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Thread: Some Thoughts After Passing the FM/2

  1. #1
    Actuary.com - Level I Poster
    Join Date
    Nov 2011

    Some Thoughts After Passing the FM/2

    Similar to my previous thread on the P/1 Exam (http://www.actuary.com/actuarial-dis...assing-The-P-1), I want to add my experiences preparing for FM/2 to this forum in the hopes that other candidates taking the exam find this information useful in their studies.

    Total Prep Time: As a very rough estimate, about 60 hours.

    Study Materials: Marcel Finan's A Basic Course in the Theory of Interest and Derivatives Markets; SOA Sample Questions and Answers; Derivatives Markets Sample Questions and Answers; Krzysztof Ostaszewski's Weekly Problems for FM/2.

    NOTE: I have collected all of Dr. Ostaszewski's exercises in one convenient PDF file, linked to in the following thread (http://www.actuary.com/actuarial-dis...n-One-PDF-File)

    Study Pattern: My time was very limited since I had just recently taken the P/1 on January 31st '12. My FM/2 exam was on February 18th '12. I studied most days between those two dates about 3 to 7 hours a day, with some days super-focused and others total "wastes" with no studying at all (I just needed a break, haha. My stamina ran out).

    Exam Date: February 18th, 2012 (the last possible date for the February 2012 Administration).

    My approach differed significantly from how I studied for the P/1. I chose not to do any practice tests, and to simply focus only on the material that I would most likely need as I did Dr. Ostaszewski's practice problems. I majored in finance so I felt fairly confident for this test. I just needed to brush up on my skills. So I began doing practice problems immediately and, when I got stumped, I turned to Dr. Finan's book and reviewed the section in question. Turns out I ended up reading most of the book anyways (early on, every single question beat me up haha). The test is mathematically much easier than the P/1 (you'll do maybe one or two integrals the entire test). It is difficult because the questions can be hard to understand sometimes.

    Some advice:
    - With every practice problem you do, try to really understand what is going on in the problem statement. Understanding the situation is critical on FM/2.
    - Timelines. Draw them...or else. Physically picturing cash flows and the dynamics of a problem can be the only way to answer some of them, especially if you are a very visual learner (like me).
    - As far as math skills go, you need to understand finite and geometric series at a level where they seem easy and natural. Series are a huge part of this test. Not much else to say here, really. The math on the FM/2 is comparatively waaaay easier than any of the other exams.
    - Know your calculator or perish. Test Day is not when you start learning new calculator functions. And bring two, preferably the TI-30XS Multiview and the TI BA-II Plus for time value of money calculations.
    - Understand and derive many of the proofs for the formulas by yourself! This alone will get you such an insightful understanding of the problems that you won't need to memorize the 100+ formulas on this exam, since you could derive most of them quickly if needed. This post is already very long, but I can recommend which equations and formulas are most critical if requested.

  2. #2
    Actuary.com - Newbie Poster
    Join Date
    Feb 2012
    I had the same approach. Read the manual very carefully and just did the SOA sample problem, I didn't do any practice test at all. Passed P in January and FM last Friday.

    @Actuareeeee: Which exam will you take next? MLC or MFE?

  3. #3
    Actuary.com - Level I Poster
    Join Date
    Nov 2011
    Congrats keane! As to which exam to take next, I'm still very undecided. I have 2 exams done and, as much as I hate the concept of "overqualification," it seems as though it would be in my best interests to land an entry-level job before completing any further exams. I've browsed the MFE, MLC, and C syllabi and I will certainly not have the advantage of previous experience (from my college studies) I had on P and FM. I'm guessing I'll try for one of the M-exams though, since C consists of evaluating and building models and might build on some of the material from those tests.

  4. #4
    Actuary.com - Newbie Poster
    Join Date
    Feb 2012
    Hi Actuareee, I'm planning to take exam FM in June and did not know and wanted to buy the ACTEX Study Manual. Thanks to your explanation concerning the preparation of your exam, I have opted for Marcel Finan's A Basic Course in the Theory of Interest and Derivatives Markets. This free study material has helped me to save my money which I can now use to pay for the fees of my exams.

    Actuaree, I want to know if the Financial Economics part in this manual is well discussed.

  5. #5
    Actuary.com - Level I Poster
    Join Date
    Nov 2011
    Indeed it is. There is in fact "extra" information that is highly unlikely to appear on your actual exam, but the extra practice with these advanced concepts really solidifies the basic theory that WILL show up on the test. Forwards, futures, options, spread strategies, swaps, etc... All discussed effectively in Finan's guide, in my opinion.

  6. #6
    Actuary.com - Level II Poster
    Join Date
    Oct 2012
    I couldn't agree more. Here's my two-cents worth (accumulated at an annual effective rate of 2 bps compounded continuously):

    a.) Just trying to memorize how to do a specific example won't prepare one for the exam. You MUST understand the concepts behind the type of problem.
    b.) Drawing timelines helps tremendously even for the seemingly simple problems.
    c.) Understanding geometric & arithmetic series is vitally important. This basic concept is used for deriving almost every formula for the course. I derived every formula by hand as I was learning the material. This helped me understand the concepts more and gave me the skills to derive a formula if I forgot it. Usually after deriving a formula a few times from the basic concepts would lead me to memorize it without much effort.
    d.) Doing practices tests -- MANY practice test -- in simulated testing conditions is a good idea to get the stamina needed to work these problems in the time permitted with the minimal amount of stress. I did 22 different practice tests and several of those I did more than once. You can never be over-prepared for an actuary test.

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