Verified solution · Exam FM
This Exam FM sample reference tests Implied Yield on Foregone Cash Discount. A buyer can pay 98% on day 10 or 100% on day 30, so the financed interval is twenty days. Annualizing the factor 1/0.98 over 365/20 periods gives 44.585%, choice E.
Independent solution
Setup
Use the last discount-eligible date as the economically equivalent early payment date.
Model
The foregone discount finances the purchase for twenty additional days.
Compute
Convert the twenty-day return to an annual effective yield.
Answer
The implied annual yield is 44.6%, choice E.
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Original practice · fully worked
A supplier permits payment after 30 days instead of today. What cash discount for immediate payment makes the 30-day credit exactly equivalent to an 18% annual effective yield? Use a 365-day year.
Discounting the full invoice for thirty days at an 18% annual effective yield gives an immediate-payment discount of 1.3512%, choice C.
Setup
Let d be the fraction discounted from an invoice of one.
Model
Solve directly for the immediate-payment discount.
Compute
Evaluate the fractional-year exponent.
Answer
The cash discount is 1.35%, choice C.
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ActuaryProof. “SOA Exam FM Sample Question #358 — Verified Solution.” Verified 2026-07-31.
Source reference: official SOA sample-question PDF. Last reviewed 2026-07-31.
