Topic 6

Question 1

What is expected loss

Answer 1

the average amount of loss expected

Question 2

What is unexpected loss

Answer 2

the amount by which the actual loss might exceed what is expected

Question 3

What is catastrophic loss

Answer 3

a loss in excess if unexpected loss

Question 4

name 3 exampples of expected loss

Answer 4

investment, house, savings

Question 5

What is annuity

Answer 5

a product where the customer pay a lump sum and in return, receives an agreed set annual amount for the rest of their life

Question 6

what is a catastrophe bond

Answer 6

a bond purchased by investors who receive a good rate of interest as long as the catastrophe the bond covers does not happen

Question 7

What happens if catastrophe happens in a catastrophe bond

Answer 7

they lose their capital and the insurance company does not have to pay them back what they invested

Question 8

What is cyberterrorism

Answer 8

a situation where terrorists deliberately attack computer networks by uploading viruses that cause links and files to malfunction and data to be deleted

Question 9

what is an ethical investment

Answer 9

an investment made in a company that takes into account the wider impact of its activities on society and the environment

Question 10

what is an exogenous shock

Answer 10

a significant event that happens without warning and that has large and lasting effects on political, economic, and social systems

Question 11

Name an example of exogenous shock

Answer 11

covid 19

Question 12

What is gross interest

Answer 12

interest paid without tax deducted

Question 13

what does index-linked mean

Answer 13

rising in line with inflation

Question 14

what are islamic home purchase plans

Answer 14

methods of buying a home that are compliant with sharia law

Question 15

what does sharia law forbid

Answer 15

muslins paying or gaining interest

Question 16

what are the 2 islamic home purchase plans

Answer 16

ljara and murabaha

Question 17

what is loan to value

Answer 17

the ratio of the size of the loan to the value of the property

Question 18

What is a money laundering officer

Answer 18

an employee of a financial provider who must be informed of suspicious activity in the business that might be linked to money laundering or terrorist finance, reporting if necessary

Question 19

what is negative real interest rate

Answer 19

where the nominal interest rate is lower than the rate of inflation

Question 20

what is nominal interest rate

Answer 20

the actual rate of interest received by a saver

Question 21

what is a public sector

Answer 21

the collective name for organisations that are funded through taxation

Question 22

name a public sectore

Answer 22

school

Question 23

what is pure risk

Answer 23

where risk can only have a downside

Question 24

name a pure risk

Answer 24

damage

Question 25

what is real income

Answer 25

the value of people's income in terms of goods and services

Question 26

what is real interest rate

Answer 26

the difference between the nominal interest rate received by the saver and the rate of inflation

Question 27

what is real terms

Answer 27

a value adjusted to account for changes in prices

Question 28

what is sharia law

Answer 28

rules that devout Muslims follow which in relation to personal finance, prohibit the paying and receiving of interest

Question 29

what is speculative risk

Answer 29

where risk can have either a good or bad outcome

Question 30

what is volitallity

Answer 30

changeability, as when the value of an investment moves up and down significantly in a short period

Question 31

what does exogenous shock occur with

Answer 31

without warning and has significant impact

Question 32

what does speculative risk have

Answer 32

either an upside or a downside

Question 33

what peoples wage increase more than to experience a rise in real income

Answer 33

rate of inflation

Question 34

what happens to demand for mortgage loans when there is expected higher inflation

Answer 34

demand will increase

Question 35

which body required RBS and Lloyds to undergo divestment in 2009

Answer 35

The EU competition commissioner

Question 36

What is riba in terms of islamic home finance

Answer 36

prohibition of interest

Question 37

what is muharaba in terms of islamic home finance

Answer 37

the bank buys a property, sells it to the buyer and the buyer pays for it in instalments with no late payment penalties

Question 38

what is a ljara in terms of islamic home finance

Answer 38

a buyer leases a property from a bank and at the end of the leasing period becomes the property owner

Question 39

what is Gharar

Answer 39

Uncertainty in business dealings