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Hi, If I go into the "Script submission - Series and Mock Exam Marking April 2024" - "CM1 Mock Exam 1 Paper A" the solutions are half way down the...

Hi Gerry, i(p) is a slightly artificial interest rate which comes about from trying to value an annuity annually that makes payments pthly....

Hi Danny, Surrenders are only allowed at the end of the year so it does not make sense to turn it into a force. The dependent probability of...

Hi, The idea is good: take the expected present value of an annuity paying quarterly in arrears from age 82 but remove the EPV of the first...

Hi Leah, If you are index-linking cashflows (increasing them in line with inflation) it's index @ payment date / index @ base date (although...

Hi, A qx probability is the probability a life dies over the next period GIVEN they were alive at the start of the period. The probability of...

For the formula itself see page 27 of chapter 11. If we differentiate the PV of a cashflow twice: PV of cashflow at time t = c * v^t = c *...

Hi Danny, Yes this is correct. If bonuses vest at the start of the year we already have the first term of the death benefits in the form...

(2)TA:x:<n> term is the expected present value of a term assurance at the squared rate of interest. If instead it's (2)TABar:x:<n> then you just...

Hi, So taking each probability term in the integral in turn: t-1p50(ai) - the probability that the life was in the able state at age 50 but the...

Hi Danny, Yes this relationship holds. Not the clearest in the course notes but it's implied at the bottom of page 18 of chapter 19. The only...

Yes, the line below the formula on page 32 says "this profit relates to the year starting at policy duration t, that is for policy year t+1".

Hi, Yes this is the same thing. So the year from 0 to 1 is the 1st year. So the year starts at policy duration t=0 but it's the first year ie t+1....

Hi Danny, For the formula to apply please see chapter 14 page 34: abarx:<n> = aduex:<n> - 1/2 *(1 - v^n * npx) This formula comes from the...

Hi Danny, Some of your fellow students might be able to help you out with this more than me. However, I would recommend trying to slow down a...

That's ok. The principle is the same. We take cashflows or values at the start of the year, grow them with interest over the year and set them...

In short, yes :)

Ah ok. In that case we're not applying interest per se, we're inflating the expenses. But if expenses are going up at 1.92308% and we're...

Hi, You've written the formula (IA)^1_45:15=(IA)_45-v^15*_15p_45*(IA_60+15A_60-15) as though it's the value of the increasing term assurance but...

The D_x tables combine survival and discounting. So whilst lx+1/lx calculates the one-year survival probability for a life aged x exact, D_x+1/D_x...

Hi Danny, I can't see a question 16 on the paper you've identified. However, i'm guessing that you might be thinking about this in the context...

Hi Greg, I think the examiners have forgotten a ... here hence your confusion. Indeed the rest of their solution is consistent with valuing a...

Hi Tina, The excel formulae required for CM1B are not particularly complex so i'd assume that's less of a problem. In terms of the material...

Hi, 1. Ch19, P.5, second bullet point: The joint life status fails on the first death so we need both lives to survive to time t and then one of...

Hi Nyaman, Sorry for the late reply. I think it's all about timing. Typically in the profit testing chapters our assumption is that surrenders...

Hi, Sorry for the late reply. There's no additional reading specified by the IFoA for CM1; the Core Reading and course notes should be...

Hi, I think you've highlighted the wrong question here. There was no Q4 on September 2022 Paper B. Could you recheck and get back to me? Thanks Joe

Hi, 4. That is correct 5. Potentially, but if they do examine I would expect them to spell out the benefits fairly clearly. They may choose to do...

"The company sets k so that the maturity benefit will be the same under both products". Under A the maturity benefit is 50,000 + 1050*10 = 60,500....

I assume here you are looking to use the multiple decrements formula from the course eg mu_40(beta) / (mu_40(alpha) + mu_40(beta)) * aq(40)? To...

In short, almost certainly not. We use (1+i)^0.5 as an approximation in later chapters because we are reliant on probabilities and...

Hi, 1) With bonuses vesting at the end of the year there's a disconnect between the amount paid on death and survival in the final year. On death...

