CM1 is one of the most basic and important paper and is widely applicable in real life. It is a combination of CT1 & CT5 and now also includes excel practical exam, for more details you can visit here – CM1 Core Mathematics 1: First Milestone of New Curriculum but this articles focusses on chapters in CM1
CM1 Chapters Summary
CM1 Chapter 1: Relating to data analysis, this chapter has been shifted to the CS1 syllabus from the 2020 Exams.
CM1 Chapter 2: This chapter is theoretical and questions can be asked from it so don’t neglect it. You should be able to tailor your answer according to the question’s needs.
CM1 Chapters 3-6: These chapters, although less important from the exam point of view, are required for the rest of the chapters. Be sure that you get plenty of practice in converting interest rates and discount rates.
Chapter 7: Although it seems tough at first sight, Chapter 7 becomes easier as your understanding becomes better. So go through the core reading and understand why you’re using a particular approach to solve a sum.
Chapters 8 & 9: These chapters deal with annuities which are fundamental to the CT5 part of the syllabus thus plenty of practice is required.
Chapter 10: Dealing with equations of value, their importance is more seen in premium and reserve calculation in the later chapters.
Chapter 11: The key to loan schedules is to know what to calculate when asked a particular thing. For e.g. you should know to calculate the capital outstanding at the start and end of a particular period to calculate the interest repaid in that period. The chapter is relatively easy in Excel.
Chap 12: Calculating the various cashflows separately is the best way to solve for NPP. DPP can be a tricky concept to grasp. So try to solve as many past questions as possible to get a hold of how they ask such sums. Create a timeline of the cashflows as it can make it easier to visualize the cashflows. Make sure that you are aware of the advantages and disadvantages of each. In Excel, it can be easy to discount all the cashflows at individual time periods to time 0 and then use the appropriate formulae to find the NPV and DPP.
Chap 13: Ensure that you understand the difference between par yield, redemption yield and running yield. Don’t forget the capital gains test whenever solving a sum. You may have to do it even if there is no capital gain tax (In case there is an optional redemption date).
Chap 14: Learning the limitations of immunization is necessary. Being able to calculate a change in portfolio value for a small change in interest rate for a given amount of volatility in also necessary. This chapter should be relatively straightforward in terms of Excel.
Chap 15: Practicing the different methods of calculating probabilities is important as they are a key part of the syllabus in later chapters. You should know how to create the Probability table in Excel.
Chap 16-17: Dealing with the fundamentals of Assurance and Annuity contracts, it is advisable to know which values are available in the Tables so as to save time in the exams. Using the D[x] notation from the tables is advisable as it saves time but remember that it is only applicable when the interest rate is 4%.
Chap 19: When the benefit increases at a compound rate, it will be such that the resulting equation can be calculated (e.g. i = 6% and increase = 1.1923% such that you can use the 4% values). This makes it a little easier as you get a hint as to what to do. In case of endowment assurance, be careful with the survival benefit.
Chap 20: Calculate the various cashflows separately and then equate the inflows with the outflows. You should know how to calculate gross premiums that satisfy probabilities. Keep a calm head while solving such sums as mistakes can be difficult to find in such sums.
Chap 21: Proving the equality of prospective and retrospective reserves and the conditions necessary for equality are important. Again, keep a calm head to avoid mistakes.
Chap 22: The notations for probability and expected value functions can be confusing so be proficient in them. Similar to single life policies, you can create a factsheet on how to calculate some particular value using the values in the tables. That shouldn’t be necessary for last survivor functions.
Chap 23: This chapter is also full of notations which you should be able to express as integrals. The types of reversionary annuity is probably the trickiest part of the syllabus. Solve the past papers or revision notes to get as much practice as possible.
Chap 24: Be careful if the benefit varies in different years as the DSAR will vary accordingly. Refer to CM1 April 2019 Q. 13 as it is a particular type of sum which is not included in the course notes.
Chap 25: You should understand the difference between dependent and independent probabilities and you can find them using their respective formulae. Solve sums asking you to create multiple decrement tables as practice leads to proficiency. You should be able to draw the diagrams as per the needs of the question.
Chap 26-28: The final 3 chapters, dealing with different kinds of policies and their profit testing, requires patience. Small mistakes in the start can lead to big differences in the end (although the IFoA does give marks for steps). Make sure that you know the features of unit-linked and AWP contracts. Refer to the revision notes for these chapters as they are very helpful and cover almost all types of sums. Be careful while applying the probabilities in zeroising the negative cashflows. Do not forget to incorporate the surrender probability if it is mentioned in the question. In Excel, calculations should be pretty easy, just make sure that the correct formula is being dragged for all.
Some additional CM1 exam tips and tricks:
Keep your calculations in different cells in Excel. Trying to do everything in one cell can lead to mistakes.
Keep on saving the data or turn the Auto-Save function on in newer versions of Microsoft Office.
Do not get fixated on a question if you’re not able to understand it or get the answer, move on to the ones you’ll be able to answer better.
Read the question carefully (multiple times if necessary) and mark the important details. (For e.g. AM92 6%, annuity payable monthly in advance, etc.)
Certain interest rate values and mortality table values such as Ia(n) are pre-calculated in the Tables. They can be very time saving than manually calculating via a calculator.
Excel shortcuts can prove to be very helpful and time saving. You can find useful shortcuts here: https://forum.theactuarialclub.com/excel-tip-6-all-keyboard-shortcuts-used-in-excel-t2977.html
If you have any issue while uploading your file, immediately contact the IFoA on their email [email protected] . The IFoA is very cooperative. Capture screenshots or some proof of you trying to upload the file but being unable to do so. You may also try sending your answer file to the aforementioned email.
That’s all that I have to say from my end. All the best for this exam and the future exams that you may appear for.
Read CM1 exam tips and tricks for your exam!
About the author: Shresht Jain is an 18 year old aspiring actuary who has strong interests in mathematics and using it to solve real life problems. He aims to become an actuarial fellow and use his analytical skills for the greater good someday.