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CT1 – P C – 08 Combined Materials Pack ActEd Study Materials: 2008 Examinations Subject CT1 Contents Study Guide for the 2008 exams Course Notes Question and Answer Bank Series X Assignments* *Note: The Series X Assignment Solutions should also be supplied with this pack unless you chose not to receive them with your study material. If you think that any pages are missing from this pack, please contact ActEd’s admin team by email at [email protected] or by phone on 01235 550005. How to use the Combined Materials Pack Guidance on how and when to use the Combined Materials Pack is set out in the Study Guide for the 2008 exams. Important: Copyright Agreement This study material is copyright and is sold for the exclusive use of the purchaser. You may not hire out, lend, give out, sell, store or transmit electronically or photocopy any part of it. You must take care of your material to ensure that it is not used or copied by anybody else. By opening this pack you agree to these conditions. The Actuarial Education Company © IFE: 2008 Examinations All study material produced by ActEd is copyright and is sold for the exclusive use of the purchaser. The copyright is owned by Institute and Faculty Education Limited, a subsidiary of the Faculty and Institute of Actuaries. You may not hire out, lend, give out, sell, store or transmit electronically or photocopy any part of the study material. You must take care of your study material to ensure that it is not used or copied by anybody else. Legal action will be taken if these terms are infringed. In addition, we may seek to take disciplinary action through the profession or through your employer. These conditions remain in force after you have finished using the course. © IFE: 2008 Examinations The Actuarial Education Company CT1: Study Guide Page 1 2008 Study Guide Subject CT1 Introduction This Study Guide contains all the information that you will need before starting to study Subject CT1 for the 2008 exams. Please read this Study Guide carefully before reading the Course Notes, even if you have studied for some actuarial exams before. The study guide includes: • information about the course structure and how it links to the tutorials • information about how the notes are written • advice on how to study efficiently and prepare for the exam • a summary of the Assignment and Mock Exam deadlines • details of what to do if you have a query • the full Syllabus. Contents: Section 1 The Subject CT1 course structure Page 2 Section 2 The course Page 3 Section 3 ActEd study support Page 5 Section 4 Information from the profession Page 13 Section 5 Study skills Page 17 Section 6 Frequently asked questions Page 21 Section 7 Syllabus Page 22 Section 8 Summary of useful information Page 30 Section 9 File tabs Page 33 The Actuarial Education Company © IFE: 2008 Examinations Page 2 CT1: Study Guide 1 The Subject CT1 course structure There are four parts to the Subject CT1 course. This should help you plan your progress across the study session. The parts cover related topics and have broadly equal lengths. The parts are broken down into chapters. The following table shows how the parts, the chapters and the syllabus items relate to each other. The end columns show how the chapters relate to the days of the regular tutorials. No of Syllabus Half 2 full 3 full Part Chapter Title pages objectives day days days 1 Cashflow models 18 (i) 2 The time value of money 16 (ii) 3 Interest rates 34 (iii) 1 4 Real and money interest rates 12 (iv) 1 1 5 Discounting and accumulating 35 (v) 1 6 Level annuities 32 (vi) 1 7 Deferred and increasing annuities 37 (vi) 2&3 8 Equations of value 23 (vii) 2 9 Loan schedules 30 (viii) 2 10 Project appraisal 51 (ix) 2 11 Investments 40 (x) Elementary compound interest 3 12 50 (xi) 3 problems 2 13 Arbitrage and forward contracts 31 (xii) 14 Term structure of interest rates 50 (xiii) 3 4 4 15 Stochastic interest rate models 32 (xiv) © IFE: 2008 Examinations The Actuarial Education Company CT1: Study Guide Page 3 2 The Course The Course consists of Course Notes, a Question and Answer Bank and Series X Assignments. Collectively, these are referred to as the Combined Materials Pack (CMP). 2.1 Course notes Each chapter of the Course Notes includes the Syllabus, a chapter summary and, where appropriate, a page of important formulae or definitions. The Syllabus for Subject CT1 has been written by the profession to state the requirements of the examiners. The relevant individual Syllabus Objectives are included at the start of each course chapter and a complete copy of the Syllabus is included in Section 7 of this Study Guide. We recommend that you use the Syllabus as an important part of your study. The Syllabus is supplemented by Core Reading, which has also been written by the profession. The purpose of Core Reading is to give the examiners, tutors and students a clear, shared understanding of the depth and breadth of treatment required by the Syllabus. In examinations students are expected to demonstrate their understanding of the concepts in Core Reading. Examiners have the Core Reading available when setting papers. Core Reading deals with each Syllabus objective. However, the Core Reading in isolation is not ideal to pass the