Worked solution · Exam FM
This Exam FM sample reference tests Annuities. Separate each payment into a level 110 component and an arithmetic increment component. Their factors at 10% are 8.51356 and 55.40691; solving the 2,000 price gives X = 19.19, choice C.
Independent solution
Setup
Write payment k as 110 plus k minus 1 copies of the increment.
Model
Value the level and arithmetic-increase components separately.
Compute
The level component is 936.49 and the increment factor is 55.40691, so X = 19.1945.
Answer
The annual payment increase is approximately 19.19, selecting choice C.
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30 original Exam FM questions across the syllabus, to be worked in 150 timed minutes, with a full worked solution for each one. Written for Exam FM, not copied from the SOA set. One-time $39 PDF.
Original practice · fully worked
A training grant pays 100 at year 1 and then increases each annual payment by 20 for a total of eight payments. At a 6% annual effective yield, calculate the present value of the grant.
Discounting the eight payments 100, 120, through 240 at 6% gives present value 1,017.81, choice C.
Setup
List the arithmetic payment rule over the eight year-end dates.
Model
Discount each generated payment at the common 6% annual yield.
Compute
The direct eight-term sum is 1017.810995.
Answer
The grant's present value is 1,017.81, which is choice C.
Keep practicing
These references share syllabus concepts or sit nearby in the official sequence. All 113 Exam FM annuities and non-contingent cash flows practice problems.
Drill the method: Exam FM Annuities and Perpetuities problems
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