Revision

Question 1

David has been particularly attracted to investment because of their ability to benefit from gearing.
This indicates that David believes the market will: a) fall, b) favour income stocks, c) remain stable, d) rise

Answer 1

D) Rise

Question 2

Name four examples of intermediantion

Answer 2

Geographical Location
Aggregation
Risk Transformation
Maturity Transformation

GARM

Question 3

Name the seven types of Financial Services

Answer 3

Retail Banking
Mortgage Services
Credit Card Services
Wealth Management Services
Financial Asset Management
Investment Banking
Insurance Services

Question 4

The Bank of England issues notes
What are the four important properties in order for notes to be an acceptable medium of exchange

Answer 4

-Sufficient in quantity
-Generally acceptable to all parties in all transactions
-Divisible into small units so that transactions of all sizes can be precisely carried out
-Portable

Question 5

Money performs two important functions which are?

Answer 5

-it is a medium of exchange meaning people will accept it in exchange for goods and services and
-it is a unit of account, a common denominator against which the value of all products can be measured

Question 6

Describe a mutual organisation

Answer 6

-does not have shareholders
-owned by its members
-members manage company through general meetings
-members are its depositors and borrowers
-for a life assurance company they are the policyholders

Question 7

What is Inflation?

Answer 7

A sustained increase in the level of goods and services over time

Question 8

What is Disinflation?

Answer 8

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

Question 9

What is Deflation?

Answer 9

A general fall in the price of goods and services.
In other words the inflation rate is below 0% a negative inflation rate

Question 10

Name the four Macroeconomic Objectives

Answer 10

-Price stability
-Low unemployment
-Balance of payments equilibrium
-Satisfactory employment economic growth

Question 11

What is FISCAL POLICY?

Answer 11

This influences economic activity and consumption.
Via TAXATION adjustment to achieve gov macroeconomic objectives
👊🏼👊🏼👊🏼👊🏼👊🏼Fist

Question 12

What is Monetary Policy?

Answer 12

This involves controlling the money supply and credit growth to influence inflation rates, often by adjusting interest rates.

Question 13

Eu Regulation.
The differences between a regulation and a directive?

Answer 13

Regulation
Are binding in its entirety both to what is to be achieved and how it’s to be achieved. Are directly applicable to all member states (unless there are DISPENSATIONS)

Directive
Each member state has discretions as to how they go about implementing the direction. The directive must be achieved within a specific timescale usually TWO YEARS

Question 14

The five tiers of regulatory oversight I. The UK?

Answer 14

1st Eu Legislation that impacts UK financial services
2nd Parliament set out what can be done and what cannot be done
3rd Regulatory Bodies FCA & PRA
4th Financial institutions (Banks) these rules are then embodied in the culture of banks and B/Soc/Lenders etc
5th Arbitration Schemes.
This external body that deals solely with customer complaints like the financial ombardsman service

Question 15

Income tax bands?

Answer 15

Up to £12570 Personal allowance
£12571 to £50270 20% Basic Rate
£50271 to £125140 40% Higher Rate
£125140+ 45%

Question 16

Blind Persons Tax Allowance?

Answer 16

£2870

Question 17

What is the order in which tax is applied?

Answer 17

1) Non Savings Income eg earned income, self emp net profits, pension income, rent received.
2) Savings interest received
3) Dividends
4) CHARGABLE Capital Gains on non qualifying life assurance policies are brought into the calculation

Question 18

What is the CAPITAL GAINS ALLOWANCE

Answer 18

£6000 Annual Exempt Amount

Question 19

Assets exempt from CGT?

Answer 19

-Main private residence
-Property as a result of death
-Ordinary private motor vehicles
-Personal belongings eg jewellery, antiques values at £6000 or less
-Items of National scientific importance
-Foreign currency for personal expenditure
-Gilts and qualifying corporate bonds
-NS&I Products
-Winnings from Premium Bonds/Lottery
-ISA’s
-Gains on life assurance policies disposed of by original owners

Question 20

When can Roll over capital gains tax relief be claimed?

Answer 20

May be claimed if assets disposed of are replaced by other business assets
Eg sell a tractor and then buy another.
The replacement asset must be bought within a period of one year before and three years after the sale if the original asset

Question 21

Stamp Duty Land Tax Tiers?

Answer 21

Up to £125,000 0%
£125,001 to £250,000 2%
£250,001 to £925,000 5%
£925,001 to £1.5m 10%
Over £1m 12%

Question 22

Businesses and Self Employed should register for VAT if your VAT taxable turnover for the last 12 months was over?

Answer 22

£90,000

Question 23

What are the four main asset classes?

Answer 23

-Property
-Cash
-Fixed Interest Securities
-Equities

Question 24

Debt Management Office Short Dated Gilts are?

Answer 24

Less than 7 years until redemption

Medium Dated gilts 7-15 years

Question 25

What is the ‘coupon’ when talking about Gilts

Answer 25

The coupon is the interest rate paid on the gilts value. It is fixed and paid 6 monthly. The amount of interest is agreed at the start. Gilt interest in normally paid gross but investors can request a net payment

Question 26

Daisy has recently purchased both gilt edged securities and a corporate bond. In which way will they primarily differ? A) the availability of a fixed repayment date B) the degree of capital risk for each of the investments C)The frequency of interest payments D) The variable levels of interest paid

Answer 26

B) The degree of capital risk for each of the investments Gilts are government backed and therefore highly secure. Corporate bonds involve a loan to a company and therefore hold a higher degree of risk

Question 27

Permanent Interest Bearing Shares (PIBS) are issued by? A) Banks B) B/Soc C) PLCS D) Local Authorities

Answer 27

B) Building Societies

Question 28

A key difference between a debenture and a loan stock issued by a company is that a debenture; A)can be converted into ordinary shares in a company B)holder has the right to vote at the company’s annual meeting C)is secured in the assets of the company D)pays a fixed rate of interest

Answer 28

C) debentures are secured on a company asset, whereas loan stocks are unsecured.

Question 29

A local authority bond is issued by local councils and governments to borrow money. They are a form of A) unsecured lending B) secured lending

Answer 29

B) local authority bonds are secured on local authority assets