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Guide to ACST2055:
Contingent Payments 

By Vanessa Ngo

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​What is ACST2055?

This Contingent Payments unit builds on concepts from ACST2002 (Mathematics of Finance), and together they form part of the CM1 subject: Actuarial Mathematics for Modelling under the Actuaries Institute. It further explores different types of annuity and assurance products, core to the life insurance industry. Specifically, you will learn to calculate the expected present value and variance of these products using the probability models and life tables. Other key concepts include pricing and reserving for future contingent liabilities and calculating prospective and retrospective net premium reserves.


What is the most challenging part of the unit?​

The most challenging part of this unit is understanding the formulas and how they relate to each other. It’s a technical, formula-heavy unit, so success comes from grasping each formula logically and intuitively rather than relying on rote memorisation, although memorising them for the exam is still essential for working efficiently under time pressure.

 

You may also find timelines overwhelming, especially when questions involve multiple products and payment terms. I strongly recommend drawing a quick timeline before starting your solution, noting down all components of the question to better visualise the cashflows.

 

Finally, this unit requires consistent practice rather than last-minute cramming. If you keep up with tutorial questions each week and ensure you fully understand them, you’ll set yourself up for great results. 

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General Study Tips/Techniques for Content

  • Get familiar with the formula sheet early

    • The exam formula sheet is long and can be hard to navigate. Print it out early and use the same physical copy when working through tutorials and past papers. Over time, you’ll remember where key formulas are, which will save precious time in the exam.

  • Build your own formula sheet

    • Throughout the semester, compile a comprehensive list of formulas from lectures, tutorials, and past papers, including relationships revisited from previous units. When revising, cross out the formulas already provided on the exam sheet and focus on memorising the rest.

  • Understand relationships between formulas

    • Some concepts have multiple formulas associated with them. Make sure you know all of them, understand how these formulas are derived and when each one applies, as different forms may be more efficient depending on the problem.

  • Visualise timelines consistently

    • Because payment timing is critical, practice sketching timelines regularly. Being able to visualise cash flows will prevent confusion when dealing with products across different periods.

  • Complete tutorials and attend classes

    • While this applies to all units, it’s especially important for this one that you attempt your tutorials before class and attend tutorials consistently. Many of the question types covered in tutorials are very similar to those that appear in exams. Being present in class helps you understand how to approach and solve these problems, which is often much clearer than simply reading through the provided solutions.

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Final Exam study 

  • Do as many questions as possible
    Start with one past paper to familiarise yourself with the style and structure of exam questions. Then, revisit tutorial problems and lecture exercises, focusing on those that mirror the exam format. Pay extra attention to areas where you struggled during your practice test. Finally, aim to work through all provided past papers, ideally under timed conditions to simulate the real exam. Since the unit convenor can only make the exam challenging in so many ways, one strategy they can use is keeping the test time-pressured and difficult to finish, so practising under time constraints is key.

  • Track and review your mistakes
    When you get a question wrong, note it down and redo it a few days later to strengthen your understanding.

  • Start memorising formulas early
    While understanding formulas is essential, speed matters in the exam. I found it helpful to memorise formulas at night and then test myself with active recall the next morning, marking any I got wrong to focus on later.

  • Read questions carefully
    Exam questions are information-heavy and easy to misinterpret. Highlight keywords like “arrears/advance,” “deferred,” “interest rate,” “immediate vs end-of-period payments” and the term and interest rate. Missing these details often leads to errors.

  • Practice efficient exam techniques
    Always begin with a timeline to organise your approach. Map out the key details from the question, then list the relevant formulas and relationships you might need before starting your calculations.

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ACST2055 is a technical but rewarding unit. If you approach it with consistent practice, a solid understanding of formulas, and strong exam techniques, you’ll be well-prepared. Focus on building intuition, practising regularly, training yourself to navigate the formula sheet quickly and you’ll do very well!

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