Worked solution · Exam FM
This Exam FM sample reference tests Interest Rate Valuation. At time zero, include the initial charge, discounted annual fees, all 24 discounted monthly payments, and the discounted remaining balance; the resulting equation is choice A.
Independent solution
Setup
Use the card-opening date as the comparison date and preserve signs of charges and repayments.
Model
Continuous annual force 18% gives monthly exponent 0.015 and annual-fee exponents 0.18 and 0.36.
Compute
The remaining 200 at time two is an ending liability and is discounted to time zero.
Answer
Only choice A contains all four components with consistent discounting.
Test the method on unseen problems
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
These notes identify the calculation error associated with each wrong letter when that error is reproducible.
Original practice · fully worked
A card is charged 1,000 immediately, charges a fee of 15 at each year-end, and uses a 12% annual force of interest. Equal payments occur at the end of each month for two years and leave zero balance at year 2. Determine the monthly payment.
Discounting the initial charge, two fees, and 24 payments at monthly force 0.01 gives X = 48.28, choice C.
Setup
Value all card charges and payments at the card-opening date.
Model
Monthly payments discount with exponent 0.01 per month, while fees occur at years one and two.
Compute
Dividing the charge value by the 24-payment discount sum gives 48.28399.
Answer
The monthly payment is 48.28, corresponding to choice C.
Keep practicing
These references share syllabus concepts or sit nearby in the official sequence. All 51 Exam FM time value of money practice problems.
Drill the method: Exam FM Annual Force of Interest and Rate Conversion problems
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Work through the related free solutions for this topic, review the formulas you used, or keep every current Exam FM solution in one searchable PDF.
