CRPC Exam 2024-2025: Practice Questions and Answers with Rationales, Exams of Business Accounting

Download CRPC Exam 2024-2025: Practice Questions and Answers with Rationales and more Exams Business Accounting in PDF only on Docsity!

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+

• $8,400 + $5,800 = $70,500, so there is a surplus of $2,700. The checking account and credit

• Cash/cash equivalents$15, Mary Goodwin's financial situation is as follows:
• Short-term debts$8,
• Long-term debts$133,
• Tax expense $7,
• Auto note payments $4,
• Invested assets $60,
• Use assets $188,
• is $122,000. Taxes and auto note payments appear on the cash flow statement. 1- What is her net worth? - correct answer Assets = $263,000; liabilities = $141,000, so net worth
• Salaries$70,
• Auto payments$5,
• Insurance payments$3,
• Food$8,
• Credit card balance$10,
• Dividends$1,
• Utilities$3,
• Mortgage payments$14,
• Taxes$13,
• Clothing$9,
• Interest income$2,
• Checking account$4,
• Vacations$8,
• Donations$5,
• $2,100 = $73,200. Expenses = $5,000 + $3,800 + $8,000 + $3,500 + $14,000 + $13,000 + $9, What is the cash flow surplus or (deficit) for Bill? - correct answer Income = $70,000 + $1,100 +

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ LO 1- 3 correct statements about income replacement percentages - correct answer Income replacement percentages are typically much higher for those with lower preretirement incomes. Income replacement percentages vary between low-income and high-income retirees. Income replacement ratios should not be used as the only basis for planning. Income replacement ratios are useful for younger clients as a guide to their long-range planning and investing. The inverse of Option I is true. Those with a lower preretirement income typically need a much higher income replacement percentage in retirement. LO 1- 4 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? - correct answer Set your calculator to the "End" mode and "1 P/Yr." Inputs: FV = 2000000, I/YR = 7, N = 25, PV = 0, then PMT = $31, 1 - 4 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.

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ What is the lump sum needed at the beginning of retirement to fund this income stream? - correct answer The monthly retirement income need is not specified as "today's dollars," and no inflation rate specified; therefore, it must be assumed that the $2,500 net monthly income need represents retirement dollars, and the retirement period income stream is level. To calculate the lump sum needed at the beginning of retirement, discount the stream of monthly income payments at the investment return rate: 10BII+ PVAD calculation: Set calculator on BEG and 12 periods per year, then input the following: 2,500 [PMT] 25 [SHIFT] [N] 6 [I/YR] 0 [FV] Solve for PV = $389, LO 1- 4 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, (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 - correct answer This PVAD calculation requires that the calculator be set for beginning-of-period payments. First, the annual retirement income deficit is expressed in retirement-year-one dollars, resulting in a $239,925 income

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ deficit in the first retirement year. This income deficit grows with inflation over the 30-year retirement period, and the retirement fund earns a 7% return. The calculator inputs are $239,925, [PMT]; 30, [N]; 2.8846, [I/YR]. (1.07/1.04)-1 x Solve for [PV], to determine the retirement fund that will generate this income stream. If you enter 2. directly into the calculator, you will get $4,911,265. If you use the equation to compute I/YR, and then hit the I/YR button you will get $4,911,256. Either way the answer is clear. The difference is that when you calculate the I/YR, the calculator takes the interest rate out to nine decimal places. If you enter in the 2.8846, then the calculator only takes the interest rate to four decimal places. LO 1- 4 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) gather data B) analyze information C) make and implement recommendations D) monitor performance - correct answer When the client's circumstances change, the asset management process goes back to the data gathering step in the process. A LO 1- 2

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ Which one of the following is not a key attribute of an investment policy? A) clearly defined B) fluid C) realistic D) long-term perspective - correct answer An investment policy provides guidelines that are standards to be followed. If they are fluid, they are ever-changing and therefore would be difficult to implement and would provide inconsistency in the management of the portfolio. LO 2- 1 Fluid All of these are examples of asset allocation strategies except A) alpha. B) tactical. C) core/satellite. D) strategic. - correct answer Alpha is not an asset allocation strategy, but a way to measure a portfolio manager's return relative to the amount of risk that has been taken. alpha LO 2- 5 Assume the following asset classes have the correlations to long-term government bonds shown below: Treasury bills:.

