Topics 1 & 2 Test Flashcards
Financial intermediaries can provide maturity transformation because they:
A offer a wide range of deposit accounts to a wide range of depositors.
B aggregate many small deposits from a large number of clients.
C provide services to clients from many different geographical locations.
D reduce the risk of default or fraud by lending to a wide variety of
borrowers.
A offer a wide range of deposit accounts to a wide range of depositors.
A key difference between a mutual organisation and a proprietary organisation is that a mutual organisation:
A can issue shares on the stock market.
B is owned by members not shareholders.
C shares its profits in the form of dividends.
D is only allowed to lend to other financial institutions.
B
How can a bank involved in wholesale banking raise money quickly in order to finance business activities?
A By a further issue of shares
B By borrowing from the Bank of England
C From the interbank market
D By issuing gilts
C
What is the role of the Bank of England’s Monetary Policy Committee?
A To veto undesirable takeovers
B To set capital adequacy levels
C To set the Bank of England Base Rate
D To set inflation targets
C
In order to be acceptable as a medium of exchange, money must have all EXCEPT which one of the following?
A It must be divisible into small units
B It must be generally acceptable to all parties in all transactions
C It must be free from the effects of inflation
D It must be sufficient in quantity
C
The Bank of England is a central bank because it:
A deposits money with the International Monetary Fund.
B has been approved by the Treasury and lends money direct to other
banks.
C holds reserves of foreign currency for other banks and institutional
investors.
D acts as banker to the government, supervises the economy and
regulates the supply of money.
D
What means have large institutions in financial services markets predominantly used to achieve growth and diversification in recent years?
A Mergers and takeovers
B Focus on existing strengths
C Internally funded growth
D Additional share issues
A
Jon has notes and coins that are accepted as legal tender. This is because they have:
A been approved by the Treasury.
B the backing of the government and the central bank.
C been issued by a high street bank.
D the International Monetary Fund’s backing and are issued by the
government.
B
Which one of the following factors distinguishes building societies from other financial institutions?
A They are mutual institutions owned by their members
B They are owned by their shareholders
C They only lend for mortgage purposes
D They cannot make regulated loans
A
Up to what percentage of their liabilities may Building Societies raise funds on the wholesale market?
A 50%
B 25%
C 100%
D 40%
A
What is the target range of inflation that the government are hoping to achieve as measured by the Consumer Price Index?
A 3-5%
B 2-4%
C 1-3%
D 2.5-5%
C
The European Union has issued a new DIRECTIVE. This means that each member state:
A must implement the Directive in its entirety within the specified timescale.
B can choose whether or not to adopt the Directive.
C has the choice of how to meet the Directive’s objectives.
D must implement the Directive, provided the member state is part of the
Eurozone.
C
The regulatory framework for the financial services industry in the UK is a five tier process. Which one of the following bodies has taken over the activities in the third tier?
A The Financial Ombudsman Service
B The Building Societies Commission
C The PRA and FCA
D The Lenders Code
C
Which index does the government use to assess the inflation rate?
A Retail prices index
B Consumer prices index
C Construction and building prices index
D FTSE 100 index
B
Under what circumstances if any can a nation state opt out of a regulation laid down by the European Council and Council of Ministers?
A None
B Only if specific dispensation has been granted
C Only if an alternative approach has been agreed
D Only if the member has joined within the previous three years
B
