If you are interested in the stuff they asked last sitting, then take a look at this thread. It is pretty long and there is a lot of garbage in there. Don’t get too hung up on anything they say in there. If it starts to overwhelm you or confuse you, then stop reading immediately.

Exam Tips

Here is another great question I received.

I know that when we see simply “duration” on a question it is safe to assume that the question is asking for MacD (unless the interest rate is nominal, in which case we find ModD…) but are there any other things that we can assume? For example, if we simply see “annuity” in a problem, could we assume it was an annuity-immediate? Or would that not necessarily be the case? Are there any other wording things that are always specified or always implied to be one thing or the other?

If a problem says duration it means Macaulay duration, end of story. It doesn’t matter if they give you a nominal rate it still means Macaulay duration. If they want you to calculate modified duration, then they have to explicitly say Modified duration in the problem.

An annuity must tell you both the amount and the time the payments occur. You can assume neither. If the problem just says “An annuity pays 50 per year, calculate the present value.” Then you do not have enough information, b/c the time the payments are made is not given.

Student Questions

I received this great question from a student.

On this problem, why isn’t the MacD of the assets calculated as the duration of a portfolio?

It doesn’t look like it, but it really is b/c there are only two bonds:

Student Questions

Sample Exam 2 problem 10 is still no good. Let me try to edit the problem one more time and see if that fixes everything. Sorry about that.

Uncategorized

On #5, the correct answer wasn’t one of the choices. On #10, the key was wrong. I made the questions up and I still missed two.

All errors are being corrected now.

Errata

This is a video response to this question on the AO.

Watch Video

Student Questions

I think there is some confusion about the decreasing annuities notation. The coefficient is the amount each payment decreases by. It is also the last payment. The first payment is the coefficient times the number of payments.

represents the present value of payments of 15, 10, and 5. Notice the first payment is 5 x 3 and the last payment is 5.

So if we have payments of 100, 90, 80 and 70. There are 4 payments and each payment decreases by 10. So we start with:

However, that only gives us 10×4, 10×3, 10×2, 10×1 => 40, 30, 20, 10.

So we need to add a level payment of 60 to each payment. So the present value is:

I hope that clears up some of the confusion.

Student Questions

Sample Exam #2 is available on tiavideos1.com and tiavideos2.com. Video solutions will be posted sometime this weekend (most likely Sunday night).

Updates

If you are looking for some more sample questions to work, then check out the SOA’s sample questions. Many of them are repeats from published exams, but it doesn’t hurt to rework those.

http://www.soa.org/files/pdf/FM-09-05ques.pdf

Solutions can be found here:

http://www.soa.org/files/pdf/FM-09-05sol2nd.pdf

If you don’t understand the provided solution to any of the problems, then let me know.

Uncategorized

There are only 2 weeks left before the exam. These last two weeks are very important to your success on the exam. You should be working as many problems as humanly possible during these last two weeks. You should also be reviewing the summary sheets daily (this should just take 10-20 minutes at most).

Now would be a great time to take a practice exam too. I recommend taking the exam under strict exam circumstances. Get a stop watch and set the timer for 2.5 hours. Do not stop the watch for any reason. If you have to use the restroom, then keep the clock running. They will not stop it for you on exam day. Do not look at your notes during the exam. Do not check your answers as you go. This is a great chance to practice exam taking strategy.

If don’t do well on the practice exam don’t get discouraged. Many students told me that my practice exam was harder than the exam last sitting.

I’m in the process of creating a second practice exam. I hope to have it finished by Friday evening. That will give you another practice exam to take this weekend if you have already taken the first one.

Study hard!

Exam Tips