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ Gold:-. Large stocks:. Small stocks:. Which one of the following best exemplifies the impact of diversification on long-term government bonds? - correct answer The asset with the lowest correlation provides the most diversification. Therefore, gold provides more diversification than any of the other assets. Small stocks do provide more diversification than Treasury bills, but gold provides the most diversification, so it is the best option. LO 2- 3 The two major risks associated with individual common stocks are A) default risk and business risk. B) market risk and business risk. C) interest rate risk and exchange rate risk. D) interest rate risk and purchasing power risk. - correct answer The primary risks associated with common stock are business risk and market risk. Interest rate risk, default risk, and purchasing power risk are the major risks of bonds. B LO 2- 2 What is the price of a bond with a 7% coupon, a $1,000 par value, and a maturity of 20 years if the market interest rate for similar bonds is 6%?

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ A) $1,115. B) $893. C) $1,074. D) $1,000.00 - correct answer Set the calculator for 2 P/YR and use the END mode. The inputs then are as follows: END 1,000 [FV], 35 [PMT], 20 [SHIFT] [N] = 40, 6 [I/YR], and solve for PV = $1,115.57. Note: The $35 payment is the semiannual payment of the bond. This is computed by taking the 7% coupon rate the par value of $1,000 = $70 and divide that by 2 to get the semiannual interest paid, in this case $35. Also, the yield to maturity (YTM) is less than the coupon rate, thus the bond must be selling at a premium. A LO 2- 8 This year, your 63-year-old client had $17,025 of earned income and $30,000 of investment income. He was also drawing Social Security benefits. Which one of the following correctly describes the impact on his Social Security benefits? A) He loses $1 of benefits for every $2 above the "allowable limit." B) There is no reduction to his benefits. C) He loses $1 of benefits for every $1 above the "allowable limit."

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ D) He loses $1 of benefits for every $3 above the "allowable limit." - correct answer The client's earnings (earned income) are below the allowable limit for the current year ($21240 2023 ). Remember that according to the work penalty rule, only earned income is counted toward the "allowable limit." B LO 3- 3 Which one of the following is a correct statement about the amount of Social Security retirement benefits available when a fully insured worker's retirement benefit begins at full retirement age (FRA)? A) A 63-year-old spouse of the retired worker will receive at least 50% of the worker's PIA. B) The worker will receive 80% of his or her primary insurance amount (PIA). C) If the spouse of the worker has attained FRA and is entitled to benefits on their earning record, the benefit is the lesser of 100% of the spouse's own PIA or 50% of the worker's PIA. D) If the spouse is at or above his or her full retirement age when commencing Social Security benefits, the spouse will receive at least 50% of the worker's PIA. - correct answer The spouse who starts receiving benefits at his or her Social Security full retirement age will receive 50% of the worker's PIA unless the spouse's Social Security benefit is higher based on his or her own earnings. (Note: The FRA began increasing for those workers who reached age 62 in the year 2000.) At full retirement age the worker will receive 100% of PIA. The 50% of PIA is reduced for each month the spouse is under full retirement age when benefits begin. A spouse who is at FRA and entitled to benefits on their own working record would receive the higher of 100% of their own PIA or 50% of the spouse's PIA.

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ D LO 3- 4 Which one of the following is correct regarding most types of tax exempt interest and the taxation of Social Security benefits? A) None of the tax-exempt interest is included in the computation of the taxation of Social Security benefits. B) 50% of the tax-exempt interest is included in the computation of the taxation of Social Security benefits. C) 85% of the tax-exempt interest is included in the computation of the taxation of Social Security benefits. D) All of the tax-exempt interest is included in the computation of the taxation of Social Security benefits. - correct answer All tax-exempt interest income is included in computing the portion of Social Security benefits that are subject to taxation. However, tax-free Roth distributions are not counted when determining provisional income. A maximum of 85% of the Social Security benefits are subject to taxation. D LO 3- 3 Susan has reached full retirement age (FRA). She is trying to decide between starting Social Security benefits of $1,000 per month now, or delaying receipt for three years and using her savings to provide current income. By delaying three years her benefit would increase to $1, per month. Ignoring the time value of money and cost-of-living adjustments, use the break- even calculation to determine how much longer Susan will need to live in order for delaying to "pay off."

