Updates ad Errata: ACTEX Study Maual for SOA Exam FM, Sprig 2017 Editio as of Jue 12, 2018 Please ote the followig errors i the Sprig 2017 Editio of the maual. I each item, the chage is show i red. The first 6 pages of this listig describe errors that appear i both the origial pritig ad the Secod Pritig of the Sprig 2017 Editio. The remaiig items (begiig o the 7 th page) apply oly to the origial pritig; they have bee corrected i the Secod Pritig. Page M1-57, solutio to Problem 1. The equatios should be: e 1.0404 l 1.0404 0. 0396 Page M2-21, ear the bottom of the page (before Formula (2.41) The equatio o the Total lie should be: 1 t0 v t v i a v i Page M2-50, Exercise (2.108). The aswer should be 17,897.52 (ot 1,789.75). Page M2-70, solutio to Problem 13. Replace the last lie with: a) The total is 10,000 4,509.67 14,509.67. b) To fid the aual rate of retur, set N=5, PV=-10,000, ad FV=14,509.67. The CPT I/Y=7.729. The rate of retur is 7.729%. Page M3-9, Exercise (3.14). The balace show i the first lie of the solutio should be 19,363.52 (ot 19,363.82). However, the equatio ad the aswer are correct as show. Page M3-27, solutio to Problem 3. The iterest rate is 7.2%, ot 8%. The 2 d lie of the solutio should read as follows: The iterest due o the 6 th paymet date is 0.07 7, 500 2 540. Page M6-6, Exercise 6.3 The last lie should read as follows: Aswers: Price = 988.31 Yield to maturity = 3.6184%
(Note: The icorrect aswers that appear i the maual are for a 4-year bod.)
Page M6-10, Example 6.6 The paragraph labeled Two-year forward rate should read as follows: Two-year forward rate: We are give s 2 0.03 ad s 3 0. 0365. Two ways to fid the accumulatio factor for a three-year ivestmet are: a) Ivest for the etire 3 years at the 3-year spot rate s 3 0. 0365. The accumulatio factor is a 3 1.0365 1.1135. 3 The fial formula should be: 3 2 3 1.0365 1.03 1 i2,3 1.0365 1 i2,3 1.0496 i 2 2,3 0.0496 1.03 Page MT2-3, Problem 11., 2 d paragraph, 2 d lie Replace 8 aual paymets with 5 aual paymets Page M7-18. A mius sig was omitted i Formula (7.36). The formula should be: (7.36) D m od i m m P i D m ac i m m P i i 1 m A mius sig was also omitted i the 7 th lie of the paragraph below Formula (7.36). The fractio show i that lie should be: m P P i Page M7-47, solutio to Problem 4. The first formula i the solutio to part (a) should read as follows: P i0 P i i m m Dm ac ( i0 ) 6.5317 1 i0 1.07 940. 29 934.57 1 1.071 i Page M9-31, Problem 1. Replace 3-year iterest rate swap with 5-year iterest rate swap. Page PE1-7, Problem 30. The last setece should read as follows: What et iterest rate will you pay i the secod quarter if the spot iterest rate for the secod quarter is 0.018?
