Question 1
Dana owes $2,000 due in 1 year and $3,000 due in 4 years. The debts are to be replaced by a single payment in 2 years, at an annual effective interest rate of 6.0%.
Calculate the single payment.
How to study for Exam FM
Exam FM is five topics built on one idea: money has a date. Learn to move payments along a timeline and the rest follows.
| Pace | Five minutes a question |
|---|---|
| Biggest topics | Annuities, and portfolios and ALM: 20 to 30% each |
| Start with | The free 50-minute diagnostic |
| Finish with | Full 30-question practice exams |
1. Find your weakest topic
Take the free diagnostic before you plan anything. Ten questions, two from each topic, show where your time should go, and each wrong answer comes with the reason that option was tempting.
2. Learn the topics in order
- Time value of money first: rates and equations of value are used in every later question.
- Annuities next, then loans, which are annuities seen from the borrower's side.
- Bonds are an annuity of coupons plus one redemption payment.
- Duration and immunization last: they measure how all of the above react to a change in the rate.
3. Draw the timeline, then use the calculator
Most wrong answers come from valuing a payment at the wrong date. Sketch the timeline, write the equation of value, and only then reach for the BA II Plus.
4. Sit full practice exams
In the last weeks, sit 30 questions in two and a half hours without notes. Review every miss the same day and redo the topic's practice set for anything you missed twice.
Try 3 questions
Question 2
An alumna endows a prize of $10,000 a year forever, with the first prize paid 6 years from now. The annual effective interest rate is 8.0%.
Calculate the present value of the endowment.
Question 3
A company must pay $100,000 in 5 years. It will immunize the liability, in Redington's sense, with a 2-year zero-coupon bond and a 10-year zero-coupon bond, at an annual effective interest rate of 6.0%.
Calculate the amount to invest today in the 2-year bond.
Next step
Questions people ask
How hard is Exam FM?
In SOA's published results, between 42% and 50% of candidates passed each sitting from February 2023 to June 2026.
Should I take Exam P or Exam FM first?
Either order works: neither exam depends on the other. Start with the one closer to courses you have just taken.
How do I get faster at Exam FM questions?
Know which questions the time-value keys solve directly, keep the calculator set to one payment a period, and practice in timed sets at five minutes a question.