Learning outcome 1

Question 1

1. How does the UK financial market operate in respect of both investments and loans?

A. All short-term investments are used to create short-term loans.
B. Financial intermediaries help transform short-term savings to long-term loans.
C. Long-term risk is transformed to short-term risk via financial intermediation.
D. Small investments are grouped together to facilitate larger loans via financial disintermediation.

Answer 1

B

Question 2

2. How do the financial markets across the various EU Member States operate?

A. As a single market governed by European Parliament.
B. As independent markets regulated by bodies in each Member State where capital may flow in and out without restriction.
C. As independent markets regulated by the European Central Bank where capital may flow in and out without restriction.
D. As independent markets regulated by bodies in each Member State where capital flow is restricted by limits set centrally.

Answer 2

B

Question 3

3. Within the UK economy, an example of disintermediation would be the

A. arrangement of a life assurance policy through an independent adviser.
B. arrangement of a personal loan with a bank.
C. purchase of securities from a stockbroker.
D. purchase of UK gilts from the Debt Management Office.

Answer 3

D

Question 4

4. A UK life assurance company is establishing a separate offshore company in the Isle of Man. In respect of the relevant EU Directives, the UK company should be aware that

A. all EU Directives that apply to the UK company will automatically apply to the company in the Isle of Man.
B. EU Directives will not apply in respect of the company in the Isle of Man.
C. the UK company’s registration by the Financial Conduct Authority will be automatically passported to the Isle of Man.
D. the Isle of Man regulators must apply all EU Directives to non UK-based companies only.

Answer 4

B

Question 5

5. How do EU Directives affect UK financial services companies, if at all?

A. Directives are binding on companies immediately and must be implemented as prescribed in the Directive.
B. Directives are binding on all companies and the methods of implementation will be prescribed by the Government.
C. Directives do not affect UK financial services companies.
D. Directives may be considered by the Government and implemented only if it is considered appropriate to do so.

Answer 5

B

Question 6

6. With respect to UK short-dated gilts, index-linked gilts and National Savings & Investments products, a financial adviser should be aware that they

A. are always tax free for the investor.
B. are all issued by the Debt Management Office.
C. are all used by the Government to raise funds.
D. cannot be purchased by corporate investors.

Answer 6

C

Question 7

7. When the Bank of England announces it will undertake quantitative easing, a financial adviser should consider that typically

A. interest rates will fall as a result.
B. a new tranche of gilts will be issued.
C. the Debt Management Office will offer to buy back a limited number of gilts.
D. the Bank of England will purchase an amount of gilts that are in circulation.

Answer 7

D

Question 8

8. The tripartite regulators of UK financial firms, when considering issues relating to financial stability,
   will report to

A. the European Systemic Risk Board.
B. the European Central Bank.
C. the Financial Action Task Force.
D. the Basel Committee on banking supervision.

Answer 8

A