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CRPC EXAM 2025 (ACTUAL EXAM 2025) | ALL
QUESTIONS AND CORRECT ANSWERS |
ALREADY GRADED A+ | VERIFIED ANSWERS |
LATEST VERSION
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." ---------CORRECT 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, b. $200, c. $300, d. $400,00 ---------CORRECT ANSWER-----------------c. $300, Instead of around $700,000, Barb will need slightly more than $ 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. 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 ---------CORRECT ANSWER-----------------d. I, II, III, and IV The age of retirement is required for determining investment and life insurance needs. Economic assumptions need to be gathered from the client. While the planner may help refine the assumption, it is nonetheless the client's assumption that is needed. Planners also need to gather information on investments the client absolutely does not want to include in an investment mix. The number of children a couple may have provides an indication as to what may be needed for education expenses, how children will affect family income, and creates the need for other forms of planning such as trusts and guardianship issues. You have just finished identifying and disclosing all of the apparent and potential conflicts of interest in the relationship with your client. What is the
d. Solution cannot be determined. ---------CORRECT ANSWER----------------
- a. $16,288. Set calculator to 1 payment per year, and C/ALL Keystrokes: 10000 PV 10 N 5 I/YR FV Solution: $16,288.95. Your client's current retirement income deficit is $80,000. In 31 years, that figure will be _________, assuming a 4% rate of inflation. a. $269, b. $275, c. $285, d. $363,043 ---------CORRECT ANSWER-----------------a. $269, Set calculator to 1 payment per year, and C ALL Keystrokes: 80000 PV 31 N 4 I/YR FV Solution: $269, 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? a. disclosing the planner's compensation agreements b. identifying specific funds in which to invest
c. establishing the duration of the services and engagement d. identifying the services to be provided ---------CORRECT ANSWER-------- ---------b. identifying specific funds in which to invest Specific investments are not discussed until step four of the planning process, when the planner develops and presents the retirement plan. The initial meeting should include a discussion of the planner's compensation arrangements so that the client can determine precisely how the planner will be paid. Duration of the engagement and scope of services provided should also be discussed. The process of data gathering is the second step in the retirement planning process. All of the following are examples of data to be gathered except: a. the client's ability to purchase health insurance b. the balances in retirement accounts c. income sources and amounts d. investment and risk tolerance ---------CORRECT ANSWER----------------- a. the client's ability to purchase health insurance The client's ability to purchase insurance or investments is reviewed in step three of the planning process, in which an analysis and evaluation of financial status takes place. During the data gathering process the planner should identify the clients retirement account balances, income sources and amounts and determine his or her risk tolerance. Frank and Brenda Elliot own $20,000 in cash equivalents, $100,000 in invested assets, and $290,000 in use assets. The Elliots have an outstanding mortgage of $150,000 and owe $3,500 in credit card debt. What is the Elliots' net worth?
Which one of the following is an incorrect statement regarding retirement spending habits? a. expenditures for pension plan contributions cease b. health costs increase c. automobile-related costs increase d. travel and recreation costs increase ---------CORRECT ANSWER---------- -------c. automobile-related costs Automobile costs often decrease. Second cars for married couples are less necessary, and commuting miles are reduced or eliminated for the primary vehicle. Eliminating the second car reduces insurance expenses, license fees, maintenance costs, and taxes. You have completed all of the activities involved in the data gathering step of the financial planning process, including obtaining sufficient quantitative information and documents. What is the next step of the process? a. Gathering information to fulfill the engagement b. Monitoring the recommendations c. Analyzing and evaluating the client's information d. Implementing the recommendations ---------CORRECT ANSWER---------- -------c. Analyzing and evaluating the client's information Once you have gathered all of the appropriate data needed, the next step is to analyze it It is anticipated that the percentage of people who continue to work after they reach age 65 or 66 will increase in the future. All of the following are reasons for this increase except: a. almost all categories of living expenses increase during retirement years b. Social Security benefits are increased for people who delay receipt of benefits beyond their Social Security full retirement age
