Unit 2 Topic 6

Question 1

What is this describing?
An increase in the market value of an investment, over and above the amount the investor paid for it or paid into it.

Answer 1

Capital growth

Question 2

Capital sum

Answer 2

The total amount borrowed or saved/invested before the addition of interest

Question 3

Competitive demand

Answer 3

A situation in which two or more products fulfil the same need or want and therefore are in competition with each other for the customer’s money

Question 4

Dependant

Answer 4

A person who is financially reliant on someone else

Question 5

Independent Financial Adviser (IFA)

Answer 5

A professional who makes financial recommendations to clients based on products offered by a wide range of providers

Question 6

Joint demand
Give an example

Answer 6

A situation in which the purchase of one product requires the purchase of another

Taking out a mortgage loan to buy a property and also needing to buy buildings insurance to cover the cost of repairing any damage to that property

Question 7

Mortgage life assurance

Answer 7

A policy that covers payment of a mortgage debt in the event of death

Question 8

Mortgage payment protection insurance

Answer 8

An insurance policy intended to cover mortgage payments in the event of illness or unemployment

Question 9

What is this definition referring to?
The methods providers use to make one product different from and more attractive than others that perform a similar function

Answer 9

Product differentiation

Question 10

Recession

Answer 10

A period of at least six months when the amount of goods and services the country is producing is shrinking

Question 11

Name 2 examples of purposes that people may use methods of long-term planning for

Answer 11

Enables you to buy a home and pay back a mortgage

Saving for retirement

Question 12

Name the 3 factors that influence where a person is on the “spectrum of willingness” to take risks

Answer 12

Personality
Age
Financial situation

Question 13

Name 2 factors that a customer should take into account when considering the risk/reward spectrum of a product

Answer 13

Reputation of provider
How it’s accessed

Question 14

Name 3 risks associated with loans

Answer 14

Varies on amount of
Rising interest rates
Changing terms and conditions

Question 15

Name the 5 factors that should be considered when matching a product to an individual’s situation

Answer 15

The intended purpose
Timescale
Affordability
Attitude to risk
How products fit into mix

Question 16

What is the ‘product mix’?

Answer 16

The total number of product lines and individual products or services offered by a company

Question 17

Name 3 factors that will influence the amount someone saves

Answer 17

Their income
The necessity of saving
People’s attitudes to saving

Question 18

Name 2 external factors that will influence financial decisions

Answer 18

Inflation
Interest rates