Topic 6 Flashcards
What is expected loss
the average amount of loss expected
What is unexpected loss
the amount by which the actual loss might exceed what is expected
What is catastrophic loss
a loss in excess if unexpected loss
name 3 exampples of expected loss
investment, house, savings
What is annuity
a product where the customer pay a lump sum and in return, receives an agreed set annual amount for the rest of their life
what is a catastrophe bond
a bond purchased by investors who receive a good rate of interest as long as the catastrophe the bond covers does not happen
What happens if catastrophe happens in a catastrophe bond
they lose their capital and the insurance company does not have to pay them back what they invested
What is cyberterrorism
a situation where terrorists deliberately attack computer networks by uploading viruses that cause links and files to malfunction and data to be deleted
what is an ethical investment
an investment made in a company that takes into account the wider impact of its activities on society and the environment
what is an exogenous shock
a significant event that happens without warning and that has large and lasting effects on political, economic, and social systems
Name an example of exogenous shock
covid 19
What is gross interest
interest paid without tax deducted
what does index-linked mean
rising in line with inflation
what are islamic home purchase plans
methods of buying a home that are compliant with sharia law
what does sharia law forbid
muslins paying or gaining interest
what are the 2 islamic home purchase plans
ljara and murabaha
what is loan to value
the ratio of the size of the loan to the value of the property
What is a money laundering officer
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
what is negative real interest rate
where the nominal interest rate is lower than the rate of inflation
what is nominal interest rate
the actual rate of interest received by a saver
what is a public sector
the collective name for organisations that are funded through taxation
name a public sectore
school
what is pure risk
where risk can only have a downside
name a pure risk
damage
what is real income
the value of people’s income in terms of goods and services
what is real interest rate
the difference between the nominal interest rate received by the saver and the rate of inflation
what is real terms
a value adjusted to account for changes in prices
what is sharia law
rules that devout Muslims follow which in relation to personal finance, prohibit the paying and receiving of interest
what is speculative risk
where risk can have either a good or bad outcome
what is volitallity
changeability, as when the value of an investment moves up and down significantly in a short period
what does exogenous shock occur with
without warning and has significant impact
what does speculative risk have
either an upside or a downside
what peoples wage increase more than to experience a rise in real income
rate of inflation
what happens to demand for mortgage loans when there is expected higher inflation
demand will increase
which body required RBS and Lloyds to undergo divestment in 2009
The EU competition commissioner
What is riba in terms of islamic home finance
prohibition of interest
what is muharaba in terms of islamic home finance
the bank buys a property, sells it to the buyer and the buyer pays for it in instalments with no late payment penalties
what is a ljara in terms of islamic home finance
a buyer leases a property from a bank and at the end of the leasing period becomes the property owner
what is Gharar
Uncertainty in business dealings
