BTEC Business Level 3 Unit 3 Finance Exam 107 Questions with Answers,100% CORRECT

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BTEC Business Level 3 Unit 3 Finance Exam 107 Questions with Answers what are the 6 types of personal borrowing? - CORRECT ANSWER mortgages, hire purchase, payday loans, overdraft, personal lo... ans, credit cards personal loan - CORRECT ANSWER gives you the ability to borrow a set amount of money, normally for a specific purpose, to be repaid in regular instalments. payday loan - CORRECT ANSWER short term source of finance used to bridge the gaps between now and next receiving a wage credit card - CORRECT ANSWER goods are paid for by card and can be paid for either at the end of a set period, normally a month, when a statement is issued overdraft - CORRECT ANSWER allows you to withdraw money that you don't have in a current account mortgage - CORRECT ANSWER long-term loan to fund the purchase of assets, normally paid back over a long time, usually 25 years. it is secured against an item like a house. hire purchase - CORRECT ANSWER allows you to have use of an item immediately but pay for it in regular instalments. the item remains the property of the seller until all instalments have been made what are the 6 saving and investment options? - CORRECT ANSWER ISA, deposits & savings account, premium bonds, bonds & gilts, shares, pensions when are saving and investment options available? - CORRECT ANSWER when you are earning or receiving more money than you need to cover your expenditure Individual savings account (ISA) - CORRECT ANSWER a type of saving account where the holder is not charged income tax on the interest received. deposit and savings account - CORRECT ANSWER accounts where interest is paid on the balance and normally the holder needs to give notice before withdrawing funds premium bonds - CORRECT ANSWER government scheme that allows individuals to save up to a set amount by buying bonds. the bond holder doesn't receive interest on their savings but each bond is placed into a regular draw for cash prizes bonds & gilts - CORRECT ANSWER fixed term securities where the lender lends money to companies and governments in return for interest payments. the money is invested for a specific period of time shares - CORRECT ANSWER involve investment in a business in return for equity. the shareholder will receive dividends from the company's profits and will also want the value of the shares to increase pensions - CORRECT ANSWER long term saving plans where individuals make regular contributions, called premium payments, throughout their working life. this is then repaid as either a lump sum, regular payments or a combinations of the two upon retirement. how is inflation a risk to your savings? - CORRECT ANSWER inflation can reduce the spending power of any money saved. what is the risk of saving money? - CORRECT ANSWER low or zero risk as the money saved is guaranteed to be available in the furture what are the benefits of saving money? - CORRECT ANSWER provides financial security/peace of mind and there are interest payments why are investments a risk? - CORRECT ANSWER they can go wrong and all or some of the value may be lost and there is no guarantee of a return what are the benefits of investing your money? - CORRECT ANSWER if it's successful, there is a potential for a high financial return and they can be exciting for some people, some invest in shares, antiques or art. what is insurance? - CORRECT ANSWER a form of protection where specific items, as a well as individuals and pets can be insured. what do insurance policies cover? - CORRECT ANSWER the cost of loss, damage or illness up to prearranged levels in return for regular payments called premiums what are the advantages of car insurance? - CORRECT ANSWER meets legal requirements, protects oneself against theft or damage and protects against damage caused to a third party. what are the advantages of home & contents insurance? - CORRECT ANSWER replaces items that may have been lost or damaged, covers accidents that happens, covers large damage they you may not otherwise be able to cover, eliminates some stress from worrying about life and low deductible compared to cost of repair what are the advantages of life insurance? - CORRECT ANSWER provides permanent protection, flexible, tax benefits, low premiums for new policies what are the advantages of travel insurance? - CORRECT ANSWER good for emergencies (can get booking costs back if your flights are cancelled), if you contract a disease your travel insurance will cover treatment costs that your medical insurance might not, may policies provide coverage for lost, stolen or damaged luggage what are the advantages of pet insurance? - CORRECT ANSWER can cover unexpected vet bills, provides peace of mind, can save the life of your pet, allows you to know your veterinary costs ahead of time what are the advantages of health insurance? - CORRECT ANSWER gives you the opportunity to maintain or improve your health by providing a low cost way to attend your physician visits and buying affordable prescription drugs, flexible plans that can be customised, covers surgery and emergency bills, provides peace of mind what are the disadvantages of car insurance? - CORRECT ANSWER premiums can be high depending upon assessed level of risk, normally there is an excess that must be paid what are the disadvantages of home & contents insurance? - CORRECT ANSWER doesn't cover flood damage or freezing of plumbing, extra monthly payment, high monthly premium because of low deductible, coverage of jewellery costs