Page MT3-9, solutio to Problem 7, the 3 rd paragraph should read: 2 More importatly, i / 2 0.044. This is the semi-aual effective rate. Callig this value j, we ca use it to calculate D m ac i coupo periods (half-years): D m ac 32 32 32 Ia v j a v j j v j 40 1, 000 32 40 32 32 j 32 / 32, 000 j 932 932 32 1 1.044 32 32 40 32 1.044 / 0.044 32, 000 1.044 0.044 / 1.044 932 18.0959 half-y ear s 9.04796 year s Page PE1-9, solutio to Problem 3. The first equatio should read as follows: K = 475 + 475v = 570v 2 + 570v 3 Page PE1-18, solutio to Problem 30. The last setece should read as follows: The et rate paid by you (as receiver) will be 0.018-0.0162 = 0.0018. Page PE1-19, Problem 32. Replace the last 4 lies with the followig 5 lies: 1 i (1.058) 4 1 0.014195 Set N=20, I/Y=1.4195, PV=50,000, AND FV=0. CPT PMT=2,889.23. Sarah makes 20 paymets of 2,889.23 ad 10 paymets of 709.74 (which is oe quarter s iterest o 50,000 at 1.4195%), for a total of: 20(2889.23)+10(709.74)=64,882 Page PE2-6, Problem 25. The last setece should read as follows: If its curret price is 975, what is the quoted rate for this T-bill? Page PE2-21, solutio to Problem 35. I the 1 st lie of the large paragraph (after the formula), replace secod with third. Page PE5-6, Problem 25. The aswer choices should be: A) 8,639 B) 8,985 C) 9,143 D) 9,282 E) 9,434
Page PE5-11, solutio to Problem 9. The solutio show is correct, ad the resultig aswer is 0.1293 (as show). However, the aswer choice should be B, ot D. Page PE5-16, solutio to Problem 24. The secod formula (time-weighted rate of retur) should be: X 1, 400 1 1, 000 X 500 Page PE6-9, Problem 35, the first setece should read: A 4-year iterest rate swap has a otioal pricipal amout of 100,000. Page PE6-23, solutio to Problem 33, the equatio i the last paragraph should be: 10 6, 000 1.003333 6, 203. 03 Page PE6-24, solutio to Problem 34. The equatio i the 4 th lie should be: 2 0.02 e 1.06184 1.10517 Page PE7-2, Problem 5. The secod paragraph should read as follows: What actual yield does Joel ear o this bod if it is called after 8 years? (deletig the words ad redeemed for its face amout ) Page PE7-7, Problem 23. The last setece should read as follows: If the preset value of the perpetuity is 40, calculate X. Page PE7-22, solutio to Problem 26. * The formula for f 1,2 should be: f * 1,2 P1 0.9525 1 1 0.05892 P 0.8995 2 Page PE8-6, Problem 24. The aswer choices should be: A) 4.38% B) 4.40% C) 4.43% D) 4.45% E) 4.47%
Page PE8-9, Problem 33. I the secod paragraph, delete the comma ad the words that follow it. The paragraph should read as follows: The accout ears a aual effective iterest rate of 7%. Page PE8-21, solutio to Problem 24. Below the table, the equatios ad the Aswer should be as follows: R P P P P 1 3 2 Aswer: B 3 0.9690 0.8890 0.9299 0.8890 0.04398 (Note: The solutio prited i the maual is for a o-deferred 3-year swap.) Page PE9-15, solutio to Problem 14. The last equatio should be: 1 1 i 1 1 0.060989 v 0.9425169 Page PE9-20, solutio to Problem 21. The expressio at the ed of the 3 rd paragraph should be: r i i e u Page PE10-2, Problem 5. The first setece should read as follows: A bod with par value X pays semi-aual coupos at a 4% aual rate. Page PE10-10, solutio to Problem 1. The ed of the first paragraph should read (for the 15-year mortgage): CPT PMT = 1,951.04. (The remaider of the solutio is correct, sice it uses the correct value (1,951.04) i the subsequet calculatios.) Page PE11-7, Problem 25. The problem should specify: otioal amouts of 1 millio, 2 millio ad 3 millio (ot 2 millio, 3 millio, ad 4 millio)
Page PE11-11, solutio to Problem 4. The equatio i the 2 d lie should be: 200,000 Pm t a 240 0.3% Page PE11-25, solutio to Problem 32. I the last paragraph, the 3 rd lie should list the followig values: i = 0.05, d 0.05 / 1.05 0.047619, ad l 1.05 0.048790