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ A) She should delay beyond FRA regardless of her life expectancy in order to maximize her lifetime benefit. B) She should delay only if she expects to live beyond the next 15½ years or so. C) She should begin at FRA if she expects to live beyond the next three years. D) She should begin her benefits at FRA regardless of her life expectancy in order to maximize her lifetime benefit. - correct answer By delaying three years, Susan is forfeiting $1,000 X 36 payments or $36,000 of benefits. She would then gain $240 per month going forward: $36,000/$240 = 150 months, or 12.5 years, from three years from now. If she thinks she is going to live beyond 15.5 years from now, it would pay to delay benefits by three years. B LO 3- 3 Sam, age 62, begins receiving his Social Security income. His PIA is $1,500 per month. Because he has filed at age 62, his payment will be reduced by 25% to $1,125. His wife Linda, age 67, would like to begin spousal benefits. Her monthly income would be A) $562.50. B) $1,125.00. C) $1,500.00. D) $750.00. - correct answer Because Linda has attained FRA, she would be eligible for 50% of Sam's full PIA, or $750.00.

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ D LO 3- 4 Unsystematic risk A) increases during periods of volatile interest rates. B) is reduced when markets fluctuate less. C) is increased through diversification. D) can be effectively eliminated. - correct answer D Diversification decreases unsystematic risk. Market fluctuations affect market risk, a type of systematic risk. Volatile interest rates affect interest rate risk, which is a type of systematic risk. One of the main points of the CAPM (Capital Asset Pricing Model) is that investors are not rewarded in the long-term for taking unsystematic risk. This does not mean an investor cannot get lucky and purchase the next Amazon or Facebook early. It means on average, over time, unsystematic risk does not benefit the average investor. LO 2- 3 Sources of risk include which of the following? fluctuating exchange rates a firm's financing decisions higher interest rates a loss of purchasing power - correct answer All of the options are types of systematic or unsystematic risk.

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ LO 2- 3 fluctuating exchange rates a firm's financing decisions higher interest rates a loss of purchasing power Investors who want to bear the least amount of risk from equity investments should acquire stocks with beta coefficients A) less than 0.5. B) less than 1.0. C) greater than 1.0. D) greater than 1.5. - correct answer When seeking investments that have the least amount of risk, the lowest beta should be selected. A LO 2- 3 If a security has an average return of 14.2% and a standard deviation of 8.4, what can be said about the security? A) The security's returns can be expected to never be negative. B)

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ The security's returns can be expected to be between 8.4% and 14.2% approximately 95% of the time. C) The security's annual volatility can be expected to be within a range approximately 8.4% above and 8.4% below the current fair market value. D) The security's returns can be expected to be between 5.8% and 22.6% approximately 68% of the time. - correct answer This security can be expected to have a return that does not range beyond one standard deviation on either side of its average return approximately 68% of the time. The standard deviation is subtracted from and added to the average return and there is no guarantee that an investor will never have a negative return. Volatility is measured by beta. D LO 2- 3 Which one of the following individuals would be best served by a $5,000 Roth conversion? A) George, a 28-year-old father of two whose wife is completing school; their income is $24, B) Mandy, a 30-year-old highly paid executive C) Tom, a 51-year-old mid-level manager making $90, D) Rachel, a 63-year-old widowed grandmother whose income is $70,000 and has $55,000 in her IRA - correct answer A George is young, so converting now would give him the longest time for the Roth account to grow and thus produce tax-free income in retirement. Second, George's gross income is below the standard deduction for a couple married filing jointly. Also, they will receive two child tax

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ credits and an earned income credit. Thus, the conversion will not be income taxed. The others are older and subject to income tax now. Rachel does not need to convert because she does not seem to be on a path that will make her pay income taxes in retirement when she claims her monthly benefit. LO 4- 4 Your client has established a balanced portfolio with various amounts allocated to different asset classes, and periodically she rebalances the portfolio to keep the same approximate percentages in the different asset classes. Her approach is A) strategic. B) dynamic. C) core/satellite. D) tactical - correct answer A This is a correct example of a strategic approach. Tactical means choosing various sectors that you believe will do best, and changing as you believe is necessary. The dynamic approach is to change asset allocation amounts as the market changes, typically used by institutional investors. Core/satellite is a combination of strategic and tactical. LO 2- 5 Harry, who is 34 years old, contributed $2,000 to a Roth IRA six years ago. By this year, the investments in his account had grown to $3,785. Finding himself in a financial bind, Harry is now compelled to withdraw $2,000 from this Roth IRA. What is the tax and penalty status of this withdrawal? A) Harry must pay tax and a $200 penalty. B)