more to get. what are the disadvantages of life insurance? - CORRECT ANSWER fixed periods of coverage, premiums may increase, limited options for people of poor health what are the disadvantages of travel insurance? - CORRECT ANSWER can be expensive and can sometimes outweigh the cost of your holiday, may not cover everything that you need coverage on. what are the disadvantages of pet insurance? - CORRECT ANSWER may need to make a claim on your policy and may need to pay for a post mortem if your pet passes away, pre-existing conditions aren't covered, doesn't cover routine vaccinations and other treatments what are the disadvantages of health insurance? - CORRECT ANSWER can be unaffordable for some, very confusing policies, can apply and be denied coverage altogether, tends not to cover pre-existing conditions. what the advantages of ISAs? - CORRECT ANSWER tax isn't charged on interest earned allowing the saver to keep all of the rewards for saving, interest rates are sometimes slightly higher than in alternative savings accounts what the advantages of deposit and savings accounts? - CORRECT ANSWER provides protections, majority of banks and credit unions are insured so the money is secured and safe, easy to setup, simple to withdraw money from a savings account, entitled to 6 withdrawals per month, can open an account with little money what the advantages of premium bonds? - CORRECT ANSWER no risk of losing money because premium bonds are supported by the government, instant access can withdraw your investment anytime, tax-free returns what the advantages of bonds and gilts? - CORRECT ANSWER safe investments, interest payments of bonds are sometimes higher than the general level of dividend payments, often liquid, have legal protections what the advantages of shares? - CORRECT ANSWER don't have to travel or do any physical work, very flexible can work in your own time, less investment what the advantages of pensions? - CORRECT ANSWER tax won't be paid on your pension contribution, compound interest so the earlier you start the better, guaranteed income at the end, employer contributes each month what the disadvantages of pensions? - CORRECT ANSWER lack of access can't access your pension finds until you're 55, risk of poor returns as your pension will be invested into stocks and shares, very complicated what the disadvantages of shares? - CORRECT ANSWER if you buy the wrong shares it could result in a heavy loss, quarterly results can result in a drastic change in the price of shares what the disadvantages of bonds and gilts? - CORRECT ANSWER not 100% secure, can lose much or all of their money if the company goes bankrupt, same bonds a re callable - so the company can choose to pay the bond off early what the disadvantages of premium bonds? - CORRECT ANSWER no interest if your bonds aren't chosen in the monthly prize draw you won't receive any returns, low odds very unlikely to win, loses value if you make a withdrawl what the disadvantages of deposit and savings accounts? - CORRECT ANSWER may be bank fess like account or maintenance fees especially if you maintain low balances, may be required to carry a minimum amount if it falls below the amount the bank may charge fees what the disadvantages of ISAs? - CORRECT ANSWER notice is often required to make withdrawals and according to the agreement there may be a limit set of the number of withdrawals made, if the saver makes more withdrawals than set out in the agreement then the penalty may cancel out the tax savings, limit set on the annual amount that can be placed in an ISA. what are financial institutions? - CORRECT ANSWER organisations that offer financial services to individuals and businesses what are the 8 examples of financial institutions? - CORRECT ANSWER banks, building societies, pension companies, payday loan companies, pawnbrokers, insurance companies, credit unions, NSI what the advantages of the Bank of England? - CORRECT ANSWER responsible for protecting the financial stability of the economy as a whole, set interest rates at a level designed to help achieve a stable economy, lends to banks what the advantages of banks? - CORRECT ANSWER reliable, secure, private, lots of options like services and account types, pay interest on credit balances on most type of accounts what the advantages of building societies? - CORRECT ANSWER can offer better interest rates and savings than banks, offers security snd dependability through long term investment, more democratic, offers a range of services, secure place to store money what the advantages of credit unions? - CORRECT ANSWER offer a range of services, good cooperative and group feeling, secure place to store money, often offer additional benefits to the community or a good cause, higher interest payments what the advantages of national savings and investments? - CORRECT ANSWER savings and investments are secured as government backed, extremely secure and guaranteed by the government, offer additional services what the advantages of insurance companies? - CORRECT ANSWER offer security and peace of mind, easy and regular monthly payments make planning easy, wide range of services and levels of cover to suit one's needs what the advantages of pension companies? - CORRECT ANSWER provides a structure that helps to plan for financial security after retirement, deductions can be taken directly from pay and be fully or partially matched by an employer's contribution, experts are employed to make investment decisions what the advantages of pawnbrokers? - CORRECT ANSWER quick way of getting money for a short period of time and