Worked solution · Exam FM
This Exam FM sample reference tests Reinvestment of Interest Cash Flows. The 30 deposits contribute 30000 of principal. At year t, accumulated deposits generate 40 times their count in interest, and those interest cash flows earn 3% to year 30. The total is 53433.89, choice B.
Independent solution
Setup
Each 1000 deposit remains principal; each completed year generates 40 of interest per prior deposit.
Model
At the end of year m+1 there are m interest-producing deposits. Reinvest that interest for the remaining years.
Compute
The reinvested interest is 23433.8876.
Answer
The accumulated value rounds to 53434, choice B.
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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.
Error diagnosis
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Original practice · fully worked
An investor deposits 500 at each year-end for 12 years. Each deposit earns 5% annually, but every year's interest is withdrawn immediately and reinvested at 2% until year 12. Determine the year-12 value attributable only to reinvested interest, excluding the 6,000 principal.
At each year-end the prior deposits generate 25 each. Accumulating the resulting triangular interest stream at 2% gives 1765.11, choice C.
Setup
Each completed deposit-year produces 25 of withdrawn interest.
Model
At year m+1, m prior deposits produce 25m; carry that amount to year 12 at 2%.
Compute
Evaluate the eleven interest installments.
Answer
Reinvested interest alone is 1765.11, choice C.
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These references share syllabus concepts or sit nearby in the official sequence. All 113 Exam FM annuities and non-contingent cash flows practice problems.
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