c. wages and salaries earned during retirement can increase retirement income d. people's life spans are expected to increase, so the need for retirement income must increase ---------CORRECT ANSWER-----------------a. almost all categories of living expenses increase during retirement years With some exceptions, most categories of living expenses (such as transportation, clothing, and housing) decrease during retirement years. Some expenses, such as travel and medical, may even increase during retirement years. It is true that Social Security benefits may increase for people who work past their Social Security full retirement age. Additionally, wages and salaries earned during retirement will obviously increase retirement income and longer life spans will result in a need for more retirement income. When a client's funds are insufficient to attain retirement goals, it is appropriate for the planner to suggest all of the following except: a. retiring later than initially planned b. increasing gifts to children c. performing part-time work during retirement d. spending less and saving more during retirement ---------CORRECT ANSWER-----------------b. increasing gifts to children Increasing gifts to children would exacerbate the problem. If client retirement funds are insufficient to meet goals, gifts to children should decrease. All other options will increase available resources. Delaying retirement will also decrease the need for retirement income. To calculate retirement needs, planners must make assumptions regarding future trends. These assumptions include all of the following except: a. rates of investment return b. inflation rates c. political events d. tax rates ---------CORRECT ANSWER-----------------c. political events
John wants to have $1 million in his retirement fund when he retires in 25 years. Assuming that he earns 11% and inflation is at 3%, how much does John need to save on a level basis at the end of each year? a. $7, b. $8, c. $13, d. $14,151 ---------CORRECT ANSWER-----------------b. $8, Set calculator to END mode, 1 payment per year, and C/ALL Keystrokes: 1000000, FV 25, N 11 I/YR PMT Solution: $8, Notice that the inflation rate does not come into play here because the question notes that John will be saving on a level basis. Mary wants to have a retirement income of $60,000 protected against 3% inflation. She assumes that she will earn 9%, and wants to have the income for 30 years. How much capital will be required to provide Mary this much income at the first of each year? (Set your calculator for four decimal places.) a. $616, b. $671, c. $841, d. $890,589 ---------CORRECT ANSWER-----------------d. $890, Set calculator to BEG mode, 1 payment per year, and C/ALL Because the problem indicates that Mary want her income to be protected against inflation you will use the inflation-adjusted rate of 5.8252% [((1.09 ÷ 1.03) - 1) × 100 = 5.8252].
Keystrokes: 60000, +/-, PMT 5.8252, I/YR 30, N PV Solution: $890, Margaret needs an annual retirement income of $48,000 protected against 2% inflation. You are to assume that she will earn 8%, and wants to have the income for 25 years. How much capital will be required to provide Margaret this much income at the first of each year? a. $512, b. $553, c. $620, d. $657,022 ---------CORRECT ANSWER-----------------d. $657, When gathering data during the retirement planning process, financial goals should be quantified in dollar amounts and which of the following? a. established time frames b. by type of goal c. by ownership d. order of priority ---------CORRECT ANSWER-----------------a. established time frames When assisting the client in establishing realistic goals, the planner should help define financial goals so that they are quantified in dollar amounts and have established time frames instead of remaining general in nature. Goals may be organized based on type, ownership, and priority but those are not ways of quantifying them and making them more specific. You would like to examine the Smiths' net worth as of Dec. 31, 20XX. You will prepare
John has been promised a stream of $30,000 annual payments at the beginning of each year for a period of 20 years. The present value of these payments, discounted at a rate of 6%, is a. $96,214. b. $344,098. c. $364,743. d. Solution cannot be determined ---------CORRECT ANSWER----------------- c. $364, Set calculator to BEG, 1 payment per year, and C/ALL Keystrokes: 30000 PMT 20N 6 I/YR PV Solution: $364, When estimating the duration of retirement for planning purposes, the retirement planner should do all of the following except a. use average life expectancy figures as a starting point. b. make adjustments based on the client's personal lifestyle. c. base the estimate on the life of the spouse expected to live longer. d. add 25 years for good measure. ---------CORRECT ANSWER--------------- --d. add 25 years for good measure. It is generally sufficient to add 5 to 10 years to all estimates. Adding 25 years would necessitate retirement funding until after age 100 in most cases. All of the other items listed should be done when estimating the duration of a client's retirement.
Small differences in rate of return create big differences in outcomes over time. For example, a 1% difference in annual return (12% versus 11%) on $20,000 compounded over 30 years is more than a. $26,956. b. $141,352. c. $457,846. d. $599,198. ---------CORRECT ANSWER-----------------b. $141, A 1% difference in annual return on $20,000 compounded over 30 years is (measuring 12% against 11%) $141,352 ($599,198 - $457,846 = $141,352). A fiduciary has five major responsibilities. These include all but which one of the following? a. put a client's interest first b. act with utmost good faith c. provide full and adequate disclosure of all material facts d. have annual meetings with clients ---------CORRECT ANSWER------------- ----d. have annual meetings with clients Having annual client meetings is not a requirement of the fiduciary standard, but it is certainly good practice Richard wants to have an annual retirement income of $100,000 (payable at the beginning of each year) protected against 3% inflation. Assuming a 7% after-tax rate of return and a retirement period of 30 years, how much money does Richard need in order to meet his goal? Explain how you need to input this on the calculator and why. --------- CORRECT ANSWER-----------------Step One - Set the calculator to BEGIN.