interest isn't charged what the advantages of payday loans? - CORRECT ANSWER immediate cash available even for those with poor credit history what the disadvantages of payday loans? - CORRECT ANSWER very expensive and easy to get into deeper debt, interest charges are likely to be high, often have to pay back a sum which is substantially higher than the original amount borrowed. what the disadvantages of pawnbrokers? - CORRECT ANSWER risk of losing assets, amount given for asset is often substantially lower than its actual worth what the disadvantages of pension companies? - CORRECT ANSWER money already invested in a pension cannot be released prior to the agreed dates, poor investment decisions by the company may result in a disappointing return what the disadvantages of insurance companies? - CORRECT ANSWER difficult to understand what is covered and what the conditions of the insurance are, premiums will be charged to ensure shareholder needs are met, premiums are assessed on the estimated degree of risk which may be seen to penalise some members. what the disadvantages of national savings and investments? - CORRECT ANSWER poor interest rate - no interest payments on premium bonds, not easy access due to lack of highstreet branches, rates are variable, often required to give notice on withdrawls what the disadvantages of credit unions? - CORRECT ANSWER more limited funds and opportunities than commercial banks and building societies, savings are only protected up to £85,000, may lack the business drive of a commercial bank. what the disadvantages of building societies? - CORRECT ANSWER fewer branches leading to poorer access, savings are only protected up to £85,000, may lack the business drive of a commercial bank what the disadvantages of banks? - CORRECT ANSWER may charge for certain accounts and services, savings are only protected up to £85,000 so if a bank goes bankrupt any savings above this would be lost, some costs may be higher so the bank fulfils their shareholder objectives. what the disadvantages of the Bank of England? - CORRECT ANSWER not a bank for members of the general public, can raise interest rates making borrowing more expensive what is the Bank of England? - CORRECT ANSWER UK's central bank with the responsibility for maintained a healthy level of financial stability for the UK as a whole. Responsibilities include issuing legal tender, setting interest rates and controlling the national debt what are banks? - CORRECT ANSWER owned by their shareholders and offer customers a range of financial services like current and saving accounts and loans what are building societies? - CORRECT ANSWER owned by their members so they have a say in how the society is run, they provide financial services like savings accounts and mortgages. Unlike banks they don't have shareholders on a stock exchange which allows costs to be kept down. what are credit unions? - CORRECT ANSWER financial cooperatives owned and run by their members, which are not-profit organisations, as the members are the owners they have a right to say how it is run what is the national savings and investments (NSI)? - CORRECT ANSWER a government backed organisation that offers a secure saving option. it offers a range of options including ISAs, premium bonds and bonds & gilts. what are insurance companies? - CORRECT ANSWER businesses that offer customers protection against loss in exchange for a premium. what are pension companies? - CORRECT ANSWER businesses that sell policies to customers allowing them to save into personal pension schemes in preparation for retirement what are pawnbrokers? - CORRECT ANSWER individuals or businesses that loan money against the value of a person's assets. however if the pawned items are not brought back within a certain time they may be sold by the pawnbroker to recover the debt What are payday loan companies? - CORRECT ANSWER businesses that offer short-term loans to people requiring cash between paydays what are the 5 methods of communicating with customers? - CORRECT ANSWER branch, telephone, postal, online, mobile banking bank branch - CORRECT ANSWER customers visit the bank to carry out transactions either over the counter or using automated self service machines. they may also seek advice on financial services and products online banking - CORRECT ANSWER allows customers to manage their accounts on a computer or laptop via the internet. customers can check their balance, pay bills, transfer money between accounts and seek online advice telephone banking - CORRECT ANSWER customers can carry out simple transactions over the phone 24/7. services are automated, although some accounts allow customers to speak directly to an adviser who can provide advice or carry out transactions and other services on their behalf. mobile banking - CORRECT ANSWER customers manage their accounts through a mobile device such as a smartphone or tablet, using an app provided by their bank. the service is available 24/7. postal banking - CORRECT ANSWER many banks still send paper copies of statements to their customers. customers may also pay bills by cheque sent through the postal system what is customer protection? - CORRECT ANSWER certain laws and organisations protect the rights of consumers. in relation to finance, they help ensure consumers are not treated unfairly or exploited. Financial Conduct Authority (FCA) - CORRECT ANSWER an independent organisation with the responsibility to regulate the actions of the providers of financial services Financial Ombudsman Service (FOS) - CORRECT ANSWER an organisation appointed by the government to