It's a tricky one. I'd have to say "probably yes" if a) it's not expressly forbidden by the question wording b) you give enough detail on the...

1. This means the probability that they die from the active state between age 41 and 42. It's not the probability they simply die because the life...

This is the solving of the simultaneous equations. We start off with the discount factors for B and C. These multiplied by the amounts of B and C...

To understand what is and is not required to be written in the exam generally you may want to refer to ASET or examiners reports and see which...

Hi, Apologies if I am misunderstanding your query but yes any additional payments made will reduce the amount of the loan outstanding and...

Hi, It's not a "nominal" delta as such. Although delta is typically given as a per annum figure, it could be specified over any period. When you...

Having made a loss of c175k due to mortality, the company would need to make a profit of c175k on interest to offset it. Since interest within...

If you think about the profit in any particular year, say by using the profit testing process, profit includes: Premium paid(P) - expenses(E) +...

I think you might be thinking the 576k is an expected reserve? In profit testing we work out expected reserves at the end of each year by...

Hi, The 576,000 is an actual reserve held for all of the policies in force at the end of the year (imagine this as a number that the company's...

Hi, Liquidity risk is defined as the risk of not having sufficient cash to meet operational needs at all times. Part of this is, as you mention,...

Hi, If I understand this correctly then you're right that if the male dies at the end of the 1st year the female would start receiving payments...

Sorry, i'm not following. Is there a specific question you are referring to? DSAR for a pure endowment would be S-V (0 - V) in all years except...

In which case the DSAR as the first one I spoke about there: S=0, there is nothing paid on death. t+1V = 0, the policy is certain to end at the...

Hi, The death strain at risk generally is sum assured on death (S) - ( reserve at the end of the year (t+1V) + any survival benefit at the end of...

So the PV of the liabilities is (working in millions): 1.5*v^0.5 + 1.5*1.025*v^1.5 + 1.5*1.025^2*v^2.5 + … To use a level annuity function we...

Apologies I have complicated matters by bringing in the T-t there. F0 is the value of the forward at time 0 and so the formula in the course is...

Hi, Merry christmas to you too! Apologies. This isn't the easiest to explain via text but hopefully the below works for you. I've tried to keep...

Hi, We never use mu from the tables because that represents the force of mortality at an exact age x. For example, mu_50 is the force of...

Hi Chirag, You can use either formula provided that you are using the correct spot rate. £/$ spot rate will have pound interest rate on numerator...

Hi Dan, A possibly unsatisfying response incoming but it's a very fair question that many students and us tutors have had to ponder over the...

Hi Dan, I'm a little confused here but apologies it is probably just me. The sum of stock selection by asset class 2012 = 2.72% and sector...

Hi Anne, An extract from the last examiners report: The worksheets are also designed so that the final numerical answers for some questions are...

Very sorry Tom that this post seemed to fall through the cracks. 1. The premium has been calculated to cover the expenses and is fixed at the...

Hi, There's a myriad of possible factors you could include here and I think it's fair for you to pick out environmental factors. Neither ours nor...

Hi Nico, They are all very similar in this respect but yes I read it as a bit of both. With regulations in place there is demand for investment...

Hi Dan, Your formula there is applicable if we consider the fund as a whole. In this question we are asked to work out the stock and sector...

Hi James, I think that will be fine. At the time it was the first paper A taken at home and the examiners may not have expected students to...

Hi, there's no required further reading, just some suggested reading. Worth noting however that after the most recent exam the examiners commented...

If investors prefer capital gains to income then demand for low-coupon bonds will be higher than high-coupon bonds. If demand is low for...

Admissible restrictions would restrict the assets that can be used to demonstrate funding or solvency. Let's take a numerical example of a pension...

Passive management is akin to index tracking. In order to be able to index track there must be an index. This is easy enough if i'm interested in...

Hi, If we've bought a bond at a particular credit rating and a price that corresponds to the credit rating we hope that the likelihood of being...

Hi, The spot rate and forward rate can be expressed in either terms (one is the reciprocal of the other) but to be consistent with the Core...

