I've been asked my thoughts on this question and another from this past exam, which was posted today. Here are my thoughts on this one.
I agree with many of the comments I have seen on this board. It sure seems like the SOA accidentally included their answer in the question. However, I would expect their grading outline to have more details ("show your work" calculations) than what you see there, so I don't think that is their whole answer. But I just finished doing the calculations and I matched within rounding every number they showed. Those are definitely the values they should expect you to show when they ask you to "calculate the embedded value ... as of 12/31/2013."
Note that this question comes very directly from study note GHS-112-14, and their answer is laid out just as that study note does it. Also, for those who were at the MATE Specialty Seminar, see question #28 from the seminar.
One part that is confusing to me because of its ambiguity is where they say to calculate the embedded value "as of 12/31/2013" "for 3 years." Those two phrases I put in quotes contradict each other. So I (and many of you from what I have read) am left wondering what exactly they meant by that. Perhaps they wanted you to calculate embedded values as of the end of each year. But if that is what they wanted, then they really need to state it better. There should not be any ambiguity in a request like that. People can't afford to waste time on these time-crunch exams doing extra work that they think might (but might not) be what the SOA is wanting.
Unfortunately, I have no faith in the SOA admitting their mistake here and throwing out this question. I have seen too many times in my decade plus of teaching seminars where a problem had an error in it and the SOA did their best to talk their way out of it. Plus, throwing the question out isn't a perfect solution either because that gives equal credit to those who punted the question and those who spent an inordinate amount of time on it. The only truly satisfactory resolution to a faulty question is to not have a faulty question in the first place.
I agree with many of the comments I have seen on this board. It sure seems like the SOA accidentally included their answer in the question. However, I would expect their grading outline to have more details ("show your work" calculations) than what you see there, so I don't think that is their whole answer. But I just finished doing the calculations and I matched within rounding every number they showed. Those are definitely the values they should expect you to show when they ask you to "calculate the embedded value ... as of 12/31/2013."
Note that this question comes very directly from study note GHS-112-14, and their answer is laid out just as that study note does it. Also, for those who were at the MATE Specialty Seminar, see question #28 from the seminar.
One part that is confusing to me because of its ambiguity is where they say to calculate the embedded value "as of 12/31/2013" "for 3 years." Those two phrases I put in quotes contradict each other. So I (and many of you from what I have read) am left wondering what exactly they meant by that. Perhaps they wanted you to calculate embedded values as of the end of each year. But if that is what they wanted, then they really need to state it better. There should not be any ambiguity in a request like that. People can't afford to waste time on these time-crunch exams doing extra work that they think might (but might not) be what the SOA is wanting.
Unfortunately, I have no faith in the SOA admitting their mistake here and throwing out this question. I have seen too many times in my decade plus of teaching seminars where a problem had an error in it and the SOA did their best to talk their way out of it. Plus, throwing the question out isn't a perfect solution either because that gives equal credit to those who punted the question and those who spent an inordinate amount of time on it. The only truly satisfactory resolution to a faulty question is to not have a faulty question in the first place.
Fall 2014 exam #3a
