13,000 + $9,000 + $8,400 + $5,800 =
$70,500, so there is a surplus of $2,700. The checking account and credit
card balances would be on the statement of financial position.
LO 1-3
,⫸ correct statements about income replacement percentages Answer:
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 long-range planning and investing.
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
⫸ 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? Answer: Set your calculator to the
"End" mode and "1 P/Yr." Inputs: FV = 2000000, I/YR = 7, N = 25, PV
= 0, then PMT = $31,621
,1-4
⫸ 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? Answer: The monthly retirement income need is not
specified as "today's dollars," and no inflation rate specified; therefore, it
must be assumed that the $2,500 net monthly income need represents
retirement dollars, and the retirement period income stream is level. To
calculate the lump sum needed at the beginning of retirement, discount
the stream of monthly income payments at the investment return rate:
10BII+ PVAD calculation:
Set calculator on BEG and 12 periods per year, then input the following:
2,500 [PMT]
25 [SHIFT] [N]
6 [I/YR]
0 [FV]
Solve for PV = $389,957
LO 1-4
, ⫸ Chris and Eve Bronson have analyzed their current living expenses
and estimated their retirement income need, net of expected Social
Security benefits, to be $90,000 in today's dollars. They are confident
that they can earn a 7% after-tax return on their investments, and they
expect inflation to average 4% over the long term.
Determine the lump sum amount the Bronsons will need at the
beginning of retirement to fund their retirement income needs, using the
worksheet below.
(1) Adjust income deficit for inflation over the preretirement period:$
90,000present value of retirement income deficit25number of periods
until retirement4%% inflation rateFuture value of income deficit in first
retirement year$239,925
(2) Determine retirement fund needed to meet 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 Answer: This PVAD
calculation requires that the calculator be set for beginning-of-period
payments. First, the annual retirement income deficit is expressed in
retirement-year-one dollars, resulting in a $239,925 income deficit in the
first retirement year. This income deficit grows with inflation over the
30-year retirement period, and the retirement fund earns a 7% return.
The calculator inputs are
$239,925, [PMT];
PRACTICE SCRIPT 2026 QUESTIONS WITH
ANSWERS GRADED A+
⫸ Salaries$70,000
Auto payments$5,000
Insurance payments$3,800
Food$8,000
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? Answer: Income =
$70,000 + $1,100 + $2,100 = $73,200. Expenses = $5,000 + $3,800 +
$8,000 + $3,500 + $14,000 + $13,000 + $9,000 + $8,400 + $5,800 =
$70,500, so there is a surplus of $2,700. The checking account and credit
card balances would be on the statement of financial position.
LO 1-3
,⫸ correct statements about income replacement percentages Answer:
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 long-range planning and investing.
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
⫸ 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? Answer: Set your calculator to the
"End" mode and "1 P/Yr." Inputs: FV = 2000000, I/YR = 7, N = 25, PV
= 0, then PMT = $31,621
,1-4
⫸ 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? Answer: The monthly retirement income need is not
specified as "today's dollars," and no inflation rate specified; therefore, it
must be assumed that the $2,500 net monthly income need represents
retirement dollars, and the retirement period income stream is level. To
calculate the lump sum needed at the beginning of retirement, discount
the stream of monthly income payments at the investment return rate:
10BII+ PVAD calculation:
Set calculator on BEG and 12 periods per year, then input the following:
2,500 [PMT]
25 [SHIFT] [N]
6 [I/YR]
0 [FV]
Solve for PV = $389,957
LO 1-4
, ⫸ Chris and Eve Bronson have analyzed their current living expenses
and estimated their retirement income need, net of expected Social
Security benefits, to be $90,000 in today's dollars. They are confident
that they can earn a 7% after-tax return on their investments, and they
expect inflation to average 4% over the long term.
Determine the lump sum amount the Bronsons will need at the
beginning of retirement to fund their retirement income needs, using the
worksheet below.
(1) Adjust income deficit for inflation over the preretirement period:$
90,000present value of retirement income deficit25number of periods
until retirement4%% inflation rateFuture value of income deficit in first
retirement year$239,925
(2) Determine retirement fund needed to meet 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 Answer: This PVAD
calculation requires that the calculator be set for beginning-of-period
payments. First, the annual retirement income deficit is expressed in
retirement-year-one dollars, resulting in a $239,925 income deficit in the
first retirement year. This income deficit grows with inflation over the
30-year retirement period, and the retirement fund earns a 7% return.
The calculator inputs are
$239,925, [PMT];