Errors i the Origial Pritig of the Sprig 2017 Editio The items o this page ad the followig pages apply to the origial pritig of the Sprig 2017 Editio of the FM Maual. These errors have bee corrected i the secod pritig. Page M1-48, Problem 7. I the last lie, replace d(4) with (4) Page M1-65, solutio to Problem 1. I the 4 th lie, replace (1 0.05/4) 4 = 1.05160 1 + i with (1 0.05/4) 4 = 1.05160 = 1 + i Page M2-14, Example 2.31 The last 2 lies should read as follows: FV = 20,000, ad CPT PMT = 712.91 The level paymet is 712.91. Page M2-15 The first two paragraphs should read as follows: The problem of Example (2.31) could also have bee solved with the calculator i END mode. I that case, you would eter the same values: N = 12, I/Y = 4.5, PV = 5,000, FV = 20,000, ad CPT PMT = 744.99 744.99 is the amout you would eed to deposit at the ed of each year. Sice this problem ivolves deposits made oe year earlier (at the begiig of each year), the 1 / 1 i : deposits should be smaller by a factor of 744.99 1.045 712.91 Page M2-15, aswer to Exercise 2.32 Replace 708.43 with 668.33 Page M2-34, aswer to Exercise 2.82 Replace 2,286.96 with 2,113.35 Page M2-52, equatios at bottom of page The first lie should read as follows: t t t Ia t v dt t 0 2 t v v t 0
Page M5-14, Example 5.21 I the 2 d lie of the 4 th paragraph, replace I=15 with I=10 Page M5-14, aswers to Exercise 5.22 Replace NPV(B)=5,646.33 with NPV(B)=5,646.53 Page M6-11, aswer to Exercise 6.9 Replace 0.0551 with 0.0546 Page M6-20, Problem 5. I the 2 d lie of the 2 d paragraph, replace j i1, with j i1, 1 Page M7-12, Example (7.21) ad Exercise (7.22) These two items should read as follows: Example (7.21) A aual-coupo par bod has a face value of 1,000, a coupo rate of 5%, ad 3 years to maturity. Because it is a par bod, its yield equals the coupo rate, so we have: D Ia 3 0.05 a,000 v 35795 63838 72325 1, 000. 86383 3 50 3 1, 000 v 50(5. ) 3, 000.8 2.8594 a m ac 3 3 0.05 50 3 0.05 1 50 2. 8 Exercise (7.22) A aual-coupo par bod has a face value of 1,000, a coupo rate of 6%, ad 5 years to maturity. Fid D m ac usig Formula (7.20), ad cofirm that it equals a. 5 6% Aswer: 4.47 Page M7-32, iequality ear bottom of page A L A L PV i PV i PV i PV i Replace 0 with Page M7-47, Equatio i 3 rd paragraph Replace D = 0.2638(3) + 0.7362(4) = 3.7362 with D mac = 0.2638(3) + 0.7362(4) = 3.7362 Page M9-12, Exercise (9.5) The questio should read as follows:
I Example (9.3), if the 1-year spot rate at time 2 is 7.4%, what paymets will be made or received at time 3 by XYZ, by Cotra, ad by the leder?
Page M9-20, Example (9.14) The last setece of the large paragraph should read as follows: What is the fixed iterest rate that WXY will pay to the couterparty i retur for receivig paymets at times 2 through 5 based o the 1-year spot rates i effect at the begiig of the 2 d through 5 th years? Page M9-21 I the last formula o the page, replace R a v 1 with R a v 1. Page M9-37, last paragraph I the ext-to-last lie, replace 4.5% 4% + 3% = 3.5% with 4.5% - 4% + 3% = 3.5%. Page PE5-8, Problem 33. The last setece should read as follows: Calculate the preset value of the perpetuity at a 3.4% aual effective iterest rate. Page PE6-17 The last 3 paragraphs should read as follows: s The last paymet icludes this outstadig balace plus iterest for oe period. So the last paymet is 564. 89(1 i) 567. 19. I total, there are 99 paymets of 1,060.11, the 158 paymets of 1,460.11, ad a fial paymet of 567.19. The total amout paid is 336,215.56, ad the amout of iterest paid is 336,215.56 200,000 = 136,215.56. This problem ca also be solved etirely o the BA II Plus: N=360, I/Y=0.004074, PV=200,000, ad FV=0. CPT PMT = -1,060.11. N=261 (o. of pmts. remaiig after 99 pmts.) CPT PV = 170,162.81. PMT=-1,460.11, CPT N = 158.3880. N=158, CPT FV = -564.98. 564.89 1.004074 158 1, 460.11 99 1, 060.11 336, 2 15.56 336, 215.56 200, 000 136, 215. 56 Page PE11-18, Problem 19. The 5 th lie of formulas should read as follows: 1 2 3 4 1 2 3 4 4 4 100c 1 s 1 s 1 s 1 s 100 1 s 100