exam. Core Reading is supplemented by tuition material that has been written by ActEd to help you prepare for the exam. The Subject CT1 Course Notes include the Core Reading in full, integrated throughout the course. Here is an excerpt from some ActEd Course Notes to show you how to identify Core Reading and the ActEd material. Core Reading is shown in this bold font. Note that in the example given above, the index will fall if the actual share price goes below the theoretical ex-rights share price. Again, this is consistent with what would happen to an underlying portfolio. This is After allowing for chain-linking, the formula for the investment index tAhecntEd becomes: text This is Core ∑∑∑∑N P i,t i,t Reading I(t)==== i B(t) where N is the number of shares issued for the ith constituent at time t; i,t B(t) is the base value, or divisor, at time t. The Actuarial Education Company © IFE: 2008 Examinations Page 4 CT1: Study Guide You should not simply try to memorise the Core Reading (or, for that matter, the tuition material). Rather, you should understand the principles stated in the Core Reading and developed in the tuition material. 2.2 Question and Answer Bank The Question and Answer Bank provides a comprehensive and balanced bank of exam- style questions with solutions and comments, which will be helpful as part of your preparation for the Subject CT1 exam. Some students like to attempt the questions from the relevant part of the Question and Answer Bank before attempting the corresponding assignment. Others use the Question and Answer Bank at the revision stage. Our advice is to try out various approaches and pick the one that best suits you. The Question and Answer Bank is divided into five parts. The first four parts of the Question and Answer Bank include a range of short and long questions to test your understanding of the corresponding part of the Course Notes. Part five of the Question and Answer Bank consists of 100 marks of exam-style questions. You may wish to use this as part of your revision closer to the examinations. 2.3 Assignments The four Series X Assignments (X1 to X4) cover the material in Parts 1 to 4 respectively. Assignments X1 and X2 are 80-mark tests and should take you two and a half hours to complete. Assignments X3 and X4 are 100–mark tests and should take you three hours to complete. The actual Subject CT1 examination will have a total of 100 marks. If you order Series X Marking at the same time as you order the assignments, you can choose whether or not to receive a copy of the solutions in advance – see the back of the order form for details. If you choose not to receive the solutions with the study material, we will send the assignment solutions to you when we mark your script (or following the deadline date if you don’t submit the assignment). © IFE: 2008 Examinations The Actuarial Education Company CT1: Study Guide Page 5 3 ActEd study support This section lists the study support available from ActEd for Subject CT1. 3.1 Combined Materials Pack The Combined Materials Pack (CMP) comprises the Course Notes, the Question and Answer Bank and the Series X Assignments, as already described. 3.2 Series Y Assignments The Series Y Assignments comprise two 100-mark assignments (Y1 & Y2), each covering the whole course. Series Y is suitable for retakers who have previously used the Series X Assignments and for first-time sitters who want additional question practice. 3.3 Mock Exam Two 100-mark mock exam papers are available for students as a realistic test of their exam preparation – Mock Exam 2007 and Mock Exam 2008. Both are issued with full marking schedules and are available with or without marking. Mock Exam 2008 is completely new. Mock Exam 2007 is also still available for students wanting extra practice. It has been updated to reflect any changes to the Syllabus and Core Reading over the last year. The Actuarial Education Company © IFE: 2008 Examinations Page 6 CT1: Study Guide 3.4 ActEd Solutions with Exam Technique (ASET) The ActEd Solutions with Exam Technique (ASET) contains ActEd’s solutions to the: • Subject CT1 papers from April 2005 to September 2007, ie six papers plus comment and explanation. In particular it will highlight how questions might have been analysed and interpreted so as to produce a good solution with a wide range of relevant points. This will be valuable in approaching questions in subsequent examinations. A “Mini-ASET” will also be available (from July 2008) covering the April 2008 Exam only. In addition, a discount is available if you have already purchased a full ASET in a previous year and wish to purchase this year’s full ASET in the same subject. Please email [email protected] for details. 