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21 Cards in this Set
- Front
- Back
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What are the four main reasons why individuals and companies need financial intermediation?
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Geographic location – lenders and borrowers are not necessarily able to find each other and deal directly with each other.
Aggregation – an individual lender might not have enough funds to fulfil a borrower’s requirements. Maturity transformation – the borrower might need funds for longer than the lender is prepared to lend. Risk transformation – the lender might be reluctant to lend all their funds to one borrower, in case that borrower is unable to repay. |
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What is the key difference between a mutual organisation and a proprietary organisation?
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A mutual organisation is owned by its members – in the case of a building society, these are savers and borrowers; for a life assurance company they are the with-profits policyholders. A proprietary organisation is owned by its shareholders and is a limited company.
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Which institution issues UK banknotes? (a) The Bank of England. (b) The Treasury. (c) The Royal Mint. |
(a) The Bank of England. The Royal Mint issues coins.
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What is the effect of European Union Directives on UK law?
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The objectives of the Directive must be implemented in each state, including the UK, within a specified timescale, typically two years. The choice of exactly how they are implemented is left to national authorities in each state.
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Karen was born in the United States while her mother, Laura (born and bred in England), was working there on a two-year assignment. Her father was American but he and Laura never married, and she returned to England with Karen. What is Karen’s domicile?
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Her domicile of origin is the domicile of her mother at the date of her birth (not the domicile of the father, since they were not married). This is probably UK domicile, although we don’t know for certain without knowing more about Laura’s parents.
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Which of the following is not subject to income tax? (a) Income from a trust.(b) A waiter’s tips.(c) Educational scholarships. |
(c) Educational scholarships.
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What classes of National Insurance contributions are paid by selfemployed persons?
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Subject to specified minimum profits levels, Class 2 and Class 4.
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What rate of inheritance tax is payable immediately on chargeable lifetime transfers?
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20 per cent.
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How much stamp duty land tax is payable by a woman who sells her house for £395,000?
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None. Stamp duty land tax (like all forms of stamp duty) is paid by the purchaser.
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It is possible to influence a nation’s level of economic activity by manipulating the amount of tax revenue and the amount of spending by the government, local authorities and public bodies. What is the name for this kind of economic policy?
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Fiscal policy.
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What is the maximum term for which Maternity Allowance can be paid?
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39 weeks.
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What is the minimum period per week that must be spent as a carer before Carer’s Allowance can be claimed?(a) 25 hours.(b) 30 hours.(c) 35 hours.
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35 hours.
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Money is: |
a unit of account – a common denominator against whichthe value of goods and services can be measured. This is the function that allows theprice of one item to be compared with the price of another. |
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How can a bank involved in wholesale banking raise moneyquickly in order to nance business activities? |
From the interbank market. The Bank ofEngland only lends to the banks in its capacity as lender of last resort,eg when there is a run on its deposits. It does not lend to nancenormal business activity. |
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Disintermediation. |
A financial transaction that is carried out directly between an organisation with surplus funds to lend and one that needs to borrow |
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Which one of the following is not a role of the Bank ofEngland? a) To regulate the supply of money and manage goldreserves. b) To act as nancial ombudsman in resolving customercomplaints about banks. c) To act as adviser to the government. d) To set interest rates. |
To act as financial ombudsman in resolving customer complaints about banks. |
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Credit unions cannot pay interest on savings. True or false? |
False. Credit unions can pay interest on savings as long as they have the necessary systems and controls in place and have at least £50,000 or 5 per cent of total assets (whichever is greater) in reserve. |
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Freshfood Ltd supplies fruit and vegetables to market traders and small shops. The banking transactions it carries out are an example of: a) wholesale banking. b) retail banking. |
Retail banking. Wholesale banking involves providing funds to other financial institutions or very large corporate clients. |
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The setting of Libor is a regulated activity. True or false? |
True. The rate of interest charged in the interbank market is the London interbanko ered rate (Libor). It acts as a reference rate for the majority of corporatelending, for which the rate is quoted as Libor plus a speci ed margin. Liborrates are xed daily and vary in maturity from overnight through to one year. |
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Jack opens an account so that his wages can be paid intoit. He can use his account to pay bills such as utilities andrent via direct debit, and he can use his debit card to makepurchases online and in shops, but he cannot have anoverdraft. What kind of account does Jack have? a) A packaged account. b) An interbank account. c) A basic bank account. d) A debit account. |
c) A basic bank account. Owing to a change in the topicstructure at a late stage of theproduction process, Q9 cannot beanswered from the content of Topic1. It can be answered from thecontent of Topic 6. |
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The process by which banks and building societies settle transfers of money between themselves as a result ofcustomers making and receiving payments is called what? |
Clearing |
