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Unformatted text preview: S. BROVERMAN STUDY GUIDE FOR SOA EXAM FM/CAS EXAM 2 2008 EDITION Samuel Broverman, ASA, PHD [email protected] www.sambroverman.com SOA Exam FM/CAS Exam 2 Study Guide © S. Broverman 2008 www.sambroverman.com S. BROVERMAN EXAM FM/2 STUDY GUIDE 2008 TABLE OF CONTENTS INTRODUCTORY NOTE SECTION 1  Calculus Review and Effective Rates of Interest and Discount 1 PROBLEM SET 1 11 SECTION 2  Nominal Rates of Interest and Discount 17 PROBLEM SET 2 27 SECTION 3  Force of Interest, Inflation 31 PROBLEM SET 3 37 SECTION 4  AnnuityImmediate and AnnuityDue 43 PROBLEM SET 4 51 SECTION 5  Annuity Valuation At Any Time Point 59 PROBLEM SET 5 67 SECTION 6  Annuities With Differing Interest and Payment Periods 73 PROBLEM SET 6 81 SECTION 7  Annuities Whose Payments Follow a Geometric Progression 87 PROBLEM SET 7 91 SECTION 8  Annuities Whose Payments Follow an Arithmetic Progression 103 PROBLEM SET 8 113 SECTION 9  Amortization of a Loan 125 PROBLEM SET 9 133 SECTION 10  The Sinking Fund Method of Loan Repayment 151 PROBLEM SET 10 155 SECTION 11  Bond Valuation 161 PROBLEM SET 11 171 SECTION 12  Bond Amortization, Callable Bonds 179 PROBLEM SET 12 187 www.sambroverman.com SOA Exam FM/CAS Exam 2 Study Guide © S. Broverman 2008 SECTION 13  Measures of the Rate of Return on a Fund 197 PROBLEM SET 13 203 SECTION 14  Term Structure, Forward Rates and Duration 213 PROBLEM SET 14 223 SECTION 15  Introduction to Financial Derivatives, Forward and Future Contracts 237 PROBLEM SET 15 251 SECTION 16  Introduction to Options 257 PROBLEM SET 16 263 SECTION 17  Option Strategies (1) 265 PROBLEM SET 17 275 SECTION 18  Option Strategies (2) 281 PROBLEM SET 18 293 SECTION 20  Swaps 303 PROBLEM SET 20 311 PROBLEM SET 21 Calculator Exercises 317 PRACTICE EXAM 1 325 PRACTICE EXAM 2 345 PRACTICE EXAM 3 367 PRACTICE EXAM 4 387 PRACTICE EXAM 5 407 PRACTICE EXAM 6 425 PRACTICE EXAM 7 449 (copyright © 2008, S. Broverman) [email protected] www.sambroverman.com SOA Exam FM/CAS Exam 2 Study Guide © S. Broverman 2008 www.sambroverman.com INTRODUCTORY NOTE This study guide is designed to help with the preparation for Exam FM of the Society of Actuaries and Exam 2 of the Casualty Actuarial Society. Among the references indicated by the SOA/CAS in the exam catalogs for the Exam FM/2 are "Mathematics of Investment and Credit" (3rd edition) by S. Broverman, and "Derivatives Markets" by R. McDonald. In this study guide, the notation and ordering of material will be mostly consistent with these references. Most examples are labeled "SOA", and some "EA1". This indicates that the example is from a previous Society or Enrolled Actuaries exam. The review part of the study guide is divided into 19 sections, each with a problem set, plus a Problem Set 20 which has exercises specifically for practice on the BA II PLUS calculator. This is followed by seven practice exams. The exam is scheduled to be 3 hours with 35 multiple choice questions....
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This note was uploaded on 12/21/2010 for the course ACT act240 taught by Professor Act during the Fall '07 term at University of Toronto.
 Fall '07
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