Hi, Dividend yields are expressed relative to the value of the index at the time of assessment. For more on this see 'Yield adjustment' on page...

100m * 20% * (8% - 6.08%) = 0.384 as it's 20% of the outperformance of the index. Joe

Hi Orchard, You are quite right, thanks for pointing this out. I've amended my post above swapping around the dollars and euros. Joe

September 2019 Q4 So the manager expects the spot rate to be 1:1.16 but forward rate is 1:1.1614 Euro to US dollars. So the investor gets a better...

Hi, No not really. It wasn't clear how to treat the FI fund. The examiners intended for it to be treated as overseas investment but they credited...

This would be our default assumption yes that money coming in is immediately invested. It's not an assumption that the examiners need spelling out...

Hi, We need to be a little careful here. The investment income is inherent within the fund values and so by using the fund values we are...

Hi, I think you may have made an error here in your calculations. I have (aq)d = 0.001033 and (aq)s = 0.024987... in which case (ap)x = 1 -...

Hi, It is not our place at ActEd to comment on the IAI exams. However, I wonder if any other students sitting these exams and browsing this...

I believe you've spotted an error here in the course notes. I agree that the lines should be labelled as the other way round and it sounds like...

Hi, Unfortunately I cannot see the image of the question here. Is it possible to send it in a different format or write it out in words? Thanks Joe

Hi, We can allow for the risk in cashflows in a number of different ways eg 1) Stress the cashflows 2) Stress the interest rate 3) Alter...

Hi, 1) Yes a slightly different approach is needed on this question to some others. Typically we assume that all policyholders are the same age,...

Agreed here that buying at 91 would not generate a 15% return. If he is always expecting returns to be 15% pa from whatever price he buys from...

For Q5(iii) I can see your thinking around the number of shares being fixed and so inflow or outflow to a particular fund not being possible....

Hi, I can't see any rules against this in the examinations handbook. From what I can see you are allowed to use other software as a calculator...

Hi, your request was a little vague but I hope the below is ok. Ok so when we are looking for an anomaly switch we are trying to identify bonds...

Hi, We can use linear interpolation to calculate probabilities with non-integer ages but only if we have been told to assume uniform distribution...

Hi, Annuity factors are not linear (with the application of interest and survival probabilities) and so linear interpolation would not be the way...

Hi, Quite right! Thanks for pointing that out, I have edited my response above. We never perform a calculation like v^[E[kx]+1]. This is because...

Hi, So when we set up these EPV expressions we are looking for payment x discount factor x probability. Payment = 20 Discount factor =...

Hi, If i'm reading this correctly you are multiplying together two expressions, the value of a term assurance that pays immediately on death to...

Hi, answers below: 1) Dx+n/Dx is defined as v^x+n*lx+n / v^x * lx = v^n * lx+n/lx or v^n * npx. You could calculate this directly of course but...

Hi, I don't think your understanding there contradicts with the core reading. In simple terms we can make high returns from buying low and...

Hi, Overall I like your approach here and it's a really great skill for the exam to be able to manipulate expressions in this way. However, there...

That's a good idea and indeed you would hope so. When it comes to making assumptions the other thing to look out for is that you're not overly...

Hi, On your first point yes. As the contract enters it's final year payment is certain. 1 will be paid at the end of the year regardless of...

Hi, Your understanding is correct here. Questions in SP5 can sometimes be a little vague in terms of a basis. It would be reasonable however to...

Hi, Someone else may be able to weigh in on this if they practical experience here (which unfortunately I don't) but my guess would be: You...

Hi, I'm afraid I can't give an exact date but these are due for release in the next few weeks. Thanks Joe

It's worth pointing out that calculations were not required in this question. The calculations they did perform are a little confusing. It's very...

Hi William, Sorry that I missed your sending of this at the time. You are right. In CM1, and I suppose logically as well, there's little...

Yes, I believe that's the case. Do keep an eye on the instructions though in case they decide to do something different this time. Joe

Hi Laura, Not sure exactly what you mean by dataset. The question templates may include data within them e.g. interest rates or mortality tables,...