All definitions

Question 1

INFLATION:

Answer 1

A sustained increase in the general level of prices of goods and services

Question 2

LIQUIDITY:

Answer 2

Assets (eg cash ) that can be quickly made available to meet an institution’s liabilities without affecting the market price of those assets. (The ease with wh an asset can be converted to cash)

Question 3

INTERBANK MARKET:

Answer 3

A very large market which recycles excess cash held by banks, either directly between banks or more usually through specialist brokers

Question 4

RECESSION:

Answer 4

A significant decline in economic activity over a sustained period - technically over two consecutive quarters of -ve economic gr as measured by a country’s GDP

Question 5

GROSS DOMESTIC PRODUCT:

Answer 5

GDP is a measure of a country’s overall economic activity (Technically it is the value of all the goods and services produced within the country within a given period eg a year)

Question 6

MONETARY POLICY:

Answer 6

Measures taken to control the supply of money in the economy to manage inflation.

Question 7

FISCAL POLICY:

Answer 7

The adjustment of levels of taxation and public spending in a a way that is intended to achieve the government’s economic objectives.

Question 8

DISINFLATION:

Answer 8

A fall in the rate of inflation i e the prices are still rising but less quickly than they were.

Question 9

DEFLATION:

Answer 9

A general fall in the price of goods and services. In other words the inflation rate is below zero per cent - a negative inflation rate

Question 10

SECURITIES:

Answer 10

Financial assets that can be traded.
They can represent 1) ownership (equities)
2) debt (gilts and corporate bonds)

Question 11

DIVIDEND:

Answer 11

A company’s profits distributed to shareholders -
the level of dividend dep on profitability of company plus the strategic decisions such as reinvestment of profits for expansion of business

Question 12

NET ASSET VALUE:

Answer 12

Total value of investment fund divided by the number of shares issued

Question 13

GEARING:

Answer 13

The level of debt as a percentage of a company’s equity. (It measures the extent to which a company’s operations are funded by borrowing rather then by shareholder capital)

Question 14

ANNUITY:

Answer 14

A financial product purchased with a lump sum, which then pays out a regular income, potentially for the lifetime of the annuity holder.

Question 15

DEFERRED PERIOD

Answer 15

The period that must elapse between the onset of the illness/injury that gives rise to the claim and the first payment of benefits.

Question 16

PERSONAL PENSION:

Answer 16

A pension product arranged on an indi basis (i e rather than a pension scheme run by an employer). The ben eventually recd dep on the performance of the funds into which the indi’s contributions are invested.

Question 17

STAKEHOLDER PENSION:

Answer 17

A simple, low-cost pension product that meets govt std pn charges and levels of contribution

Question 18

LOAN TO VALUE:

Answer 18

The amount of the loan in reln to the value of the asset used for security, expressed as a percentage.

Question 19

REALTY:

Answer 19

Property is deemed real if a court will restore it to the dispossessed owner and not merely provide compensation for loss. Tends to be immoveable eg land and what is attached to it…in other words real estate

Question 20

PERSONALTY:

Answer 20

All other property that is not real

Question 21

LEGAL PERSON:

Answer 21

Is a body that has a legal existence and can therefore into into legal contracts, can sue and be sued in a court of law. eg an indiv, a company etc

Question 22

REGULATION:

Answer 22

Body of rules created by various regulatory bodies, to which the financial services industry must adhere.

Question 23

SUPERVISION:

Answer 23

The range of acti undertaken by regulators to ensure that participants adhere to regulatory requirements

Question 24

CAPITAL ADEQUACY:

Answer 24

Ensuring that a business holds sufficient reserves of capital to ensure it is sustainable

Question 25

SOLVENCY:

Answer 25

The extent to wh a busi’s assets exceed its liabilities
E.g. For mortg lenders, assets are loans made to consumers and liabilities are funds borrowed to facilitate the loans - from deposits or money markets

Question 26

SOLVENCY RATIO:

Answer 26

Capital as a percentage of risk-adjusted value of assets

Question 27

‘EXECUTION-ONLY’ BUSINESS

Answer 27

A transaction executed upon a client’s specific instruction, where the firm gives no advice and rules on assessing appropriateness do not apply.