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ Harry must pay the penalty but no tax. C) Harry does not have to pay any tax or penalty on the $2,000 distribution, even though he is only

D) Harry must pay tax on the $2,000, but there is no penalty. - correct answer C All Roth IRA contributions are made with after-tax funds, and contributions are considered to be withdrawn first, tax-free, then earnings. Also, the IRC rules allow the aggregation of all Roth IRAs for this calculation. Penalties would apply only to the gains the account experienced or withdrawals of converted amounts within five years of the conversion. LO 7- 3 Norman and Brenda Walker are married taxpayers filing jointly. They are both 44 years old. Norman earned $132 this year, and Brenda earned $100,000. Brenda is an active participant in the qualified plan offered by her employer, and she contributed $1,500 to her IRA for this tax year. How much can be contributed to a spousal IRA and deducted for Norman for 2022? A) $4, B) $6, C) $ D) $132 - correct answer B The maximum deductible contribution to a spousal IRA for Norman is $6,000. The deductible amount phases out at AGI of $204,000-$214,000 (for 2022) for Norman, who is the nonactive participant spouse. LO 4- 2

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ James and Doris Stewart, both age 40, will contribute a total of $12,000 to their IRAs for 2022. They both work outside the home, and they file a joint tax return. James is a teacher at the local high school and contributes to a TSA. Doris's employer has no retirement plan. Their adjusted gross earnings for this year will be $117,000. What amount can they deduct for their IRA contributions? A) $9, B) $8, C) $6, D) $12,000 - correct answer A Doris is entitled to deduct the full $6,000 spousal IRA amount and James is in the phaseout range for active spouses: $129,000 - $117,000 = $12,000; $12,000/$20,000 phaseout range = 0.6; 0.6 x $6,000 = $3,600; $3,600 + $6,000 = $9,600. Notice that the Stewarts are in the phaseout range for active participants. Also, one of the spouses is not an active participant in a qualified retirement plan. Thus, the nonparticipant spouse can deduct the full amount and the active participant can deduct at least something. Thus, $6,000 is too small. Also, $12,000 is too large because at least some of the active participant's ability is phased out. LO 4- 2

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ Charlie contributed $2,000 to Roth IRA 1 last year, when he was age 24, and $2,000 to Roth IRA 2 this year. Two years from now, Roth IRA 1 will have a balance of $2,650, and Roth IRA 2 will have a balance of $2,590, and Charlie will close Roth IRA 1, receiving the balance of $2,650. Which one of the following statements best describes his tax and penalty status for that year? A) He only pays ordinary taxes because Roth IRA distributions are not subject to a penalty. B) He cannot make any withdrawals because the money has not been in the Roth IRA for five years or longer. C) He will not pay taxes or a penalty. D) He must pay taxes and a penalty on the full distribution. - correct answer C The distribution is not qualified because Charlie is under age 59½, not disabled, not dead, or not making a first-time home purchase and he is withdrawing the money before the waiting period of five tax years. Withdrawals within five years are not prohibited, but taxation may occur and penalties may apply in some cases. None of this withdrawal, however, is included in Charlie's taxable income because the $2,650 sum is less than the aggregate total of his contributions ($4,000). Also, no penalty applies because the withdrawal is accounted for as coming from his contributions. LO 7- 3 The "required beginning date" (RBD) for IRA distributions is which one of the following? A) April 1 of the year following the year in which age 73 was attained B)

