Verified solution · Exam FM
This Exam FM sample reference tests Immunization Principles. Statement I overstates Redington protection, statement II reverses the duration equality, and statement III replaces the required asset-convexity excess with equality. None is true, so choice A is correct.
Independent solution
Setup
Redington immunization is local protection for small parallel yield changes, not arbitrary rate movements.
Model
Both Redington and full immunization require matched value and duration at the immunization yield.
Compute
The curvature condition requires asset convexity to exceed liability convexity.
Answer
No listed statement is true, which is choice A.
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Original practice · fully worked
At a selected yield, an asset portfolio and a liability have equal present values and equal Macaulay durations. Asset convexity is 105 and liability convexity is 96. Which conclusion follows under Redington immunization?
Value and duration match, while asset convexity exceeds liability convexity. These are the Redington conditions for local protection against small parallel shifts, choice B.
Setup
The supplied equalities satisfy the zero-order and first-order conditions.
Model
Compare second-order curvature.
Compute
Positive curvature difference makes surplus locally convex at the matched yield.
Answer
The portfolio has local parallel-shift protection, choice B.
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ActuaryProof. “SOA Exam FM Sample Question #333 — Verified Solution.” Verified 2026-07-31.
Source reference: official SOA sample-question PDF. Last reviewed 2026-07-31.
