CRPC Practice Exam 2 Questions and
answers | Updated 2024/25 RATED A+
Richard wants to have an annual retirement income of $100,000 (payable at the beginning
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of each year) protected against 3% inflation.
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Assuming a 7% after-tax rate of return and a retirement period of 30 years, how much
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money does Richard need in order to meet his goal?
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Explain how you need to input this on the calculator and why. - Step One - Set the
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calculator to BEGIN.
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Step Two - Calculate the inflation adjusted rate of return (One plus the Rate of Return
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divided by One plus the interest rate, minus one, multiplied by 100 = the inflation adjusted
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rate of return) Put this number in the I/YR
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Step Three - 100,000 goes in as a PMT
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Step Four - 30 goes in as N ii ii ii ii ii ii ii
Step Five -Press PV ii ii ii
Richard needs $1,822,042.88 in today's dollars to meet his needs.
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ii How do you calculate the inflation-adjusted rate of return? - 1 plus the Rate of Return
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Divided by ii
1 plus the interest rate
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minus one ii
multiplied by 100 ii ii
Tom has been promised a stream of $40,000 annual payments at the end of each year for
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25 years. The present value of these payments discounted at a rate of 5% is which one of
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the following amounts? - Step One - The problem says END in it so you have to set your
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calculator to the END mode.
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Step two - Enter the $40000 as a PMT
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Step Three - Enter 25 as the N.ii ii ii ii ii ii ii
Step Four - Enter 5 as the I/R ii ii ii ii ii ii ii
, Step Six - Hit PV. ii ii ii ii
$563,758
Nick wants to maintain the purchasing power of $75,000 (in today's dollars) in retirement. If
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inflation continues to average 3.5%, approximately what amount will Nick need in 20 years
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to equal the purchasing power of $75,000 today? (Round your answer.) - If you know the
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Rule of 72, and you divide 3.5 into 72, you arrive at the number 20, which is the number of
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years it will take for a sum to double. With a calculator, you can solve for the future value of
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$75,000 over 20 years at 3.5%.
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Keystrokes: 20 N, 3.5 I/YR, 75,000 PV, FV = $149,234; rounded = $150,000
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What is the second step in the retirement planning process? - The second step in the
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retirement planning process is to gather client data, including goals and expectations
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What is the first step in the retirement planning process? - The first step is to establish and
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define the client-counselor relationship which includes disclosing the counselor's
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compensation arrangement
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What is a characteristic of a TIP? - The increase in principal is taxable each year. Any
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annual increase in principal is subject to federal taxation (unless in a tax-deferred
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account). Returns are tied to the consumer price index. TIPS are sold at par value and
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have maturities up to 30 years.
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How you calculate the weighted beta of a portfolio? - You multiply the weight times the
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beta for each stock, then you add those numbers up together.
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What does Jensen's alpha tell you - The percentage a manager over or underperformed
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based on the amount of risk taken.
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Moving averages, graphs and statistics regarding the supply and demand of stocks are an
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example of what kind of analysis? - Technical analysis.
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ii Financial statement ratios are part of what kind of analysis? - Fundamental analysis.
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When performing bond calculations, what general assumptions should be made unless
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stated otherwise? - The coupon rate is annualized but paid semiannually for U.S. bonds.
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The face value of the bond should be assumed to be $1,000, not $10,000. The coupon rate
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is stated on an annual basis but is assumed to be paid semiannually for U.S. bonds and the
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coupon payment is always made at the end of the period, not the beginning.
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Which is correct regarding the additional payroll tax for high wage earners that was
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brought about by the Patient Protection and Affordable Care Act - The tax was designed
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to provide additional funding for Medicare. This tax is an additional Medicare tax. The 0.9%
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tax is employee paid and applies to high earners only.
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