# CT1 Financial Mathematics: An Introductory Brief

*Are you wondering how and from where to start your Actuarial profession? *I am very sure those who are *planning to take up Actuarial Science* must have heard about CT1. CT1 is generally the first exam that you will *prepare for your Actuarial Science examinations*. This is one of the most important Core Technical subjects. This subject should be studied with at most perfection because this will open gates for you to the world of finance. CT-1 tells you how mathematics is applied in finance. You might be having a lot of questions in your mind regarding CT1.

**Here is a list of some common questions that you have in your mind regarding the paper CT1**

**Q. What is the aim of studying CT-1?
** The aim of the

__financial mathematics subject__is to provide a basic understanding of mathematical application in finance. It gives you a lot of insights regarding various mathematical concepts required in the field of finance. It will teach you how mathematical techniques are used to model various financial instruments, compare and analyze different projects and make decisions regarding the suitability of the project to the organization.

**The concepts covered are as follows:**

**Interest rates**– You learn about simple and compound interest rates; which interest rate is to be applied in the long term and in the short term. You study discounting as well under this category. You will get an exposure to the nominal and effective rate of interest and their relationship with each other.**Cash flows**– Finding the present value (what is the current value of a future cash flow) and accumulated/future value( what is the future value of the money currently invested that will be accumulated using interest rates). You will deal with single cashflows as well as many complex cash flows. You start with single cashflows and fixed time periods and gradually you will deal with varying amounts and time periods.- Understanding
**real and money rates of interest**and their impact on the prices of investment projects. **Loan structures**– how loans are structured using various techniques**Investment Project Appraisal**in which we determine the feasibility of a project. You go through concepts of NPV, IRR which help you analyze a project. Calculate MWRR, TWRR and the linked internal rate of return on an investment or fund.**Annuities**– annuities are payments made at regular intervals of time. This is a very interesting part of CT-1. You will study various types of annuities and calculate their values using actuarial symbols and the actuarial tables. The knowledge of this section is required for the subject CT-5.**Investment products and assets**– shares, derivatives, bonds etc. and how to price them. You will also study arbitrage, forwards contracts, futures contracts, etc.**Term structure of interest rates**- I
**mmunisation**– Here we do immunization of a portfolio of liabilities. We create portfolios immunized to small changes in interest rates.

**Q. What are the pre-requisites to write the paper of CT-1?
** The most important thing required for CT-1 is you should be very good at mathematics. The basic mathematics required in CT-1 are

__Algebra and Calculus__. You should be well-versed with these two. It will be a plus if you have knowledge in basic statistical concepts like random variables, measures of central tendency, etc. So if you have these pre-requisites you can go ahead with CT1.

**Q. Are there any changes in a CT-1 subject in the 2019 curriculum?
** This is the biggest confusion you might be facing now-

__the new curriculum__. There will be a new module in the Actuarial papers from the year 2019 known as Core Modelling (CM). This is the Actuarial Mathematics module. So according to the new curriculum,

__CT-1 and__and this paper is known as

*CT-5*will be combined__CM-1__. One will be a 3 hours 15 minutes written examination, and the other will be 1 hour 45 minutes of practical examination using MS Excel.

You need to clear or get an exemption from both CT-1 and CT-5 in order to be considered eligible for a pass in CM-1 in the new curriculum.

**Q. Can I attempt the paper without taking membership?
** Until the April 2018 exams, non-members were able to apply for CT1 under

*IFoA*. If you are appearing from

*IAI*you need to be a member. To become a member of IAI you must clear ACET.

__For the September 2018 exams, non-members will only be able to apply for CT3__because of the change in curriculum.

So if you plan to appear for CT1 then you need to take membership. Also, you will have to write CT-5 in this attempt because CT1 and CT5 are merging under the new curriculum and passes in both will be required to gain the CM1 exam in 2019.

**Q. How much time is required to prepare for the paper?
** The ideal time required to prepare for CT1 is

__150-200 hours__, as suggested by the institute. As per my experience you need to, start preparing from at least four months prior from the exam. But it is always advisable to start before that because a lot of practice is required to clear the exams.

**Q. What is the passing mark?
** The passing marks

__vary from 50 to 60__. But in order to get these marks, the student should aim for 100% and study the paper with precision

**Q. Which topics should be focused on for scoring good marks?
** The major part of the exam comprises the last chapters. But in order to understand those heavyweight chapters, you need to have a clear understanding of the first seven chapters. Also, you need to study the middle most chapter of loan schedules because important questions from this chapter are also asked although not for very high marks. So I would suggest you to initially practice the beginning chapters thoroughly to form a base and then study as per your method and easy to learn. Although, different chapters have different weight try not to omit anything. There were times in which only small mark questions came from huge chapters. So you never know what questions may come in the exam. Study every chapter!

**Q. Is it necessary to take coaching for the subject?
** I would suggest you take coaching because the tutors will provide you with the ways and tricks to clear the exam. They would teach you many things that you cannot study alone. Also, they teach in a particular order that you should follow. In my opinion, without coaching, you may find it difficult to grasp the concepts of CT-1 explicitly and the burden to grasp everything by yourself will not be there. Also, your time will be saved. But it is completely up to the student to decide on whether to take coaching or not.

**Q. Is more focus required in the theory part or application part?
** From the exam perspective yo,u need to focus on the application part because exam questions will be based on that and theory part forms a very small percentage of the exam.

But I always suggest you to learn theory and practical part together. Understand the concepts and try to learn and research about its real life application because in the interviews they test your real world knowledge.

**Q. Is it necessary to attempt the exam question in the order?
**

__No__, you can attempt the questions in any order. The time is very limited. Hence, always do some mock papers to practice time management. During the exam, they give you 15 minutes of reading time at the start. So utilize that time and plan your exam accordingly.

**Q. Any study tips?**

- Practice every question by writing. Do not just read and think you got it clear. Even you should write and practice the theoretical part so that there is no chance that you forget any point in the exam. So adequate practice is required.
- Read the study material along with the notes and practice a lot of questions from revision notes and question bank after completion of each section. Revision notes are past ten years IFoA question papers with detailed solutions divided into small booklets, sorted chapter-wise. Although the past papers are of IFoA, you can use them for preparations as well, even if you are appearing from IAI. You will find the same pattern of questions as in the revision notes at the exam. Make a small note for quick revision including the main points from a chapter and you can just get through it once you have studied everything.
- Also, do X-series and mock papers. Practice mock papers under strict exam conditions.

**Last but not the least study everything and practice a lot. Make sure you understand the concept and never do rote learning. Actuarial Science is one of the toughest courses in the world. So there is no shortcut. Hard work and practice will pave a way to successful results. All the best!**

If you have already cleared CT1 and need a quick review, *click here*.