CRPC Practice Exam 2 Newest Exam with Questions and Detailed Answers Already Graded A+
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Course
CRPC Practice Ex
Institution
CRPC Practice Ex
1. Richard wants to have an
annual retirement income
of $100,000 (payable at the
beginning of each year)
protected against 3% infla
tion. Assuming a 7% af
ter-tax rate of return and
a retirement period of 30
years, how much mon
ey (rounded) does Richard
need in order to meet his...
CRPC Practice Exam 2 Newest Exam with
Questions and Detailed Answers Already Graded
A+
1. Richard wants to have an
annual retirement income
of $100,000 (payable at the
beginning of each year)
protected against 3% infla
tion. Assuming a 7% af
ter-tax rate of return and
a retirement period of 30
years, how much mon
ey (rounded) does Richard
need in order to meet his
goal?
B)
$1,822,043
To determine how much money Richard needs,
calculate the inflation-adjusted rate of return:
(1.07 1.03) - 1 100 = 3.8835. Next, clear your
calculator and set it to begin mode. Enter the
following known values in any order: 100,000,
+/-, PMT; 3.8835 I/YR; 30, N; and request the
unknown PV (PVAD). This will give you the
correct answer, $1,822,043 (rounded).
2. Tom has been promised a
stream of $40,000 annual
payments at the end of each
year for 25 years. The pre
sent value of these pay
ments discounted at a rate
of 5% equals which one of
the following amounts?
A)
$563,758
B)
,$666,542
C)
$610,224
D)
$591,946
A)
$563,758
Tom has been promised a stream of annual
payments. To determine the present value of
the annual payments to Tom, clear your calcu
lator and set it to the end mode. Next, enter the
following unknown values in any order: 40,000,
PMT; 5, I/YR; 25, N; and request the known
present value of an annuity (PVOA). This will
show the correct answer, $563,758. If you got
$591,946, you did everything correctly except
you were in the begin mode.
3. Nick wants to maintain
the purchasing power of
$75,000 (in today's dol
lars) in retirement. If infla
tion continues to average
3.5%, approximately what
amount will Nick need in
20 years to equal the pur
chasing power of $75,000
C)
$150,000
If inflation continues at a 3.5% level, Nick
will need approximately double his original
$75,000 to maintain purchasing power. This
can be determined in two ways. If you know
the Rule of 72, and you divide 3.5 into 72, you
arrive at approximately 20, which is the number
today? (Round your answer
to the nearest $5,000.)
A)
,$100,000
B)
$175,000
C)
$150,000
D)
$225,000
of years it will take for a sum to double. With a
calculator, you can solve for the future value of
$75,000 over 20 years at 3.5%.
Keystrokes: 20 N, 3.5 I/YR, 75,000, +/-, PV, FV
= $149,234; rounded to the nearest $5,000 =
$150,000
4. Which of the following are
examples of the second
step of the retirement plan
ning process?
prioritize goals
disclose compensation
arrangements
examine a person's tax sit
uation
determine important time
horizons
B)
I, III, and IV
The second step in the retirement planning
process is to gather client data, including goals
and expectations. The first step is to estab
lish and define the client-counselor relation
ship, which includes disclosing the counselor's
compensation arrangement.
5. Which of the following per
sonal expenses are likely to
decrease following an indi
vidual's retirement?
travel
, education
utilities
income taxes
home repairs
A)
II and IV
Travel and recreation costs escalate for many
retirees. Even if retirees have their mortgage
paid off, they will still be faced with the following
expenses: real estate taxes, utilities, insurance,
and repairs. Retirees tend to spend less on
education than do nonretirees. Total income
taxes are likely to diminish as earned income
declines.
6. Which of the following are
correct statements about
the capital utilization strat
egy?
A)
I, II, III, and IV
All of the options are true. A capital utilization
It produces an annual re
tirement income over a fi
nite number of years.
Assuming the yield re
mains the same, the larger
the retirement income that
is paid, the shorter the num
ber of years over which it
will be paid.
When the capital utilization
approach is used, the plan
ner must be careful in mak
ing assumptions about the
life expectancy of the client.
The effect of taxes on re
tirement savings and distri
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