8/18/24, 6:46 AM CRPC Practice Exam 1 Flashcards | Quizlet
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Practice Exam 1 UPDATE
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Terms in this set (89)
Mary Goodwin's financial situation is as $122,000
follows:
Cash/cash equivalents$15,000S Assets = $263,000; liabilities = $141,000, so net worth is $122,000. Taxes and auto note
hort-term debts$8,000 payments appear on the cash flow statement.
Long-term debts$133,000
Tax expense$7,000
Auto note payments$4,000
Invested assets$60,000
Use assets$188,000
What is her net worth?
For the year ending December 31, XXXX, $2,700
Bill Greer has the following financial
information: Income = $70,000 + $1,100 + $2,100 = $73,200. Expenses = $5,000 + $3,800 + $8,000 +
Salaries$70,000Auto $3,500 + $14,000 + $13,000 + $9,000 + $8,400 + $5,800 = $70,500, so there is a surplus
payments$5,000Insurance$3,800Food$8,0 of $2,700. The checking account and credit card balances would be on the
00Credit card statement of financial position.
balance$10,000Dividends$1,100Utilities$3,5
00Mortgage
payments$14,000Taxes$13,000Clothing$9,0
00Interest income$2,100Checking
account$4,000Vacations$8,400Donations$
5,800
What is the cash flow surplus or (deficit) for
Bill?
II, III, and IV
Which of the following are correct
statements about income replacement
The inverse of Option I is true. Those with a lower preretirement income typically
percentages?
need a much higher income replacement percentage in retirement.
If Tom and Jenny want to save a fixed $31,621
amount annually to accumulate $2 million
by their retirement date in 25 years (rather Set calculator "End" and "1 P/Yr" Inputs: FV = 2000000, i = 7, N = 25, PV = 0, then Pmt =
than an amount that grows with inflation $31,621
each year), what level annual end-of-year
savings amount will they need to deposit
each year, assuming their savings earn 7%
annually?
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,8/18/24, 6:46 AM CRPC Practice Exam 1 Flashcards | Quizlet
Bill and Lisa Hahn have determined that $389,957
they will need a monthly income of $6,000
during retirement. They expect to receive The monthly retirement income need is not specified as "today's dollars," and no
Social Security retirement benefits inflation rate specified; therefore, it must be assumed that the $2,500 net monthly
amounting to $3,500 per month at the income need represents retirement dollars, and the retirement period income
beginning of each month. Over the 12 stream is level. To calculate the lump sum needed at the beginning of retirement,
remaining years of their preretirement discount the stream of monthly income payments at the investment return rate:
period, they expect to generate an average 10BII+ PVAD calculation:
annual after-tax investment return of 8%; Set calculator on BEG and 12 periods per year, then input the following:
during their 25-year retirement period, they 2,500 [PMT]
want to assume a 6% annual after-tax 25 [SHIFT] [N]
investment return compounded monthly. 6 [I/YR]
What is the lump sum needed at the 0 [FV]
beginning of retirement to fund this income Solve for PV = $389,957
stream?
Chris and Eve Bronson have analyzed their $4,911,256
current living expenses and estimated their
retirement income need, net of expected This PVAD calculation requires that the calculator be set for beginning-of-period
Social Security benefits, to be $90,000 in payments. First, the annual retirement income deficit is expressed in retirement-year-
today's dollars. They are confident that they one dollars, resulting in a $239,925 income deficit in the first retirement year. This
can earn a 7% after-tax return on their income deficit grows with inflation over the 30-year retirement period, and the
investments, and they expect inflation to retirement fund earns a 7% return. The calculator inputs are $239,925, [PMT]; 30, [N];
average 4% over the long term. 2.8846, [I/YR]. Solve for [PV], to determine the retirement fund that will generate this
Determine the lump sum amount the income stream. If you enter 2.8846 directly into the calculator, you will get
Bronsons will need at the beginning of $4,911,265. If you use the equation to compute I/YR, and then hit the I/YR button you
retirement to fund their retirement income will get $4,911,256. Either way the answer is clear. The difference is that when you
needs, using the worksheet below. calculate the I/YR, the calculator takes the interest rate out to nine decimal places. If
you enter in the 2.8846, then the calculator only takes the interest rate to four
(1) Adjust income deficit for inflation over decimal places.
the preretirement period:$ 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 Br
A) analyze information
Assume a client and investment
B) gather data
professional have worked together for
C) make and implement recommendations
several years. Recently, the client's
D) monitor performance
personal and financial circumstances have
changed. According to the course
--B
materials, what is the next asset
management step that the investment
When the client's circumstances change, the asset management process goes back
professional should take?
to the data gathering step in the process.
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A) realistic
B) clearly defined
C) long-term perspective
D) fluid
When the client's circumstances change,
the asset management process goes back
--D
to the data gathering step in the process.
An investment policy provides guidelines that are standards to be followed. If they
are fluid, they are ever-changing and therefore would be difficult to implement and
would provide inconsistency in the management of the portfolio.
A) tactical.
An investment policy provides guidelines B) alpha.
that are standards to be followed. If they C) core/satellite.
are fluid, they are ever-changing and D) strategic.
therefore would be difficult to implement
and would provide inconsistency in the --B
management of the portfolio. Alpha is not an asset allocation strategy, but a way to measure a portfolio manager's
return relative to the amount of risk that has been taken.
Assume the following asset classes have A) Gold provides more diversification than large stocks.
the correlations to long-term government B) Small stocks provide more diversification than Treasury bills.
bonds shown below: C) Treasury bills provide more diversification than gold.
Treasury bills:.12 Gold:-.25 Large stocks:.22 D) Large stocks provide more diversification than small stocks.
Small stocks:.17
Which one of the following correctly states --A
the impact of diversification on long-term The asset with the lowest correlation provides the most diversification. Therefore,
government bonds? gold provides more diversification than any of the other assets.
A) $1,074.39
B) $893.23
C) $1,000.00
D) $1,115.57
What is the price of a bond with a 7%
coupon, a $1,000 par value, and a maturity --D
of 20 years if the market interest rate for Set the calculator for 2 P/YR and use the END mode. The inputs then are as follows:
similar bonds is 6%? 1,000 [FV], 35 [PMT], 20 [SHIFT] [N] = 40, 6 [I/YR], and solve for PV = $1,115.57. Note:
The $35 payment is the semiannual payment of the bond. This is computed by taking
the 7% coupon rate the par value of $1,000 = $70 and divide that by 2 to get the
semiannual interest paid, in this case $35. Also, the yield to maturity (YTM) is less
than the coupon rate, thus the bond must be selling at a premium.
This year, your 63-year-old client had -- There is no reduction to his benefits.
$17,025 of earned income and $30,000 of
investment income. He was also drawing The client's earnings (earned income) are below the allowable limit for the current
Social Security benefits. Which one of the year ($18,240 for 2020). Remember that according to the work penalty rule, only
following correctly describes the impact earned income is counted toward the "allowable limit."
on his Social Security benefits?
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