This Exam FM sample reference tests Loan Amortization. Valuing both staged schedules at 0.6% monthly and canceling m gives Loan A divided by Loan B = 1.12668, nearest choice A.
These notes identify the calculation error associated with each wrong letter when that error is reproducible.
BChoice B is inconsistent with the staged immediate-versus-due loan present-value ratio; no distinct standard single-step error producing it is identifiable.
CChoice C is inconsistent with the staged immediate-versus-due loan present-value ratio; no distinct standard single-step error producing it is identifiable.
DChoice D is inconsistent with the staged immediate-versus-due loan present-value ratio; no distinct standard single-step error producing it is identifiable.
EChoice E is inconsistent with the staged immediate-versus-due loan present-value ratio; no distinct standard single-step error producing it is identifiable.
Original practice · fully worked
Original variant: base payment for a staged monthly loan
A 72-month loan of 30,000 carries 6% nominal interest convertible monthly. It is repaid with m at each month-end for 36 months and 1.4m at each month-end for the final 36 months. Determine m.
A 370.60
B 395.60
C 420.60
D 445.60
E 470.60
Variant answer in brief
Valuing the two payment blocks at loan issue gives base monthly payment 420.60, choice C.
Setup
Setup
Value both month-end payment stages at the advance date.
30000=ma36∣0.005+1.4mv36a36∣0.005
Model
Model
The second stage is deferred by 36 months and carries multiplier 1.4.
m=a36∣+1.4v36a36∣30000
Compute
Compute
Dividing the advance by the combined factor gives 420.5986.
m=420.5986
Answer
Answer
The base monthly payment is 420.60, corresponding to choice C.
The 2210-page Financial Mathematics Proof Manual reorganizes 461 verified Exam FM solutions by syllabus skill and adds formula proofs, error patterns, and original worked practice.