B1

Question 1

What is the Bank of England?

Answer 1

This is the UK’s central bank with the responsibility for maintaining financial stability for the uk as a whole.

Question 2

What are the Bank of England advantages?

Answer 2

• It is responsible for protecting the financial stability for the economy as a whole.
• It lends money to banks
• It sets interest rates to control the flow of money in the economy,

Question 3

What are the Bank of Englands disadvantages?

Answer 3

• It is not a bank that the general
  public can use.
• As it controls interest rates it can
  make loans expensive.

Question 4

What are banks?

Answer 4

A bank is a financial institution that handles different financial transactions and stores money on behalf of its customers.

Question 5

What are the advantages of a bank?

Answer 5

• It provides a secure place for individuals to store their money
• It pays interest out on credit balances. For most types of accounts

Question 6

What are the disadvantages of a bank?

Answer 6

• They only guarantee savings up to £75000 so if a bank goes bankrupt any savings above £75000 would be lost.

Question 7

What is a building society?

Answer 7

Building societies are financial institutions that handle financial transactions and store money on behalf of their members.

Question 8

What are the advantages of a building society?

Answer 8

• It pays interest out on credit balances. For most types of account.
• It provides a secure place for individuals to store their money.

Question 9

What are the disadvantages of a building society?

Answer 9

- They only guarantee savings up to
£75000 so if a building society goes
bankrupt any savings above €75000
would be lost.
- Building societies are not as business orientated as commercial banks.

Question 10

What is a credit union?

Answer 10

There are not-for-profit organisations that handle financial transactions’ and store money on behalf of their members.
Credit unions are usually set up to support a community made up of its members.
Members are owners and have voting rights as how the union is run.

Question 11

What are the advantages of a credit uni on?

Answer 11

• It pays interest out on credit balances. For most types of account.
• It provides a secure place for individuals to store their money.
• They often exist to help local communities get access to banking facilities.

Question 12

What are the disadvantages of a credit union?

Answer 12

- They only guarantee savings up to
£75000 so if a building society goes
bankrupt any savings above £75000
would be lost.
- Credit unions are not as business
orientated as commercial banks.

Question 13

What are national savings and investments?

Answer 13

• This is a government backed organisation that offers a secure saving option.
• It offers a range of services including ISAs, premium bonds, gilts and bonds.

Question 14

What are the advantages of national savings and investments?

Answer 14

• These are backed by the governemt and therefore you savings are secure
• They offer alternative methods of saving e.g. premium bonds.

Question 15

What are the disadvantages of national savings and investments?

Answer 15

• The rates of interest are variable,
• Its not easy to get access to your
  savings because there is not high
  street building
• You might be required to give notice

Question 16

What are insurance companies?

Answer 16

• These are companies that protect against the risk of losing something in return for a premium.
• They exist to make a profit.

Question 17

What are the advantages of insurance companies?

Answer 17

• They protect you from unexpected financial losses or expenses.
• Payments are by monthly instalments and therefore financial planning is made easier
• There are a wide range of services available

Question 18

What are the disadvantages of insurance companies?

Answer 18

Premiums are based of the assessed
risk by the company and may
disadvantage certain groups of people
e.g. travel insurance and older people

Question 19

What are pension companies?

Answer 19

These are businesses that sell policies to individuals to allow them to save now to fund their retirement.

Question 20

What are the advantages of pension companies?

Answer 20

• They provide people with a way as saving for their retirement
• Pension deductions can be taken directly out of pay and employers may match the contribution fully or partially.

Question 21

What are the disadvantages of pension companies?

Answer 21

• If the investment doesn’t work out as intended then the return expected
  in retirement might not be met.
• You can’t get access to the money
  until the agreed date in the policy.

Question 22

What are pawn brokers?

Answer 22

• There are companies that loan money against personal assets e.g. jewellery etc.
• If the item is not brought back off the pawn broker within a specific time it will then be sold on.

Question 23

What are the advantages of pawn brokers?

Answer 23

• This is a quick way of getting hold of cash.
• The asset given as security can be bought back within a set time period.
• Interest is not charged on the money

Question 24

What are the disadvantages of pawn brokers?

Answer 24

- The amount of money the pawn
broker will give against the asset
will be lower than the value of the
asset.
- If the money is not repaid within
the set time period the asset will be
sold by the pawn broker.

Question 25

What are payday loans?

Answer 25

• These are organisations that loan small amounts of money out for short periods of time.
• Interest rates are very high
• They may be suitable in an emergency to bridge a shortfall in cash between pay days.

Question 26

What are the advantages of payday loans?

Answer 26

• This is a quick way of acquiring emergency cash
• Payday loans are relatively easy to get
  hold of.

Question 27

What are the disadvantages of a payday loan?

Answer 27

• The interest charged is extremely high

- If you don’t pay the money back within the set time period the loan can spiral out of control.