Society of Actuaries Financial Mathematics
(FM) Practice Test Exam
1. What is the primary focus of the Society of Actuaries
Financial Mathematics exam?
A. Interest theory and financial economics
B. Surgical procedures
C. Hospital administration
D. Nursing education
Answer: A
Rationale: The SOA Financial Mathematics exam focuses on
interest theory and financial economics.
2. What is the definition of simple interest?
A. Interest calculated only on the principal
B. Interest calculated on principal and interest
C. Interest calculated on interest only
D. Interest calculated on a declining balance
Answer: A
,Rationale: Simple interest is calculated only on the principal
amount.
3. What is the definition of compound interest?
A. Interest calculated on principal and interest
B. Interest calculated only on the principal
C. Interest calculated on interest only
D. Interest calculated on a declining balance
Answer: A
Rationale: Compound interest is calculated on both principal
and accumulated interest.
4. What is the formula for compound interest accumulation?
A. A(t) equals P times (1 plus i) to the power of t
B. A(t) equals P times (1 plus i times t)
C. A(t) equals P times (1 minus i) to the power of t
D. A(t) equals P divided by (1 plus i) to the power of t
Answer: A
Rationale: The compound interest accumulation formula is A(t)
equals P times (1 plus i) to the power of t.
,5. What is the present value formula?
A. PV equals FV divided by (1 plus i) to the power of t
B. PV equals FV times (1 plus i) to the power of t
C. PV equals FV times (1 plus i times t)
D. PV equals FV divided by (1 plus i times t)
Answer: A
Rationale: The present value formula is PV equals FV divided by
(1 plus i) to the power of t.
6. What is the definition of an annuity?
A. A series of payments made at regular intervals
B. A single payment
C. A lump sum
D. A declining balance
Answer: A
Rationale: An annuity is a series of payments made at regular
intervals.
, 7. What is the difference between an annuity-immediate and an
annuity-due?
A. Annuity-immediate pays at the end of each period, annuity-
due pays at the beginning
B. Annuity-immediate pays at the beginning, annuity-due pays
at the end
C. Both pay at the end
D. Both pay at the beginning
Answer: A
Rationale: Annuity-immediate pays at the end of each period,
while annuity-due pays at the beginning.
8. What is the formula for the present value of an annuity-
immediate?
A. PV equals PMT times (1 minus (1 plus i) to the power of
negative n) divided by i
B. PV equals PMT times (1 plus (1 plus i) to the power of
negative n) divided by i
C. PV equals PMT times (1 minus (1 plus i) to the power of n)
divided by i
(FM) Practice Test Exam
1. What is the primary focus of the Society of Actuaries
Financial Mathematics exam?
A. Interest theory and financial economics
B. Surgical procedures
C. Hospital administration
D. Nursing education
Answer: A
Rationale: The SOA Financial Mathematics exam focuses on
interest theory and financial economics.
2. What is the definition of simple interest?
A. Interest calculated only on the principal
B. Interest calculated on principal and interest
C. Interest calculated on interest only
D. Interest calculated on a declining balance
Answer: A
,Rationale: Simple interest is calculated only on the principal
amount.
3. What is the definition of compound interest?
A. Interest calculated on principal and interest
B. Interest calculated only on the principal
C. Interest calculated on interest only
D. Interest calculated on a declining balance
Answer: A
Rationale: Compound interest is calculated on both principal
and accumulated interest.
4. What is the formula for compound interest accumulation?
A. A(t) equals P times (1 plus i) to the power of t
B. A(t) equals P times (1 plus i times t)
C. A(t) equals P times (1 minus i) to the power of t
D. A(t) equals P divided by (1 plus i) to the power of t
Answer: A
Rationale: The compound interest accumulation formula is A(t)
equals P times (1 plus i) to the power of t.
,5. What is the present value formula?
A. PV equals FV divided by (1 plus i) to the power of t
B. PV equals FV times (1 plus i) to the power of t
C. PV equals FV times (1 plus i times t)
D. PV equals FV divided by (1 plus i times t)
Answer: A
Rationale: The present value formula is PV equals FV divided by
(1 plus i) to the power of t.
6. What is the definition of an annuity?
A. A series of payments made at regular intervals
B. A single payment
C. A lump sum
D. A declining balance
Answer: A
Rationale: An annuity is a series of payments made at regular
intervals.
, 7. What is the difference between an annuity-immediate and an
annuity-due?
A. Annuity-immediate pays at the end of each period, annuity-
due pays at the beginning
B. Annuity-immediate pays at the beginning, annuity-due pays
at the end
C. Both pay at the end
D. Both pay at the beginning
Answer: A
Rationale: Annuity-immediate pays at the end of each period,
while annuity-due pays at the beginning.
8. What is the formula for the present value of an annuity-
immediate?
A. PV equals PMT times (1 minus (1 plus i) to the power of
negative n) divided by i
B. PV equals PMT times (1 plus (1 plus i) to the power of
negative n) divided by i
C. PV equals PMT times (1 minus (1 plus i) to the power of n)
divided by i
