Topic 1 Flashcards
Introducing the Financial Services Industry
The benchmark for financial businesses and institutions to calculate the interest paid on swap transactions and sterling floating rate notes is the:
a) Monetary Policy Committee rate.
b) London interbank offered rate.
c) sterling overnight index average.
d) Bank of England base rate.
c) sterling overnight index average.
Where lenders and borrowers interact directly, it is known as:
a) intermediation placement.
b) disintermediation.
c) indirect intermediation.
d) intermediation.
b) disintermediation.
In order to be acceptable as a medium of exchange, money must have certain properties. Which of the following is not one of the properties?
a) Available in high value denominations.
b) Divisible into smaller units.
c) Portability.
d) Sufficient quantity.
a) Available in high value denominations.
Which of the following is not one of the four elements of intermediation?
a) Maturity transformation.
b) Risk transformation.
c) Aggregation.
d) Equalisation.
d) Equalisation.
The Workers Credit Union has reserves of £60,000, which equals 6% of its assets. This means it:
a) can only pay dividends to savers.
b) cannot pay dividends or interest to savers.
c) can pay dividends or interest to savers.
d) can only pay interest to savers
c) can pay dividends or interest to savers.
Which organisation is responsible for managing new issues of UK gilts?
a) The London Stock Exchange.
b) The Debt Management Office.
c) The UK government.
d) The Bank of England.
b) The Debt Management Office.
Which of the following is not a function of the Bank of England?
a) Maintaining economic stability.
b) Issuing bank notes.
c) Prudential regulation.
d) Banker to the UK government.
c) Prudential regulation.
Which one of the following would not be an example of a mutual organisation?
a) Eastern Bank.
b) Savers Credit Union.
c) Bolton Building Society.
d) Foresters Friendly Society.
a) Eastern Bank.
Finance houses raise most of their funds through:
a) retail markets.
b) wholesale markets.
c) customer deposits.
d) private equity markets.
b) wholesale markets.
What is the maximum borrowing a building society can raise on the wholesale market?
a) 25% of their assets.
b) 50% of their liabilities.
c) 60% of their liabilities.
d) 75% of their assets.
b) 50% of their liabilities.
How can a bank involved in wholesale banking raise money quickly
in order to finance business activities?
a) By a further issue of shares.
b) By borrowing from the Bank of England.
c) By calling in their debts.
d) From the interbank market.
d) From the interbank market.
A financial transaction that is carried out directly between an organisation with surplus funds to lend and one that needs to borrow is an example of:
a) demutualisation.
b) disintermediation.
b) disintermediation
Which one of the following is not a role of the Bank of England?
a) To regulate the supply of money and manage gold reserves.
b) To act as financial ombudsman in resolving customer complaints about banks.
c) To act as adviser to the government.
d) To set interest rates.
b) To act as financial ombudsman in resolving customer complaints about banks.
Which institution issues UK banknotes?
a) The Bank of England.
b) The Treasury.
c) The Royal Mint.
a) The Bank of England.
Credit unions cannot pay interest on savings: true or false?
False.
Credit unions can pay interest on savings as long as they have the necessary systems and controls in place and have at least £50k or 5% of total assets, whichever is greater, in reserve.
