TOPIC 1 - Introducing the financial services industry Flashcards
What is the difference between a mutual organisation and a proprietary organisation ?
Mutual held by members
Proprietary held by shareholders
Which one of the following would not be an example of a mutual organisation?
a) Bolton Building Society.
b) Eastern Bank.
c) Savers Credit Union.
d) Foresters Friendly Society.
b) Eastern Bank
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) Sufficient quantity.
c) Portability.
d) Divisible into smaller units.
a) Available in high value denominations.
Which of the following is not a function of the Bank of England?
a) Banker to the UK government.
b) Prudential regulation.
c) Issuing bank notes.
d) Maintaining economic stability.
b) Prudential regulation.
The Workers Credit Union has reserves of £60,000, which equals 6% of its assets. This means it:
a) can only pay interest to savers
b) cannot pay dividends or interest to savers.
c) can only pay dividends to savers.
d) can pay dividends or interest to savers.
d) can pay dividends or interest to savers.
Finance houses raise most of their funds through:
a) retail markets.
b) private equity markets.
c) customer deposits.
d) wholesale markets.
d) wholesale markets.
The benchmark for financial businesses and institutions to calculate the interest paid on swap transactions and sterling floating rate notes is the:
a) London interbank offered rate.
b) Bank of England base rate.
c) sterling overnight index average.
d) Monetary Policy Committee rate.
c) sterling overnight index average.
Which organisation is responsible for managing new issues of UK gilts?
a) The London Stock Exchange.
b) The Bank of England.
c) The UK government.
d) The Debt Management Office.
d) The Debt Management Office.
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.
Where lenders and borrowers interact directly, it is known as:
a) intermediation placement.
b) disintermediation.
c) intermediation.
d) indirect intermediation.
b) disintermediation.
Which of the following is not one of the four elements of intermediation?
a) Risk transformation.
b) Aggregation.
c) Equalisation.
d) Maturity transformation.
c) Equalisation.
What are the four main reasons why individuals and companies
need financial intermediation?
- Aggregation
- Geographical location
- Risk transformation
- Maturity transformation
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 £50,000 or 5 per
cent of total assets (whichever is greater) in reserve.
Freshfood Ltd supplies fruit and vegetables to market traders
and small shops. The banking transactions it carries out are an
example of:
a) wholesale banking.
b) retail banking.
b) retail banking.