Nick wants to maintain the purchasing power of $75,000 (in today's dollars) in retirement. If inflation continues to average 3.5%, approximately what amount will Nick need in 20 years to equal the purchasing power of $75,000 today? (Round your answer.) ---------CORRECT ANSWER----------- ------If you know the Rule of 72, and you divide 3.5 into 72, you arrive at the number 20, which is the number of years it will take for a sum to double. With a calculator, you can solve for the future value of $75,000 over 20 years at 3.5%. Keystrokes: 20 N, 3.5 I/YR, 75,000 PV, FV = $149,234; rounded = $150, What is the second step in the retirement planning process? --------- CORRECT ANSWER-----------------The second step in the retirement planning process is to gather client data, including goals and expectations What is the first step in the retirement planning process? ---------CORRECT ANSWER-----------------The first step is to establish and define the client- counselor relationship which includes disclosing the counselor's compensation arrangement What is a characteristic of a TIP? ---------CORRECT ANSWER----------------- The increase in principal is taxable each year. Any annual increase in principal is subject to federal taxation (unless in a tax-deferred account). Returns are tied to the consumer price index. TIPS are sold at par value and have maturities up to 30 years.
How you calculate the weighted beta of a portfolio? ---------CORRECT ANSWER-----------------You multiply the weight times the beta for each stock, then you add those numbers up together. What does Jensen's alpha tell you ---------CORRECT ANSWER----------------
- The percentage a manager over or underperformed based on the amount of risk taken. Moving averages, graphs and statistics regarding the supply and demand of stocks are an example of what kind of analysis? ---------CORRECT ANSWER-----------------Technical analysis. Financial statement ratios are part of what kind of analysis? --------- CORRECT ANSWER-----------------Fundamental analysis. When performing bond calculations, what general assumptions should be made unless stated otherwise? ---------CORRECT ANSWER----------------- The coupon rate is annualized but paid semiannually for U.S. bonds. The face value of the bond should be assumed to be $1,000, not $10,000. The coupon rate is stated on an annual basis but is assumed to be paid semiannually for U.S. bonds and the coupon payment is always made at the end of the period, not the beginning. Which is correct regarding the additional payroll tax for high wage earners that was brought about by the Patient Protection and Affordable Care Act -- -------CORRECT ANSWER-----------------The tax was designed to provide additional funding for Medicare. This tax is an additional Medicare tax. The 0.9% tax is employee paid and applies to high earners only.
You have to remember that penalties in a non deductible IRA apply ONLY to the earnings. So $32000 - $20000 = $12000. Mike is only 50, so that's a 10% penalty. Add that to his tax bracket so 35% + 10% = 45%. $12000 x 45% = $5400 in taxes. When deciding how much to contribute to a Roth IRA, what is something you must always remember to consider about your client? --------- CORRECT ANSWER-----------------Their AGI. When deciding to contribute to a Roth IRA, you must consider only your AGI. You do not need to consider active participant status. That is only considered when calculating the amount of a TRADITIONAL IRA contribution that is deductible. What is a deductible IRA? ---------CORRECT ANSWER-----------------A deductible IRA can lower your tax bill by allowing you to deduct your contributions on your tax return - you essentially get a refund on the taxes you paid earlier in the year. You fund a NON-deductible IRA with after-tax dollars What is a traditional IRA? ---------CORRECT ANSWER-----------------A traditional IRA lets you make tax-deductible contributions to a retirement account that grow tax-deferred until you're ready to start taking distributions in retirement. It's a popular option for many savers, but it doesn't work for everyone. One alternative is the non-deductible IRA, which lets high earners get in on the IRA action
What is a non deductible IRA? ---------CORRECT ANSWER----------------- Depending on your circumstances, you may be ineligible to deduct IRA contributions. For example, according to the 2015 limits, a married couple filing jointly who both save in employer-sponsored retirement plans and who have a combined adjusted gross income (AGI) of $118,000 or more cannot make deductible IRA contributions. That's where a non-deductible IRA comes in. The idea behind a non-deductible IRA is to bring the benefits of tax- deferred growth to the folks who are ineligible to save in a regular IRA. Folks like our hypothetical wealthy couple. You can make non-deductible contributions to a pre-exisiting IRA, or open a separate IRA just for non- deductible contributions. Regarding longevity annuities, at what age must the owner being receiving income? ---------CORRECT ANSWER-----------------Age 85. Regarding longevity annuities, why are payments large than those received from a regular annuity? ---------CORRECT ANSWER-----------------Because of the delay in receipt of the actual payments. What type of insurance is referred to as "pure" life insurance? --------- CORRECT ANSWER-----------------Term life is insurance in it's purest form. It provides nothing more than a cash payment if death occurs while the policy is in force. Reverse mortgages can be used for what purpose? ---------CORRECT ANSWER-----------------To generate a lump sum that can be used to fund long term care.
