Topic 7

Question 1

Assets

Answer 1

Things that a business or a person owns

Question 2

Bonds

Answer 2

See savings bonds - product held for a fixed period.

Question 3

Cash card

Answer 3

Card used to withdraw money from ATMs or branch counters

Question 4

Cash ISA

Answer 4

An account that pays interest tax free on cash savings up to a certain level.

Question 5

Chancellor of the Exchequer

Answer 5

The British cabinet minister responsible for financial and economic matters and in charge of the Treasury.

Question 6

Cheque

Answer 6

A written instruction to the provider to pay a specified amount to a certain person or organisation.

Question 7

Children’s bond

Answer 7

An investment bond taken out by a parent, grandparent or guardian for a child under 16. Investing between £25 and £3000, the investor is guaranteed interest at a fixed rate for 5 years, at which point the bond matures. A nominated parent or guardian controls the bond until the child is 16.

Question 8

Common bond

Answer 8

An interest or circumstance shared by a group of people, such as working for the same employer or living in a certain area

Question 9

Communication channel

Answer 9

The way through which information is transferred to its intended recipient, e.g. Email or telephone. Refers to how a customer can contact their provider

Question 10

Credit card

Answer 10

A card that allows the holder to purchase face to face, online or on the phone. Paid for by the card provider and the card holder has to pay back at once or in instalments. Provider may also charge interest.

Question 11

Credit union

Answer 11

Mutual organisation owned by members that provides a range of financial products to its members e.g. Savings accounts, who all have s common bond, e.g. Working for the same employer

Question 12

Current account

Answer 12

Bank or building society account where people can store their money in the form of electronic balances and withdraw or make payments

Question 13

Debit card

Answer 13

Can be used in face to face transactions, internet and over the phone, and withdraw cash. Direct from current account.

Question 14

Demutualisation

Answer 14

The process where a mutual members owned organisation (e.g. A building society) becomes a shareholder owned joint stock company (e.g. A bank)

Question 15

Direct debit

Answer 15

Electronic payment out of an account, the amount and frequency can very

Question 16

Dividend

Answer 16

A payment of profits from a company to its shareholders, often at twice yearly intervals, either as cash or as further shares.

Question 17

Financial conduct authority FCA

Answer 17

One of the two main regulators of financial services in the U.K. (The other is the Prudential Regulation Authority).

Question 18

Financial services compensation

Answer 18

A scheme that pays up to £75000 if the provider goes into default and can’t pay the account holders the money they have in their account

Question 19

Insurance

Answer 19

Products that give people financial protection against certain events. For example, someone who has travel insurance might be able to claim back the cost of a holiday if they have to cancel through illness.

Question 20

Life assurance

Answer 20

A policy of insurance that pays out a sum of money if the insured person dies

Question 21

Interest rate margin

Answer 21

The difference between the interest rate a bank charges on borrowing products and the interest rate it pays on savings.

Question 22

Life cover

Answer 22

See life assurance

Question 23

Mortgage

Answer 23

A loan taken out to pay for a property, usually over a long time e.g. 25 years

Question 24

Mutual organisation

Answer 24

An organisation owned by its customers who are also members rather than backed by shareholders.

Question 25

NS&I

Answer 25

National Insurance and investments; a provider backed by the treasury who manage the UKs finances

Question 26

AER

Answer 26

Annual equivalent rate, the interest earned on money in one year and takes into account the frequency of interest payments and any fees and charges

Question 27

Overdraft (authorised and unauthorised)

Answer 27

Overdraft (authorised and unauthorised) A facility that allows an account holder to withdraw more money than they actually have in their account. An authorised overdraft is agreed with the bank in advance within certain limits. Exceeding those limits or going overdrawn without permission is an unauthorised overdraft, and attempted withdrawals may not be honoured.

Question 28

Personal loan

Answer 28

A product that allows someone to borrow a fixed amount over a fixed period at a fixed amount of interest.

Question 29

Premium Bond

Answer 29

A lottery bond, issued by NS&I, entered into a monthly prize draw with tax-free prizes or ‘premiums’. Bonds must be held for a full calendar month after the month in which they were purchased, and retain an equal chance of winning until cashed in.

Question 30

Prudential Regulation Authority (PRA)

Answer 30

One of the two main regulators of financial services in the UK (the other is the Financial Conduct Authority)

Question 31

Public limited company (plc)

Answer 31

A large company whose shares are sold and traded to the general public. The shareholders have limited liability, up to the value of their investment, for the company’s debts.

Question 32

Rate of return

Answer 32

The amount a saver gains in interest on their savings. For instance an account paying 0.2% AER offers a lower rate of return than one paying 0.4% AER.

Question 33

Savings bonds

Answer 33

A savings product held for a fixed period, eg two years. The holder can only make a limited number of withdrawals, or none at all, during that period without incurring a penalty

Question 34

Standing order

Answer 34

An electronic payment out of an account. Standing orders are used to make regular payments of the same amount.

Question 35

Stocks and shares

Answer 35

Stocks, shares and equities are all words used to describe an investment that gives the holder part ownership of a company. If the company’s value increases, so does the value of your share; if its value falls, so does the value of your investment. Shares are bought and sold on stock exchanges

Question 36

Travel insurance

Answer 36

A product providing coverage for unexpected events such as trip cancellation, medical expenses, travel delays and other losses incurred while travelling.

Question 37

Treasury

Answer 37

Her Majesty’s (HM) Treasury, the government department responsible for development and implementation of financial and economic policy.