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ April 15 of the year in which age 73 was attained C) April 15 of the year following the year in which age 73 was attained D) April 1 of the year in which age 73 was attained - correct answer A By definition, under the SECURE Act the required beginning date for IRA distributions is April 1 of the year following the year in which the participant or IRA owner turns age 73. LO 7- 3 Over a period of 10 years, Mark contributed a total of $20,000 to a nondeductible IRA. The current value of Mark's IRA is $40,000, and Mark, who is now age 45, has decided to use all of his IRA assets for the down payment on a second home. Assuming Mark's marginal tax bracket is 35%, how much does he owe in taxes and penalties? A) $2, B) $14, C) $9, D) $7,000 - correct answer C The major difference between a nondeductible IRA and a traditional or Roth IRA is that you can contribute to a nondeductible IRA no matter how much you earn. Roth and traditional IRAs, on the other hand, are subject to strict income limits. Mark's effective tax rate is 45%; i.e., 35% plus the 10% early withdrawal penalty. 45% * $20,000 tax-deferred earnings = $9,000.

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ The $20,000 basis in the IRA is not subject to income tax or the early withdrawal penalty. LO 7- 3 Richard, age 45, and his wife Betty, age 44, plan to contribute a total of $12,000 to their IRAs for 2022. They both work outside the home, and they file a joint income tax return. Richard is a teacher at the local high school and participates in a 403(b) plan. Betty's employer does not provide a retirement plan. They expect that their adjusted gross income for the year will be $150,000. What amount, if any, can they deduct for their IRA contributions? A) $6, B) $5, C) $4, D) $12,000 - correct answer A An individual is not denied a deduction for his or her IRA contribution simply because of the other spouse's active participation, unless the couple's combined AGI exceeds $204, (phasing out to $214,000 in 2022). Based on their AGI, Betty will be able to deduct a contribution of up to $6,000 to an IRA. Richard cannot deduct any of his IRA contribution because their AGI is beyond the 2022 phaseout range for active participants of $109,000- $129,000. Because their combined AGI is too high for Richard to make a deductible IRA contribution, he should consider contributing to a Roth IRA. Their AGI is well below the start of the phaseout range for married people filing jointly who contribute to a Roth IRA. LO 4- 1 For purposes of determining if an individual may contribute to an IRA,

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ A) passive income, such as interest or dividends, is considered to be earned compensation. B) workers' compensation or unemployment compensation are considered to be earned compensation. C) taxable alimony received from a divorce finalized prior to January 1, 2019, is considered to be earned compensation. D) inheritance money counts as earned income for IRA contribution purposes. - correct answer C For IRA purposes, taxable alimony is earned income, but passive income, workers' compensation, or unemployment compensation are not. Alimony is taxable income if the divorce was finalized prior to January 1, 2019, and not substantially amended since then. LO 4- 2 Harry, a single professor who is age 36, started his Roth IRA three years ago, contributing $5,000 for his first year. He has since made a contribution of $5,500 in Year 2 and also in Year 3. He converted a traditional IRA of $17,000 to the Roth IRA last year. His total contributions are $16,000 plus the $17,000 conversion, and the account is now worth $36,497. Harry would like to make a complete withdrawal so that he can buy a new car. He wants to know what his options are and what the tax consequences would be. Which one of the following statements would be the correct information for Harry? A)

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ If Harry's Roth IRA meets the five-year holding period, the distribution will be a qualified distribution. B) If a withdrawal of converted IRA funds is made from the Roth account before five years has elapsed, such a withdrawal may be subject to the 10% penalty. C) Contribution amounts always come out of a Roth IRA ac - correct answer B Contribution amounts always come out of a Roth IRA account first, and then conversion amounts, if any. Because taxes have already been paid on these amounts, there are no income taxes. In this case, Harry can withdraw up to $33,000 income-tax-free. If he withdrew all $36,497 he would only owe income taxes on $3,497. However, if a withdrawal of converted IRA funds is made from the Roth account before five years has elapsed, such a withdrawal would be subject to the 10% penalty unless it meets one of the exceptions. Thus, he would be subject to the 10% early withdrawal penalty on the $17,000 from last year's conversion. If the Roth IRA earnings are withdrawn and the distribution is not "qualified," the earnings will be subject to income taxation and the 10% penalty unless it satisfies an exception. If he withdrew the entire amount, he would owe income tax on $3,497 and the 10% early withdrawal penalty on $20,497. LO 7- 3 The vested accrued benefit in George's tax-sheltered annuity is $87,500. He has never taken a loan from the plan but is interested in paying off his credit cards. Which of the following statements correctly describes George's option? = A) George can borrow up to $50,000, but the term of the loan would be limited to five years. B) The amount of the loan would be limited to $43,750 and the term would be limited to five years. C)

