Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

FSRE - Josh > Topic 1 - The role and structure of financial markets > Flashcards

Topic 1 - The role and structure of financial markets Flashcards

1
Q

What are building societies

A
  • A small bank where the lenders/owners are the members
  • Offers a wide range of services, which are similar to a Bank
  • Mutual Organisation
  • Similar to Credit Unions
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What services do Banks and Building Societies provide

A
  • Make payments
  • Keep funds safe
  • Insurances
  • Policies
  • Loans
  • Investments through savings
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is the difference between Proprietary and Mutual organisations

A
  • Proprietary organisations are owned by their shareholders
  • Mutual organisations owned and run for the benefit of the members
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What methods are used in Money Transmission

A
  • Provision of cash
  • Cheque clearing
  • Standing orders
  • Current accounts
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are the 6 Clearing Banks in the UK

A
  • HSBC
  • Lloyds Banking Group
  • NatWest
  • Bank of London
  • Barclays
  • ClearBank
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Pros and Cons of Equities (Shares)

A

Pros

  • More profit than deposit based investments
  • Income through dividends

Cons

  • Risk of capital loss and dividends not paid
  • Long-term
  • Not as liquid as cash
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

2 types of property

A
  • Commercial
  • Residential
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What 2 asset classes does commercial property fall between

A
  • Equities and Bonds
  • Less volatile than Equities!
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Pros and Cons of Property

A

Pros

  • Capital growth through rent and value
  • Commercial has stable market

Cons

  • Vulnerable to economic conditions E.G. no tenants
  • Commercial is expensive to buy an run
  • Not liquid
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Main functions of Bank of England

A
  • Banker to Banks
  • Banker to Government
  • Maintains financial stability of the economy
  • Issues banknotes
  • Adviser to Government
  • In charge of Foreign Exchange
  • Lender of last resort
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Define Money and Capital markets

A
  • Money markets - short-term borrowing and lending
  • Capital Markets - long-term borrowing and lending
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are the 4 main asset classes

A
  • Cash
  • Property
  • Fixed interest securities
  • Shares
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is a Money Market Instrument (MMI) and give the 2 main examples

A
  • Short-term, cash based loans
  • Mainly used by businesses and the Government
  • Commercial Paper and Treasury Bills
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Pros and Cons of cash investments

A

Pros

  • Small interest with no risk
  • Short-term and liquid

Cons

  • Not good for capital growth
  • Inflation can devalue cash
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Name the 5 main financial markets

A
  • Interbank market
  • Bond market
  • Equity market
  • Foreign Exchange market
  • Insurance market
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are the main international markets

A
  • New York - Dow-Jones and NASDAQ
  • Tokyo - Nikkei
  • Germany - DAX
  • France - CAC40
  • Hong Kong - Hang Seng
17
Q

Define ‘Intermediation’

A
  • The ‘middle man’ between surplus and deficit customers, E.G. Banks when someone b buys a house, they provide the mortgage
18
Q

What are the benefits of Intermediation

A
  • Diversification through spreading of risk
  • Also makes services available to anyone from anywhere
19
Q

What is Commercial Paper

A
  • Short-term Bond
  • Sold for discounted face value
  • Used for short-term liquidity from corporations
20
Q

Define running yield and redemption yield

A
  • Running yield - annual return on investment
  • Redemption yield - total return from all interest and also capital initially invested
21
Q

Bonds

Define:

  1. Bond coupon
  2. Par value
  3. Redemption date
  4. The length of a typical bond
A
  1. Coupon providing fixed-interest, redemption date and where the bond comes from
  2. Face value - value paid for Bond (before interest)
  3. Date when Bond is repaid
  4. 5-30 years
22
Q

What 2 key factors determine the price of second hand bonds

A
  • Financial strength of issuer
  • General interest rates
23
Q

How are Gilts different to Bonds

A
  • Gilts are Government Bonds issued by the DMO
  • Bonds are from corporations
24
Q

Pros and Cons of Bonds/Gilts

A

Pros

  • Fixed income for fixed term
  • Potential for profit when sold

Cons

  • Small risk of no payment from interest and redemption of capital
  • Vulnerable to general interest rates
25
Q

Pros and Cons of Money Market Instruments (MMI)

A

Pros

  • Safe, short-term investments
  • Higher returns than savings

Cons

  • Risk of companies defaulting
  • Lower returns than other investments

FSRE - Josh (18 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions