Unit 1 Topic 1 Flashcards
What are the main four reason me why individuals and companies need intermediation?
- Geographical location
- Aggregation
- Maturity transformation
- Risk transformation
What is the difference between mutual and proprietary organisation?
Mutual organisation is owned by its members
Proprietary organisation is owned by its shareholders and is a limited company.
A financial transaction that is carried out directly between organisation with surplus money to lend one that needs to borrow is an example of:
A. Demutualisation
B. Disintermediation
B. Disintermediation
Which of the following is not a role of Bank of England:
A. To regulate the supply of money and manage gold reserves
B. To act as a financial ombudsman in resolving customer complaints about banks
C. To act as an adviser to the government
D. To set interest rates
B. To act as a financial ombudsman in resolving customer complaints about banks
Which institution issues UK banknotes?
A. The Bank of England
B. The Treasury
C. The Royal Mint
A. The Bank of England
Credit unions cannot pay interest on savings. True or false?
Credit unions can pay interest rates on savings as long as they have the necessary systems and controls in place and have at least £50,000 or 5% of total assets (whichever is greater) in reserve.
Freshfood Ltd supplies fruit and vegetables to market traders and small shops. The banking transactions it carries out are an example of:
1. Wholesale banking
2. Retail banking
- Retail banking
Who is responsible for administering Sonia?
1. The FCA
2. The Bank of England
3. The Monterey Policy Committee
4. The Prudential Regulation Authority
- The Bank of England
Which of the following is NOT a function of money?
a) Medium of exchange
b) Store of value
c) Unit of account
d) Guarantee of high returns
d) Guarantee of high returns
Money should possess certain desirable features to be accepted. Which of the following best describes “durability” in this context?
a) It should be easily portable.
b) It should maintain its value over time.
c) It should be easily divisible into smaller units.
d) It should be resistant to physical deterioration.
d) It should be resistant to physical deterioration.
Which of the following best defines inflation?
a) A decrease in the general price level of goods and services.
b) An increase in the purchasing power of money.
c) A sustained increase in the general price level of goods and services.
c) A sustained increase in the general price level of goods and services.
What is “aggregation” in the context of financial intermediation?
a) The process of spreading risk across multiple borrowers.
b) The transformation of short-term liabilities into long-term assets.
c) The collection of small deposits from many savers to fund larger loans or investments.
d) The direct interaction between surplus and deficit units.
c) The collection of small deposits from many savers to fund larger loans or investments.
“Maturity transformation” by financial intermediaries involves:
a) Converting illiquid assets into liquid assets.
b) Changing the currency of deposits and loans.
c) Borrowing short-term funds and lending them out for longer terms.
d) Reducing the overall risk in the financial system.
c) Borrowing short-term funds and lending them out for longer terms.
What is the definition of “liquidity”?
a) The ability of an asset to generate high returns.
b) The measure of a company’s profitability.
c) The ease with which an asset can be converted into cash quickly without significant loss of value.
d) The total value of an individual’s or institution’s assets.
c) The ease with which an asset can be converted into cash quickly without significant loss of value.
Which committee within the Bank of England is responsible for setting interest rates?
A. The Financial Policy Committee (FPC)
B. The Prudential Regulation Authority (PRA)
C. The Monetary Policy Committee (MPC)
D. The Treasury Select Committee
C. The Monetary Policy Committee (MPC)
Gilt-edged securities are primarily issued by which entity?
A. Large corporations
B. The UK government
C. Interbank
D. Local authorities
B. The UK government
What is generally considered to be a characteristic of gilt-edged securities?
A. High risk of default
B. Low interest rates
C. Variable dividend payments
D. Ownership by shareholders
B. Low interest rates
Demutualisation is described as a process of switching from what type of organisation to what?
A. From a private company to a public company
B. From a partnership to a limited company
C. From a mutual company to a limited company or bank
D. From a charity to a for-profit organisation
C. From a mutual company to a limited company or bank
Credit unions are typically regulated by which authority in the UK?
A. The Bank of England
B. The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA)
C. HM Revenue & Customs (HMRC)
D. The UK Parliament
B. The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA)
What does SONIA stand for?
A. Sterling Overnight Negotiated Interest Agreement
B. Sterling Overnight Index Average
C. Standard Overnight National Interest Authority
D. Sovereign Overnight Net Investment Asset
B. Sterling Overnight Index Average