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ George could borrow up to $43,750, and since the loan will pay off debt, it could be for longer than five years. D) The amount of the loan would be limited to $50,000, and the loan could be for longer than five years. - correct answer B George wants to pay his credit cards. The amount of the loan cannot exceed 50% of the vested amount in George's account, and the term of the loan would be limited to five years. LO 7- 1 An income-tax-penalty-free distribution cannot be made from a tax-sheltered annuity (TSA) until the employee does which of the following? separates from service after attaining age 55 attains age 55 becomes disabled or dies takes a distribution under most hardship withdrawal rules - correct answer ALL OF THE FOLLOWING Penalty-free distributions can be made from a TSA or 401(k) when an employee separates from service after attaining age 55, attains age 59½, becomes disabled or dies, or takes a hardship distribution for deductible medical expenses only. All other hardship withdrawals are subject to early withdrawal penalty rules. Attaining age 55 means the worker is 55 on December 31 of the year of separation-not that the worker was 55 on the day of separation. LO 7- 3 Charles turns 73 this year. His IRA was worth $100,000 at the end of last year. What is his RMD for this year? (The Uniform Table factor is 27.4 at age 73.) A) $5,501 B)

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ $3,774 C) $3,650 D) $3,906 - correct answer C $100,000/ 27.4 = $3,650. LO 7- 3 A springing durable power of attorney A) is usually created in a person's revocable trust. B) remains effective after the principal's death. C) gives the attorney-in-fact authority only when the principal is deemed incompetent. D) remains effective until the principal becomes incapacitated. - correct answer C Explanation The very purpose of any durable power of attorney is to give the attorney-in-fact authority to act after the principal becomes incapacitated. However, such authority does not survive the principal's death. Such authority is created in an independent document (not part of a living will or a living trust), and is effective immediately in this type of power of attorney. A springing durable power of attorney becomes effective when the principal becomes incompetent or incapacitated. LO 5 - 2

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ Non springing durable poa - correct answer With a non-springing power of attorney, the agent has the powers granted in the document the moment it is signed by you and the agent(s) you designate. A Medicare Part A patient must pay A) the approved costs of care in a skilled nursing facility for the first 10 days. B) all costs for a hospital stay beyond 150 days. C) the annual deductible for out-of-hospital doctor's services. D) all costs above the hospital deductible for a 30-day stay in a hospital. - correct answer B The patient must pay all costs related to a hospital stay beyond 150 days. The annual deductible describes a gap in Medicare Part B coverage, not Part A. Medicare pays for the cost of the first 60 days in a hospital, but the patient must pay the Part A deductible. Medicare will pay the approved charges for the first 20 days in a skilled nursing facility. The gap results from the cost of care that exceeds 20 days (the patient pays the per day copayment) or the need for custodial care. LO 5- 3 Which one of the following U.S. citizens is currently eligible for Medicare Part A coverage at no cost? A) a self-employed truck driver, age 66 B)

RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+ an unmarried heiress who has always lived on trust fund money, has never had earned income, and just turned 65 C) a professional independent corporate director, age 57 D) a federal government employee, hired in 1989 and age 64 - correct answer A The truck driver is in a covered occupation (covered by Social Security) and is over age 65. Thus, he or she would receive benefits if fully insured. The independent corporate director is incorrect because although this individual is in a covered occupation for Social Security purposes, he or she must be age 65 to be eligible for Medicare benefits. Although the federal government employee is employed in a covered occupation, he or she must be age 65. The unmarried heiress is wrong because although this person is age 65, she is not in a covered occupation for Social Security purposes. LO 5- 3 Which of the following statements accurately describe basic provisions of Medicare Part B? Coverage includes benefits for physicians' services. Individuals who are eligible for Part A are automatically eligible for Part B. Participants pay a monthly premium. - correct answer ALL OF THESE Medicare Part B includes coverage for physicians' services; Part A covers hospital charges. Part A is provided to eligible individuals at no charge, but participants must pay a premium for Part