CRPC PRACTICE EXAM/ COMPREHENSIVE QUESTIONS
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Mary Goodwin's financial situation is as follows:
Cash/cash equivalents $15,000
Short-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?
A)$111,000
B)$137,000
C)$122,000
D)$263,000 - ANSWER C
At the end of last year, Bill Greer has the following financial information:
Salaries$70,000Auto payments$5,000Insurance payments$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?
A)
$2,700
B)
,$6,500
C)
$10,700
D)
($500) - ANSWER A
Which of the following are correct statements about income replacement percentages?
I.Income replacement percentages are typically much higher for those with higher preretirement
incomes.
II.Income replacement percentages vary between low-income and high-income retirees.
III.Income replacement ratios should not be used as the only basis for planning.
IV.Income replacement ratios are useful for younger clients as a guide to their long-range planning and
investing.
A)
I and IV
B)
I and II
C)
II and III
D)
II, III, and IV - ANSWER D
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?
A)
$55,692
B)
$31,621
C)
,$29,552
D)
$54,130 - ANSWER B
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. 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?
A)
$931,241
B)
$388,017
C)
$389,957
D)
$598,504 - ANSWER C
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 - ANSWER D
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)
make and implement recommendations
B)
gather data
C)
monitor performance
D)
analyze information - ANSWER B
Which one of the following is not a key attribute of an investment policy?
A)
clearly defined
B)
realistic
C)
fluid
D)
long-term perspective - ANSWER C
All of these are examples of asset allocation strategies except
A)
tactical.
B)
core/satellite.
