Features of Financial Institutions

Question 1

What are the 5 types of for-profit financial institutions?
1.
2.
3.
4.
5.

Answer 1

1. Banks.
2. Insurance companies.
3. Pension companies.
4. Pawnbrokers.
5. Payday loans.

Question 2

What are the 3 types of non-profit financial institutions?
1.
2.
3.

Answer 2

1. Building societies.
2. Credit unions.
3. National savings.

Question 3

What is the financial institution that is not for-profit or non-profit, but exists to only distribute legal tender and maintain interest rates?

Answer 3

The Bank of England.

Question 4

Banks are for ________________.

Building societies and credit unions are for ________________.

Answer 4

customers

members

Question 5

Give 2 advantages of banks:
1.
2.

Answer 5

1. Range of services and account types.
2. A secure place to store money.

Question 6

What is a major advantage of banks, building societies, and credit unions?

Answer 6

They offer a wide range of services and account types.

Question 7

What is a major disadvantage of banks, building societies, and credit unions?

Answer 7

Only savings of up to £85,000 are fully protected.

Question 8

True or false: Building societies function like a bank but serves members instead of customers.

Answer 8

True.

Question 9

What is the main disadvantage of building societies and credit unions specifically?

Answer 9

They may lack business drive.

Question 10

What is the National Savings & Investment (NSI)?
A ______________________ organisation that offers _____________________________.

Answer 10

government-backed
premium bonds and gilts

Question 11

Give 2 advantages of NSI:
1.
2.

Answer 11

1. It is government backed, so it is secure.
2. It offers additional premium bonds.

Question 12

Give 2 disadvantages of NSI:
1.
2.

Answer 12

1. Rates are variable.
2. Requires a notice before withdrawal.

Question 13

Insurance companies are organisations that protect you against unexpected losses or expenses in return for a premium.

What is a premium?

Answer 13

The amount paid for an insurance policy.

Question 14

What are 2 advantages of insurance companies:
1.
2.

Answer 14

1. Wide range of covers.
2. The regular monthly payments make budgeting easy.

Question 15

What are 2 disadvantages of insurance companies:
1.
2.

Answer 15

1. Premiums are given based on likelihood of risk, which may discriminate against people groups.
2. Premiums are charged at an amount to make profit for shareholders.

Question 16

What is an advantage of pension companies?

Answer 16

Payments are taken directly and regularly from pay, which makes budgeting easy.

Question 17

What are 2 disadvantages of pension companies:
1.
2.

Answer 17

1. Money invested cannot be given before the agreed policy date.
2. If the pension company invests poorly, you may have disappointing returns.

Question 18

What are 2 advantages of pawnbrokers:
1.
2.

Answer 18

1. Quick.
2. No interest charged.

Question 19

A pawnbroker is an individual or business that __________________ in exchange for an ___________.

Answer 19

lends money
asset

Question 20

What are 2 disadvantages of pawnbrokers:
1.
2.

Answer 20

1. The money given for an asset is often much lower than its actual worth.
2. If the money is not repaid in the given period, the asset is sold off.