CRPC Practice Exam 1 Questions with Verified Answers
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Course
NU1426
Institution
NU1426
CRPC Practice Exam 1 Questions with Verified Answers
Which of the following are correct statements about income replacement percentages?
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 infla...
CRPC Practice Exam 1 Questions with Verified
Answers
1). Which of the following are correct statements about income replacement percentages?
Ans: II, III, & IV
II IRP vary between low-income and high-income retirees
III IR ratios should not be used as the only basis for planning
IV IR ratios are useful for younger clients as a guide to their long-range planning and
investing
2). 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?
Ans: "END" mode and "1 P/Yr".
FV = 2,000,000
I/YR = 7
N = 25
PV = 0
then PMT = $31,621
3). Bill and lisa hahn have determined that they will need a monthly income of $6,000 during
retirement. they expect to receive ss 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?
Ans: 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:
BEG mode and "12 P/Yr"
PMT = 2,500
SHIFT N = 25
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, I/YR = 6
FV = 0
then PV = $389,957
4). Assume a client and investment professional have worked together for 7 years, recently, the
client's personal and financial circumstances have changed. according to the course
materials, what is the next asset management step that the investment professional should
take?
Ans: gather data
5). Which one of the following is not a key attribute of an investment policy
Ans: fluid
6). All of these are examples of asset allocation strategies except
Ans: alpha
7). When determining what provides the most diversification
Ans: the further away from +1, the more diversification
8). The two major risks associated with individual common stocks are
Ans: market risk and business risk
9). Risks associated with bonds:
Ans: interest rate, default, purchasing power
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, 10). What is the price of a bond with a 7% coupon, a $1,000 par value, and a maturity of 20 years
if the market interest rate for similar bonds is 6%?
Ans: Set the calculator for 2 P/Yr and END mode.
FV = 1000
PMT = 35
20 SHIFT N
I/YR = 6
and then PV = $1,115.57
35 is the semiannual payment of the bond. ($70/2)
11). This year, your 63 year old client had $17,025 of earned income and $30,000 of investment
income. he was also drawing ss benefits. which one of the following correctly describes the
impact on his ss benefits?
Ans: There is no reduction to his benefits.
The client's earnings (earned income) are below the allowable limit for the current year
($19,560 for 2022). Remember that according to the work penalty rule, only earned
income is counted toward the "allowable limit".
12). Which one of the following is a correct statement about the amount of ss retirement
benefits available when a fully insured worker's retirement benefit begins at full retirement
age (fra)?
Ans: If the spouse is at or above his or her full retirement age when commencing SS
benefits, the spouse will receive at least 50% of the worker's PIA
13). Which one of the following is correct regarding most types of tax exempt interest and
taxation of social security benefits?
Ans: All of the tax-exempt interest is included in the computation of the taxation of SS
benefits
However, tax-free Roth distributions are not counted when determining provisional
income. A maximum of 85% of the SS benefits are subject to taxation
14). Susan has reached fra. she is trying to decide between starting ss benefits of $1,000 per
month now, or delaying receipt for 3 years and using her savings to provide current income.
by delaying three years her benefit would increase to $1,240 per month. ignoring the time
value of money and colas, use the break-even calculation to determine how much longer
susan will need to live in order for delaying to "pay off".
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