This Exam FM sample reference tests Cash-Flow and Risk Matching. The exact-match combinations are two units of J for 3,000, one K plus two L for 2,500, or one M for 4,000; the minimum is 2,500, choice C.
These notes identify the calculation error associated with each wrong letter when that error is reproducible.
AChoice A is inconsistent with the whole-unit dated cash-flow matrix; no distinct standard single-step error producing it is identifiable.
BChoice B is inconsistent with the whole-unit dated cash-flow matrix; no distinct standard single-step error producing it is identifiable.
DChoice D is inconsistent with the whole-unit dated cash-flow matrix; no distinct standard single-step error producing it is identifiable.
EChoice E is inconsistent with the whole-unit dated cash-flow matrix; no distinct standard single-step error producing it is identifiable.
Original practice · fully worked
Original variant: whole-unit funding for a three-year festival
A festival owes 500 at each of years 1, 2, and 3. Investment A costs 850 and pays 500 in years 1 and 2. Investment B costs 350 and pays 500 in year 3. Investment C costs 1,300 and pays 500 in all three years. Whole units only are allowed. Find the least cost of an exact match.
A 850
B 1,000
C 1,200
D 1,300
E 1,550
Variant answer in brief
One A plus one B exactly covers all three dates for 1,200, less than one C; choice C.
Setup
Setup
Translate each whole-unit investment into a three-entry dated cash-flow vector.
CFA=(500,500,0),CFB=(0,0,500)
Model
Model
Adding one A and one B reproduces the liability vector exactly.
CFA+CFB=(500,500,500)
Compute
Compute
That pair costs 1,200, while the only other one-unit exact match, C, costs 1,300.
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