represent the interests of the consumer in the disputes with financial service providers financial services compensation scheme (FSCS) - CORRECT ANSWER an organisation in the UK that will pay compensation to a consumer of financial services if the service provider is unable to Office of Fair Trading (OFT) - CORRECT ANSWER a government organisation that regulates all markets (aims to encourage fair practices and healthy competition between financial institutions) consumer credit - CORRECT ANSWER laws passed by the UK government to enforce the regulation of any firm offering credit to consumers consumer credit legislation - CORRECT ANSWER the Consumer Credit Act (1974) regulates credit card purchases and gives consumers protection when signing loan and hire purchase agreements. it covers interest rates, credit limits, cooling off periods and access to credit files. what are the organisations that provide financial information and guidance to customers? - CORRECT ANSWER citizens advice service, independent financial advisors, price comparison websites, money advice service, debt counsellors, individual voluntary arrangements (IVA) what is the citizens advice service? - CORRECT ANSWER charitable organisation which provides 'free, confidential and impartial advice' on a variety of financial and non-financial issues, including debt, tax matters, borrowing and consumer rights. Advice may be provided online, by phone or in person. Advisers are volunteers and may not be financial professionals. what is an independent financial advisor? - CORRECT ANSWER Professional individuals who give independent advice and guidance on a range of financial products, such as mortgages, pensions and investments. They are regulated by the Financial Conduct Authority. Consumers pay a fee for the advice. what are price comparison websites? - CORRECT ANSWER help consumers find the best deal on a range of financial products, e.g. mortgages, savings, insurance. The price comparison is free, and can be accessed at any time. Consumers may need to use more than one website to find all the options available. what is the money advice service? - CORRECT ANSWER independent organisation, set up by the government, offering free and impartial advice to help people manage their money. They provide guidance on a wide range of financial matters such as debt, borrowing, budgeting, saving and insurance. Advice may be provided online or by phone. The website includes a range of calculators and tools to assist users. what are debt counsellors? - CORRECT ANSWER Organisations such as the charity National Debtline provide free debt advice and information on a wide variety of debt related topics such as council tax, loans, hire purchase. Its expert debt advisors also advise on court procedures, dealing with creditors and various debt options. They are regulated by the FCA. what is an IVA? - CORRECT ANSWER An agreement that an individual undertakes with their creditors to pay off all or part of their debts. The individual pays an insolvency practitioner, who then splits the payment between creditors. There are fee for this service. An individual who cannot pay their debts may apply to the Insolvency Service to become bankrupt. The individual's assets can be used to pay off debts and there will be bankruptcy restrictions. what are the advantages of IVAs? - CORRECT ANSWER Helps manage debt repayment with regular payments making budgeting easier, Independent advice, without bias what are the disadvantages of IVAs? - CORRECT ANSWER Set up and handling fees are charged for the service Will affect future credit ratings what are the advantages of debt counsellors? - CORRECT ANSWER • Advice is offered by a professional who specialises in debt management • Services offered are regulated by the FCA and FOS what are the disadvantages of debt counsellors? - CORRECT ANSWER • Services will be charged for • Advice will focus just on debt management rather than the whole package of financial concerns what are the advantages of the Money Advice service? - CORRECT ANSWER • Government-funded therefore advice is free and impartial • Covers a wide range of financial matters what are the disadvantages of the money advice service? - CORRECT ANSWER • Advice is only available online or over the telephone - no physical presence • Can take time to find and understand the exact advice that is being searched for • Advice can be generic rather than personal what are the advantages of price comparison websites? - CORRECT ANSWER • Easy to access 24/7 • Free service what are the disadvantages of price comparison sites? - CORRECT ANSWER • Not guaranteed to be 100% up to date, accurate or unbiased • Do not always cover all of the available options • Potential for bias what are the advantages of independent financial advisors? - CORRECT ANSWER • Advice is offered by professionals in the field • Services offered are regulated by the FCA and FOS • Advisors will take time to understand an individual's full financial situation what are the disadvantages of independent financial advisors? - CORRECT ANSWER • Services will be charged for • Advice offered is not guaranteed to be 100% up to date or unbiased what are the advantages of the citizens advice service? - CORRECT ANSWER • Free service • Offers face to face as well as online and telephone advice • Wide ranges of areas covered what are the disadvantages of the citizens advice service? - CORRECT ANSWER • Trained volunteers are not necessarily professionals in financial issues and therefore knowledge may be limited [Show More]

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