# Tips to ace Exam FM’s materials

Written by Ramy Gaballa:

Before discussing the details, most of us had the following question before studying for FM: What kind of math do we need to master before starting to study for this exam? Simply put, this exam does not require rigorous math. The math used in FM includes basic algebra and calculus. Topics that require rigorous math do not show up very frequently on the exam. These topics include:

1) Variable force of interest, which requires basic knowledge of differentiation and integration

2) Continuous varying stream of payments where you have to integrate by parts, but everyone usually uses a short-cut formula

3) Immunization, duration, and convexity – these topics require differentiation

4) And finally, what I call “contingent payoffs in the derivatives section”. These require applying very basic probability-based calculations and such questions do not come up on the exam very frequently (expect a single question per hundreds of questions)

Previous knowledge of sequence and series topics can help you in understanding the topics where you should be able to use short-cuts and manipulation to deal with a sequence of payments to solve the problem in less than 5 minutes. In the beginning, I used to plot a timeline in order to easily figure out the details, however, after a few weeks I abolished the idea of using timelines because it wastes a lot of time.

Try to make everything as intuitive as possible. Remember that financial mathematics are used to numerically and mathematically represent details happening in real life. Sometimes certain information in some of the exam problems do not make economic sense and the reason why is that the examiner’s goal is to test your quantitative skills regardless of the intuition behind the problems.

Based on my experience, the SOA does not focus on specific topics. In my first attempt last February, I earned a 5 (I failed it). The main reason why this happened was that many questions focused on amortization of sinking funds, which is a relatively marginalized topic in most study manuals. During my 2nd attempt a few days ago, the exam was more balanced and the derivatives questions were far more advanced than those of my first attempt. The SOA sample derivatives questions posted on the SOA website are relatively advanced so you should be able to solve them under the exam conditions before taking the exam, as some people had exams where the derivatives part was extremely difficult.

When solving Adapt exams, your goal should be reaching at least an earned level of 7 and you should keep solving level 7 exams after reaching this point. In my opinion, solving level 8 or above exams includes questions that are too advanced and unrealistic. Focus instead on individual topics that you have not mastered yet. After acing different topics, make sure to know the meaning of the following terms:

1) Theoretical price

2) Semi-theoretical price

3) Practical price

4) Dirty price

5) Full price

6) Clean price

7) Quoted price

8) Market rate

9) Repo rate

10) Lease rate

Don’t risk losing marks and failing the exam because of not spending 5 or 10 more minutes to know the meaning of such terms.

Abolish the idea of using timelines and fancy mathematical derivations (if you can) after acing the topics because this can save you 30 to 60 minutes.

Using fancy mathematical models and derivations is not wise when dealing with such problems. Your goal for FM is coming up with the exact solution as quickly as possible. This requires mastering techniques used in financial calculators. Using the store and recall buttons can save you a lot of time.

Don’t panic during the exam because this can negatively impact your performance. You should highlight the questions that are confusing and you should select any of the choices before skipping.

Finally, you have to scrutinize your exam sitting’s syllabus posted on the SOA website to check that you aced the topics mentioned.

Good luck!