3.5 CMP Upgrade The CMP Upgrade lists all significant changes to the Core Reading and ActEd material so that you can manually amend your 2007 study material to make it suitable for study for the 2008 exams. The Upgrade includes replacement pages and additional pages where appropriate. If a large proportion of the material has changed significantly, making it inappropriate to include all changes, the upgrade will still explain what has changed and if necessary recommend that students purchase a replacement CMP or Course Notes at a significantly reduced price. The CMP Upgrades can be downloaded free of charge from our website at www.ActEd.co.uk. 3.6 Revision Notes ActEd’s Revision Notes have been designed with input from students to help students revise efficiently. They are suitable for first-time sitters who have worked through the ActEd Course Notes or for retakers (who should find them much more useful and challenging than simply reading through the course again). The Revision Notes are a set of six A5 spiral-bound booklets – perfect for revising on the train or tube to work. Each booklet covers one main theme of the course and includes Core Reading (with a set of integrated short questions to develop your bookwork knowledge), relevant past exam questions (with concise solutions) since April 2000, detailed analysis of key past exam questions and other useful revision aids. © IFE: 2008 Examinations The Actuarial Education Company CT1: Study Guide Page 7 3.7 Flashcards Flashcards are a set of A6-sized cards that cover the key points of the subject that most students want to commit to memory. Each flashcard has questions on one side and the answers on the reverse. We recommend that you use the cards actively and test yourself as you go. Flashcards may be used to complement your other study and revision materials. They are not a substitute for question practice but they should help you learn the essential material required. 3.8 Marking You can have your attempts at Assignments or Mock Exams marked using Series Marking, Mock Exam marking or Marking Vouchers. These are described below. Marking is not included with the CMP and you need to order it separately. On every assignment or mock exam that you submit for marking, you must write your ActEd Student Number clearly in the box on the cover sheet. Your ActEd Student Number is printed on all personal correspondence from ActEd. This is not the same as your ARN (Actuarial Reference Number), which is used by the profession. By filling in your ActEd Student Number, you will help us to process and return your script more quickly. If you do not supply this information, your script may be delayed. When completing an assignment which you are having marked, please also remember the following guidelines: • Leave plenty of space for markers to write their comments – the less room you leave, the fewer helpful comments the marker will be able to add. • Photocopy your assignment before posting it to ActEd – we’ll be happy to mark your copy if your original script should get lost in the post. • Only use current versions of assignments. Do not submit any assignments from the 2007 exam session. We will return old versions of assignments unmarked. • Identify how much you completed in the recommended time – this will help the marker to advise you on your chances of passing the exam. Do not stop after the allotted allocation of time however. Use the marker to get feedback on all questions, even if the assignment takes you longer to complete than the time allocated. The Actuarial Education Company © IFE: 2008 Examinations Page 8 CT1: Study Guide • Grade and comment on your previous assignment marker (where applicable) – this helps us to improve the quality of future marking. Series Marking and Mock Exam marking You may buy marking for a specified series of assignments (eg Subject CT1 Series X) or Mock Exam Marking for a specified subject (eg Subject CT1). By submitting your scripts in line with our published recommended submission dates, you will make steady progress through the course. We also publish a set of final deadline dates – if you miss the final deadline date for an assignment or mock exam, your script will not be marked. Recommended submission dates and final deadline dates are set out on the summary pages at the end of this document. Once you have booked Series Marking or Mock Exam Marking, you will not be able to defer the marking to a future study period. If you order Series X Marking at the same time as you order the assignments, you can choose whether or not to receive a copy of the solutions in advance – see the back of the order form for details. If you choose not to receive the solutions in advance, we will send the assignment solutions to you when we mark your script (or following the deadline date if you don’t submit the assignment). Marking Vouchers If you would prefer not to be restricted to deadlines during the session, or a particular series of assignments in any one study session, you may buy Marking Vouchers instead. Each Marking Voucher gives the holder the right to submit an attempt at any assignment or mock exam for marking at any time, irrespective of the individual assignment deadlines, study session, subject or person. Marking Vouchers are valid for four years from the date of purchase. Expired Marking Vouchers cannot be refunded. Important information Although you may submit your script with a Marking Voucher at any time, you will need to adhere to the explicit Marking Voucher deadline dates to ensure that your script is returned before the date of the exam. The deadline dates are given on pages 31 and 31 of this study guide. If you live outside the UK you must ensure that your last script reaches the ActEd office earlier than this to allow the extra time needed to return your marked script. © IFE: 2008 Examinations The Actuarial Education Company