CRPC 2018 Exam Questions with
Revised Answers
You would like to examine the Smiths' net worth as of Dec. 31, 20XX. You will prepare
a. a retirement plan
b. a statement of financial position
c. an income replacement percentage
d. a cash flow statement - Answer-a. a statement of financial position
A statement of financial position shows a client's net worth, which is defined as assets
minus liabilities, as of a specific date. A cash flow statement shows a client's net cash
flow (or deficit) over a period of time (usually one year). Income replacement
percentage is another name for "replacement ratio" and is used as a rough guide in
determining the amount of income needed in retirement relative to pre-retirement
income.
All of the following may conflict with retirement goals except
a. emergency funding
b. college funding
c. wealth accumulation
d. the cost of caring for elderly parents - Answer-c. wealth accumulation
One of the purposes of lifelong wealth accumulation is to provide for a comfortable
retirement. Each of the other goals may conflict with retirement goals.
Industry standards typically consider expenses lasting beyond ___ to be long-term
liabilities.
a. one month
b. six months
c. one year
d. five years - Answer-c. one year
Which one of the following client goals is sufficiently specific for retirement planning
purposes?
a. "I'd like to retire with enough money to do what I want."
b. "We'd like to send our children to college."
c. "We want to travel."
, d. "I want to accumulate $500,000 by December 2020." - Answer-d. I want to
accumulate $500,000 by December 2020."
"I want to accumulate $500,000 by December 2020." is an adequately specific goal. The
planner will be able to analyze resources and determine if this goal is achievable. The
other goals listed are all vague and nonspecific.
Barb wants a retirement income of $5,000 at the beginning of each month for 25 years.
If she is able to earn a return of 7% on invested assets, she needs $700,000 to fund her
income. However, this does not include any inflation adjustment. By incorporating a
3.5% inflation factor, what is Barb's approximate funding requirement increase, if she
wants to maintain the same purchasing power?
a. $100,000
b. $200,000
c. $300,000
d. $400,00 - Answer-c. $300,000
Instead of around $700,000, Barb will need slightly more than $1 million to maintain an
inflation-adjusted budget with equal purchasing power (using an inflation-adjusted rate
of 3.3816 compounded monthly); so the increase is approximately $300,000.
Set calculator to BEG mode, 12 payments per year, and C/ALL
Keystrokes:
25, shift, N
3.3816 I/YR
5000, +/-, PMT
PV Solution: $1,014,389.93
Which of the following types of information are important to gather from a client prior to
developing retirement planning recommendations?
I. his or her desired age of retirement
II. the client's assumption for the long-term rate of inflation
III. investments the client prefers not to use
IV. number of children client and spouse intend to have
a. I and II only
b. II and III only
c. I, III, and IV only
d. I, II, III, and IV - Answer-d. I, II, III, and IV
Prior to providing retirement planning services, the scope of the services to be offered
should be mutually defined by the planner and client. This initial discussion should not
include which of the following topics?
Revised Answers
You would like to examine the Smiths' net worth as of Dec. 31, 20XX. You will prepare
a. a retirement plan
b. a statement of financial position
c. an income replacement percentage
d. a cash flow statement - Answer-a. a statement of financial position
A statement of financial position shows a client's net worth, which is defined as assets
minus liabilities, as of a specific date. A cash flow statement shows a client's net cash
flow (or deficit) over a period of time (usually one year). Income replacement
percentage is another name for "replacement ratio" and is used as a rough guide in
determining the amount of income needed in retirement relative to pre-retirement
income.
All of the following may conflict with retirement goals except
a. emergency funding
b. college funding
c. wealth accumulation
d. the cost of caring for elderly parents - Answer-c. wealth accumulation
One of the purposes of lifelong wealth accumulation is to provide for a comfortable
retirement. Each of the other goals may conflict with retirement goals.
Industry standards typically consider expenses lasting beyond ___ to be long-term
liabilities.
a. one month
b. six months
c. one year
d. five years - Answer-c. one year
Which one of the following client goals is sufficiently specific for retirement planning
purposes?
a. "I'd like to retire with enough money to do what I want."
b. "We'd like to send our children to college."
c. "We want to travel."
, d. "I want to accumulate $500,000 by December 2020." - Answer-d. I want to
accumulate $500,000 by December 2020."
"I want to accumulate $500,000 by December 2020." is an adequately specific goal. The
planner will be able to analyze resources and determine if this goal is achievable. The
other goals listed are all vague and nonspecific.
Barb wants a retirement income of $5,000 at the beginning of each month for 25 years.
If she is able to earn a return of 7% on invested assets, she needs $700,000 to fund her
income. However, this does not include any inflation adjustment. By incorporating a
3.5% inflation factor, what is Barb's approximate funding requirement increase, if she
wants to maintain the same purchasing power?
a. $100,000
b. $200,000
c. $300,000
d. $400,00 - Answer-c. $300,000
Instead of around $700,000, Barb will need slightly more than $1 million to maintain an
inflation-adjusted budget with equal purchasing power (using an inflation-adjusted rate
of 3.3816 compounded monthly); so the increase is approximately $300,000.
Set calculator to BEG mode, 12 payments per year, and C/ALL
Keystrokes:
25, shift, N
3.3816 I/YR
5000, +/-, PMT
PV Solution: $1,014,389.93
Which of the following types of information are important to gather from a client prior to
developing retirement planning recommendations?
I. his or her desired age of retirement
II. the client's assumption for the long-term rate of inflation
III. investments the client prefers not to use
IV. number of children client and spouse intend to have
a. I and II only
b. II and III only
c. I, III, and IV only
d. I, II, III, and IV - Answer-d. I, II, III, and IV
Prior to providing retirement planning services, the scope of the services to be offered
should be mutually defined by the planner and client. This initial discussion should not
include which of the following topics?
