Exam (elaborations)
CRPC EXAM 2024/2025 QUESTIONS WITH COMPLETED & VERIFIED SOLUTIONS.
- Course
- Institution
CRPC EXAM 2024/2025 QUESTIONS WITH COMPLETED & VERIFIED SOLUTIONS.
[Show more]
Seller
Follow
Content preview
CRPCDiversification - ANS Acquiring assets with low or negative correlations to each other
with the goal of lowering overall risk
Correlation - ANS - 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 - ANS - 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 - ANS 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 - ANS - 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 - ANS - 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 - ANS 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 - ANS
Dollar-Cost averaging - ANS - investing regular amounts at regular intervals
- reduce market timing risk, improve cost per share
Low P/E strategy - ANS 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) - ANS 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 - ANS P-purchasing power risk
R- reinvestment risk
I- interest rate risk
M- market risk
E- exchange rate risk
Social Security- Fully insured - ANS - 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 - ANS - 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 - ANS - age he starts
- earnings history
SS calculation before full retirement age - ANS - 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 - ANS - Payment increases by about 8% each
year they delay, until maximum year 70
- actual math is 2/3 for each month
Social Security milestones - ANS 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 - ANS $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 - ANS 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 - ANS Provisional income=AGI(excluding SS) +Nontaxable
interest(muni bonds) + 1/2(SS benefit)
Single provisional income SS taxable % - ANS 25k-34k: 50%
34k+: 85%
Jointly provisional income SS taxable % - ANS 32k-44k: 50%
44k+:85%
maximum taxable SS amount - ANS 85% of Total SS benefit
Spousal benefit - ANS - Pay spouse a maximum of 50% of earners PIA
What tax funds the Social Security Trust Fund - ANS Payroll taxes; FICA
, What is the FICA tax; how is it split up - ANS 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 - ANS $118,500
Covered employment - ANS Any position that participates in social security system
Excluded
- Railroad employees
- Fed gov employees hired before 1984
Average SS benefit - ANS $1300 pm
Max benefit - ANS $2639 pm
Quarter of Coverage - ANS earned after $1260 of earnings in year
- most you can earn in 1 year is 4 credits in year
= $5040 in year
need 40 quarters of credit
Fully insured - ANS Eligible for all SS benefits
- credits needed increase with age, up to max of 40
Currently insured - ANS have earned at least 6 credits during previous 13 quarters
before death/disability
- eligible for some survivor benefits
Average indexed monthly earnings - ANS used to determine the amount of ss you will
receive
- TOP 35 years of earnings/420 (months in 35 years) =AIME
** if client doesn't have 35 years, any missed years will be factored as 0's
Full Retirement Age (FRA) - ANS born 1960 or later: 67
born 1937 or earlier: 65
born 1943-1954: 66
Primary Insurance Amount (PIA) - ANS Benefit received at full retirement age
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 LEWIS12. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $9.99. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
79650 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now