TIA’s Exam ILA-CSP Blog

I want to wish all of you good luck on the exam tomorrow.  I hope you are all successful!

Anita

Handouts from the live seminar have been posted.  These include an analysis of past exams, a set of problems and solutions, and a new set of exam hints.

Hope your studying is going well.

Anita

Here are some more problems from old exams that are pertinent to CSP-ILA:

8F 2002: 5, 6ab, 11, 12abc, 13

2003: 3abc, 7

2004: 1ab, 6

8V 2002: 14, 16

AFE 2007: 11

Thanks to Josh Nissley for passing these along.

Anita

Here is a link to a recent article with tips from a grader about how to write the SOA essay exams:  http://newsmanager.commpartners.com/soaf/issues/2008-03-24/5.html

Hope your studying is going well.

Anita

I’ve fixed the link for the Section B Notes. In the future, any technical questions can be answered much more quickly by sending an email to tech support as I don’t frequent the blogs as often. Thanks!

On page 38, Table 8 gives the calculation of the Leverage-Adjusted Cost of Capital.  Here is how you get the last column:

Eqn 7:  ThetaK = [thetaA x (1-TFMVA)xMVA - thetaD x (1-TFFVL) x FVL]/DDE

In this example, thetaA = 2.48% (p. 36), thetaD = 1.43% (p. 35), (1-TFMVA)xMVA = After-Tax MVA, and (1-TFFVL) x FVL = After-Tax FVL (p. 37).  Also, Fair Value of Equity = DDE = (1-TFMVA)MAV - (1-TFFVL)xFVL  (eqn 8).

Putting this all together, gives the cost of capital column.

Ex.  year 2:  thetak = [.0248 x 997.12 - .0143 x 938.08]/59.03 =  19.17%, and so COC = 5% + thetak = 24.17% (this is within rounding error from the table’s value of 24.19%)

NOTE:   The Asset-Risk Leverage, calculated in the previous column, does not enter into the calculation for the COC.

The increase in reserves in PY 2 should be 800,000.  (That is the value that is used throughout my solution.)

There is a small typo in this example. All of the calculations are correct, however.

The expenses in the example are maintenance expenses (or contract administration expenses). The equation for the EGP should be:

EGP = Interest margin + SC + expense margin

OR

EGP = Interest margin + SC - maintenance expenses.

(I had written: EGP = Int marging + SC + expense charges)

The column in the chart that is labeled “expense charges” would be better labeled “Maintenance expenses.”

This example will be used again for SOP-03-1 Sales Inducement Liability. The headings I used followed the book’s, but could have been better.

The stat earnings for 2005 should be 464,000 (not 194,000).  (I typed the commission number wrong into my spreadsheet where I did the calculation.  Sorry.)   The value-based earnings are 1,060,853.

Continuing onto example 3 which uses the stat earnings, the available earnings are -66,000 and the value-based earnings are 1,023,305.

Section B.1.2 on recoverability and loss recognition has been updated. We have posted the vidoes that go with pages 6 and 7.