ACTL20001: Financial Mathematics I

Group (3-5) Assignments 2 × 10% , Mid Semester Exam 10% (45 minutes), End of Semester Exam 70% (2 hours)

I found this to be quite an interesting subject, and a good/logical continuation from ACTL10001. Although it is considered the first "real actuarial" subject, I can't see how anyone who was able to satisfy the maths prerequisites for this subject would struggle too much. That being said, you can't slack off, and need to know and understand all the formulae presented, as well as the underlying concepts - But the actual proofs are not too hard to understand and learn, and you only actually have to remember a few key formula, and the relationships between similar ones.

There were 4 major topics in this subject (the first 4 chapters of the textbook); Chapter 1 was about interest, discount and force of interest rates, chapter 2 went into cash flows (mostly annuities), chapter 3 focused on loans and business project evaluation and chapter 4, which was all definitions, was about types of asset classes.

Lectures:
Lectures involved Ping talking through the slides, as well as annotating them and providing additional information. She was very organised with the timing of the lectures throughout the semester which was a plus. The lectures themselves were definitely helpful to watch, although I usually had to do my own study/practice later to actually absorb the material. I was also able to watch most of them with the lecture capture without drama.

Tutorials:
Tute's in this subject were also identical in structure to those in ACTL10001 - You're given the questions beforehand, and then your tutor takes the class through the solutions, but worked solutions are uploaded at the end of the week (Which significantly hinders attendance). However, I found this subject's tutes more useful, as my tutor would provide a nice summary and go into more detail with the really difficult mathematical proofs (Although these types of questions were usually way above the expected exam standard). You'll get the most benefit out of these by trying the questions beforehand, then working through and correcting any mistakes after seeing the solutions.

Assignments:
There were two group assignments, which consisted of 5 or 6 exam style questions. As I mentioned in my review for ACTL10001, this essentially removes the "hard" factor of actuarial exams (Time, memorizing formulae, silly mistakes), and thus getting full or close to full marks in this section of assessment is the norm. Fortunately, this can boost your grade, and help shield the effect of silly exam mistakes/exam pressure. You're also free to chose your groups.

Mid Semester Exam:
While it only covers chapter 1 and the basic annuities taught in ACTL10001, you really have to know your stuff and be on the ball for this one. There's not much time to check over your answers or think about questions for long. However, it was quite similar in format to the past exam (2017's mid sem), and no real trick questions. Average was 21.7/30

Final Exam:
Was more difficult than the mid-sem, but you had quite a bit longer to think things through and review your answers (And I personally scored around 10% higher on my final exam than my mid-sem). Required an understanding of the 4 chapters taught (but no calculations for chapter 4 content), and had a fair few "different" questions. If you work through all the lecture slides (your number 1 place to start for revision), have done the tutorial questions (There were a few exam questions very similar to these) and had a go at the past exams to get used to the timing, you should be fine. Note also for actuarial students taking this subject (probably all or almost all), your final exam mark in this subject, plus your final exam result in ACTL20002 are the only things that contribute to your CT1 exemption, and the actual result needed is not set in stone, but 75+ should be safe.

Yes, with screen capture

Ping Chen

Yes, 3 past final exams with solutions, plus 1 past mid-sem exam with solutions

4 Out of 5

Official book for this subject is Compound Interest and its Applications by Fitzherbert and Pitt - Probably not vital but provided many extra questions with worked solutions, and is also used in this subject's successor ACTL20002

2 × 1hr lectures per week, 1 × 1hr tutorial per week

2018, Semester 1

H1 (85)

2 excel assignments (10% each), midsemester exam (10%), final exam (70%)

The content in this subject was not very challenging, and consequently, it was a rather boring (for which I have taken off a point) and easy subject, though potentially not incredibly easy to score high in. The main “problem” (though some would disagree) is that all of the content in ACTL90001 Mathematics of Finance 1 is spread across FM1 and FM2 in undergrad, and FM2 contains the more interesting content. This means that the pace of content is incredibly slow, and it became pointless to attend lectures as you could learn the content faster on your own at home – which I and quite a few of my friends did. Fortunately the textbook is very good and the subject follows the textbook very closely.
The subject starts with an introduction to interest (effective, simple, rates of discount, nominal, force of interest, accumulation factors, force of interest, etc, if those words mean anything to you) which doesn’t take very long.
You then spend quite a while deriving a lot of different types of annuities, not just the ordinary ones you saw in an Introduction to Actuarial Studies - you see increasing and decreasing annuities, with potentially multiple or continuous payments per period. You may also get asked to derive a closed-form formula of some annuity that is described to you in words, and so it is a good idea to focus on the methods of which these annuities are derived. Whether you decide to actually remember derivations for formulas done in lectures (and quite a bit of time is spent on this, or so I assume because I never went) is up to you, and perhaps what your lecturer hints at. You also need to memorise all the formulas (of which there are quite a lot) and become adept at solving problems quickly – the problems in the textbook are great in addition to the tutorial problems. You should do them all.
The next major section of the course focuses on project analysis – so ways of measuring the (typically projected) performance and comparing projects. Of course, you use the NPV and IRR methods (a little while is spent on some theory behind equations of value, as well, which are used to solve for IRRs). There’s a few other things like payback period, discounted payback period, and a couple of others that escape my memory now.
Finally, there is a little bit of time spent on some background to financial markets and how they operate, as well as a little theory on derivative securities and other investment options.


The two assignments weren’t too difficult and we did them in small groups. Most students got 10/10 for both assignments. The midsemester exam was also quite easy, and consistent of mostly basic problems. I think the class average was 16-7/20.

The final exam was long and difficult – far harder than the content in this subject, and it was this that really separated the students, especially as we were expecting (rightly or wrongly) an easy exam based on what we had been told by previous students. This couldn’t have been further from the truth and it probably remains the hardest exam I’ve sat at university to date. Our results were significantly scaled up, and considering that the centre for actuarial studies states that marks are not standardised to fit a specified distribution, and to quote, “if all students achieve a standard of H1, then all students will receive this grade. Likewise, in the unlikely event that no student achieved the performance required for an H1 grade, this grade would not be awarded”, I think this suggests that our exam was a little (or a lot!) harder than normal.
The meat of the exam was on project analysis, but this also incorporated other aspects of the course as well (as in, you may need to use some certain annuity to do it). There were a few free marks (eg on some theory of financial markets, or on basic questions like finding a rate of discount) that probably made up 10-15% of the exam. You needed to be quick and be able to think independently on problems that you hadn’t seen before. Of note, I think there were a few questions that were very similar (although not identical) to some tutorial questions, so it would probably be worthwhile reviewing those close to the exam. No formula sheet is provided for the exam, and there is a lot of formulas that you are expected to remember.
Of course, any of the information regarding assessment is subject to change with different lecturers.

Overall, enjoy the fact that content is not too difficult and is covered at quite a slow pace, but don’t take the subject too lightly and assume it will be a guaranteed H1. As this forms the CT1 exemption with ACTL20002 Financial mathematics 2, you should definitely try and get yourself a good mark ‘in the bag’, so to speak.

No.

Zhou Jin

No. One sample was provided.

4 of 5

Compound Interest and its Applications. The textbook is published by the university and is available in the co-op bookshop for a small (~$20) cost.

two 1-hour lectures, one 1-hour tutorial per week

2014, semester 1

H1