Exam (elaborations)
CRPC Exam With Correct Solutions
- Course
- Institution
CRPC Exam With Correct Solutions
[Show more]
Content preview
CRPC Exam With CorrectSolutions
Diversification CORRECT ANSWERS Acquiring assets with low or negative correlations to each other with the goal of lowering overall risk
Correlation CORRECT ANSWERS - a relative measure of the degree to which the
returns of two assets move together - range from +1.0 to -1.0
- in practice negative correlations are rare
- the further a correlation is from +1.0, the more diversified
Asset allocation CORRECT ANSWERS - the apportioning of available funds among a number of asset classes in a way that meets the needs of a particular client, dampens the effects of periodic market fluctuations, and meets investment goals
Four steps in the asset allocation process CORRECT ANSWERS 1) select asset classes to be represented 2) determine the percentage that each asset class should represent in the total portfolio
3) Select individual securities
4) Review and rebalance
Strategic Asset Allocation CORRECT ANSWERS - determine asset mix that provides optimal balance of expected risk and ROR - asset classes selected and % weight determined - Used to develop long-term allocation policy
- utilizes rebalancing to maintain targeted weight
Tactical Asset Allocation CORRECT ANSWERS - used to develop short term strategies to exploit changes in market conditions - ofter viewed as a contrarian strategy - periodic revisions of asset mix; moving funds from over valued investments to undervalued investments - market timing strategy
Core-Satellite asset allocation CORRECT ANSWERS 70-80% invested in broad index fund or etfs - remaining satellite consists of actively managed MF's in niches such as sector funds or alt investments like hedge funds
Contrarian Strategy CORRECT ANSWERS Dollar-Cost averaging CORRECT ANSWERS - investing regular amounts at regular intervals
- reduce market timing risk, improve cost per share
Low P/E strategy CORRECT ANSWERS Ratio of 1= fair value
Ratio > 1= overvalued Ratio < 1= undervalued ** The long-term average P/E for stocks is 16
Bond Investment strategies (2) CORRECT ANSWERS 1) Ladder: Owning equal amounts of bonds along with maturities of equal intervals; ex. 50k of bonds with 10k each in 2,4,6,8,10 year maturities 2) Barbell: Owning short-term and long-term bonds, each with a ladder; ex. 100k of bonds with 10k each in 1,2,3,4,5 year maturities and in 16,17,18,19,20 year maturities
Systematic Risk CORRECT ANSWERS P-purchasing power risk
R- reinvestment risk
I- interest rate risk
M- market risk E- exchange rate risk Social Security- Fully insured CORRECT ANSWERS - having 10 years of employment covered by social security; expressed as "40 quarters of coverage"
- Must be fully insured for retirement benefits - fully insured workers are also eligible for disability if he has earned at least 20 work credits in last 10 years
Social Security- currently insured CORRECT ANSWERS - individual must has at least 6 quarters of coverage in the 13-quarter period proceeding the event for which
eligibility is sought - child's benefit, mother/fathers benefits, and lump-sum death benefit are available if a worker is only currently insured at death
Components of SS calculation CORRECT ANSWERS - age he starts - earnings history
SS calculation before full retirement age CORRECT ANSWERS - Payment reduced by 5/9th of 1% for each month filed before FRA, up to 36 months - Payment is reduced by 5/12ths of 1% for each month filed early in excess of 36 months
SS calculation after full retirement age CORRECT ANSWERS - Payment increases by about 8% each year they delay, until maximum year 70
- actual math is 2/3 for each month
Social Security milestones CORRECT ANSWERS Ages
50: disabled survivors can start receiving benefits
60: nondisabled survivors can start receiving 62: earliest one can start receiving benefits at reduced rate
65-67: FRA, depending on birth year
70: delayed retirement age
Social Security income cap CORRECT ANSWERS $15,720
- Those who are under FRA and working will lose $1 SS benefit for every $2 they earn above $15,720
- At FRA it is reduced to $1 for every $3 earned After FRA there is no reduction
Max provisional income for SS CORRECT ANSWERS Single or head of househouse:
Tax-free if provisional income is less than 25k
Filing jointly:
Tax free if provisional income is less than 32k
Provisional income CORRECT ANSWERS Provisional income=AGI(excluding SS) +Nontaxable interest(muni bonds) + 1/2(SS benefit)
Single provisional income SS taxable % CORRECT ANSWERS 25k-34k: 50%
34k+: 85%
Jointly provisional income SS taxable % CORRECT ANSWERS 32k-44k: 50%
44k+:85%
maximum taxable SS amount CORRECT ANSWERS 85% of Total SS benefit
Spousal benefit CORRECT ANSWERS - Pay spouse a maximum of 50% of earners PIA
What tax funds the Social Security Trust Fund CORRECT ANSWERS Payroll taxes; FICA
What is the FICA tax; how is it split up CORRECT ANSWERS 15.3%; The employer and employee each pay 6.2% for old-age, survivors and disability insurance (OASDI) and 1.45% each for hospital insurance
Social Security Wage Base CORRECT ANSWERS $118,500
Covered employment CORRECT ANSWERS Any position that participates in social security system
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller ElevatedExcellence. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $20.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
78252 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now