Exam FM
Financial Mathematics
This
three
hour multiplechoice examination is administered by SOA/CAS and is
identical to CAS Exam 2.
During 2008, Exam FM will begin to be administered by computerbased testing (CBT). Please
check the “
ComputerBased Testing Rules and Procedures”
section for additional details about
CBT. Check the
Updates
section of the SOA Web Site for any changes to the exam or
Syllabus
.
The goal of the Financial Mathematics exam is to provide an understanding of the fundamental
concepts of financial mathematics, and how those concepts are applied in calculating present
and accumulated values for various streams of cash flows as a basis for future use in:
reserving, valuation, pricing, asset/liability management, investment income, capital budgeting,
and valuing contingent cash flows. The candidate will also be given an introduction to financial
instruments, including derivatives, and the concept of noarbitrage as it relates to financial
mathematics.
The following learning objectives are presented with the understanding that candidates are
allowed to use specified calculators on the exam. The education and examination of
candidates should reflect that fact. In particular, such calculators eliminate the need for
candidates to learn and be examined on certain mathematical methods of approximation.
LEARNING OBJECTIVES
1. Candidates will know definitions
of key terms of financial mathematics: inflation; rates of
interest [simple, compound (interest and discount), real, nominal, effective, dollarweighted,
timeweighted, spot, forward], term structure of interest rates; force of interest (constant
and varying); equivalent measures of interest; yield rate; principal; equation of value;
present value; future value; current value; net present value; accumulation function;
discount function; annuity certain (immediate and due); perpetuity (immediate and due);
stocks (common and preferred); bonds (including zerocoupon bonds); other financial
instruments such as mutual funds, and guaranteed investment contracts.
Specifically, candidates are expected to demonstrate the ability to:
a.
Choose the term, given a definition.
b. Define a given term.
c.
Determine an equation of value, given a valuation problem involving one or more sets
of cash flows at specified times.
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 Spring '10
 Diaz
 Time Value Of Money, Interest, financial mathematics

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