Unit 2 Topic 1

Question 1

Affordability

Answer 1

Important concept in helping people to choose financial products based on budgeting and forecasting to help individuals decide what they can afford to spend.

Question 2

Aspirations

Answer 2

Things or experiences that people would like to have in the future.

Question 3

Define ‘Attitudes’
How can these be changed?

Answer 3

People’s thoughts and feelings, at a given time and place, about another person, an event or issue.

Can be changed by:
Circumstances
Events
Experiences
Advice

Question 4

Beliefs

Answer 4

Specific and detailed personal convictions about how things are.
Can be absolute or causal.

Question 5

Define ‘Capital’
In the context of financial service providers, what does it refer to?

Answer 5

The money or other assets owned by an individual or business.

It refers to the funds provided by the shareholders, not deposits from customers.

Question 6

Define ‘Consumer credit’, what is it another term for?

Answer 6

Another term used for borrowing.

Question 7

Define ‘Credit Card’
Who are the transactions paid by?

Answer 7

A card that allows the holder to make purchases face to face, online or over the phone and to withdraw cash from an ATM.

Transactions paid by card provider.

Question 8

Culture

Answer 8

A society’s set of norms about behaviour and attitudes across social groups.

Indicates what society considers to be acceptable and unacceptable.

Question 9

Deposit

Answer 9

A sum of money placed by a customer with a financial services provider.

Question 10

Distribution channel

Answer 10

The medium through which info is transferred to its intended recipient.

Refers to the way a customer can contact their provider and manage their account.

Question 11

Define ‘Ethical investing’
What are ethics?

Answer 11

When someone chooses to save in a way that means money will be used for what the individual considers to be good purposes.

Ethics are a set of ideas about what people believe is morally right.

Question 12

What is the feedback effect?

Answer 12

The notion that thoughts and feelings have a direct influence on behaviour.

Question 13

What is ‘hire purchase’?

Answer 13

A type of secured consumer credit to finance items such as cars and furniture which involves the borrower repaying over a number of years.

Question 14

What are investments? What is their aim? Are these a way of saving over the short-term, medium or long-term?

Answer 14

Money paid into financial products.

The aim is that the value of the product will grow over time and so the person will eventually receive back more money than they paid in.

A way of saving over the medium or long term.

Question 15

What is ‘life assurance’?

Answer 15

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

Question 16

What is the life cycle?

Answer 16

The stages through which people pass between birth and death.

Question 17

What is marketing?

Answer 17

Advertising, selling and delivering products to customers.
Everything a company does to acquire customers and maintain a relationship with them, including promotion and public relations (PR).

Question 18

What is a mortgage?

Answer 18

A loan taken out to pay for a property, usually over a long term such as 25 years.

Question 19

Needs

Answer 19

Things people need to survive, such as food, basic clothing and a place to live.

Question 20

Peers

Answer 20

Our equals - people in the same position as us i.e. the same age.

Question 21

Pension

Answer 21

An income that people receive after retiring from work.

Question 22

Personal loan

Answer 22

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

Question 23

Product placement

Answer 23

An aspect of public relations (PR) involving a product appearing on a TV show or in a film.

Question 24

Promotion

Answer 24

Paid-for marketing activities, including advertising.
Includes all activities that aim to communicate with people.

Question 25

Public relations (PR).
Is the message it sends implicit or explicit?

Answer 25

A specific part of promotion known as ‘below the line expenditure’.
Advertising that is not paid for directly but which keeps a business’s product in the public eye.

Entire message is implicit.

Question 26

Repossession

Answer 26

A legal process whereby a financial institution takes ownership of an asset, often a house, because loan repayments relating to that asset have not been met.
Last resort in the process of recovering money owed.

Question 27

Risk tolerant

Answer 27

Willing to take risks.

Question 28

Secured loan

Answer 28

A loan secured against an asset, such as a house.
If the borrower does not keep up repayments on the loan, the lender can seize the asset and sell it to recover the money owed.

Question 29

Sponsorship

Answer 29

An aspect of public relations (PR) involving a business paying for a sporting or entertainment event or venue.

Question 30

Values

Answer 30

General feelings about desirable behaviour and goals.

Question 31

Wants

Answer 31

Things that people like to have but can survive without, such as entertainment or fashionable clothes.

Question 32

Name two factors that influence our approach to needs and wants

Answer 32

External factors e.g marketing and advertising
Internal factors e.g values and beliefs

Question 33

Name 3 factors that may cause changes in our needs and wants

Answer 33

Our lifestyles
Our ability to afford products
Our society in which we live in

Question 34

Name 5 types of finance that can be used to satisfy needs, wants and aspirations

Answer 34

Investments
Long-term borrowing
Medium and long term savings
Insurance
Pensions

Question 35

Name five factors that influence needs, wants and aspirations

Answer 35

Values
Beliefs
Attitudes
Perceptions
Preferences

Question 36

Name four external factors that influence needs, wants and aspirations

Answer 36

Marketing
Peer pressure
Trends and role models
Culture

Question 37

How do attitudes to risk play an important role in influencing financial decisions?

Answer 37

Those who are more risk tolerant may be more likely to make risky, poorer financial decisions than those who are risk-averse.

Question 38

What time period is ‘medium-term’ considered to be?

Answer 38

A period of time longer than 3 years.

Question 39

Why aren’t muslims allowed to borrow money via a western-type mortgage loan?

Answer 39

Because islamic law (Sharia law) prohibits the payment of interest on a debt.

Question 40

What is the age range of a young adult?

Answer 40

18-25 years old.

Question 41

What is the age range of a mature adult?

Answer 41

26-40 years old.

Question 42

What is the age range of a middle age to late middle age adult?

Answer 42

41-69 years old / 55-65 years old.

Question 43

What age is classified as old age/retirement?

Answer 43

66 onwards.