CRPC Practice Exam 1 Questions with Detailed Answers Updated 2024

CRPC Practice Exam 1 Questions with Detailed Answers
Updated 2024

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? - $31,621
Set calculator "End" and "1 P/Yr" Inputs: FV = 2000000, i = 7, N = 25, PV = 0, then Pmt =
$31,621
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.
What is the lump sum needed at the beginning of retirement to fund this income stream? -
$389,957
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
Mary Goodwin's financial situation is as follows:
Cash/cash equivalents$15,000S
hort-term debts$8,000
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? - $122,000
Assets = $263,000; liabilities = $141,000, so net worth is $122,000. Taxes and auto note
payments appear on the cash flow statement.
For the year ending December 31, XXXX, Bill Greer has the following financial information:
Salaries$70,000Auto payments$5,000Insurance$3,800Food$8,000Credit card
balance$10,000Dividends$1,100Utilities$3,500Mortgage
payments$14,000Taxes$13,000Clothing$9,000Interest income$2,100Checking
account$4,000Vacations$8,400Donations$5,800
What is the cash flow surplus or (deficit) for Bill? - $2,700
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.
Which of the following are correct statements about income replacement percentages? - II,
III, and IV
The inverse of Option I is true. Those with a lower preretirement income typically need a
much higher income replacement percentage in retirement.
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 Br - $4,911,256
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
withinflation over the 30-year retirement period, and the retirement fund earns a 7%
return. The calculator inputs are $239,925, [PMT]; 30, [N]; 2.8846, [I/YR]. Solve for [PV], to
determine the retirement fund that will generate this income stream. If you enter 2.8846
directly into the calculator, you will get $4,911,265. If you use the equation to compute I/YR,
and then hit the I/YR button you will get $4,911,256. Either way the answer is clear. The
difference is that when you 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 decimal places.
Assume a client and investment professional have worked together for several 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? - A) analyze information
B) gather data
C) make and implement recommendations
D) monitor performance