Unit 3 (Personal and Business Finance)

Question 1

What are the 4 functions of money

Answer 1

• Unit of Account
• Means of Exchange
• Store of Value
• Legal Tender

Question 2

What is Unit of Account

Answer 2

Money serves as the common bases of comparisons that people use to present price and record debts

Question 3

What is Mean of Exchange

Answer 3

Where we uses notes and coins rather than barter as a medium of exchange

Question 4

What problems does money as a medium of exchange avoid

Answer 4

Avoids the problems of barter such as double coincidence of wants

Question 5

What is a double coincidence of wants

Answer 5

A situation where both parties hold an item needed by the other to fulfill their demand.

Question 6

What is a store of value

Answer 6

That money holds a value

Question 7

What is Legal Tender

Answer 7

That money is accepted to buy goods and services

Question 8

What does legal tender enable?

Answer 8

As money is an accepted medium of exchange,it enables credit to be offered so payment can take place at a future date

Question 9

What are factors that affect the role of money

Answer 9

• Personal attitudes towards money
• Culture (including religious and ethical beliefs)
• Life Events
• External Influences
• Interest Rates

Question 10

What is a credit limit?

Answer 10

The maximum amount of money that can be borrowed

Question 11

What is APR?

Answer 11

Annual Percentage Rates which is the cost paid per year to borrow money expressed as a percentage

Question 12

What is interest?

Answer 12

The additional fee that will need to be paid on top of any money borrowed via credit card

Question 13

What is a transfer fee?

Answer 13

This is the amount of interest paid on top of the amount of money that is transferred to another credit card

Question 14

What is AER?

Answer 14

Annual Equivalent Rate, This is the interest which you will be paid by the bank by saving

Question 15

What is a current account?

Answer 15

A current account is a type of bank account most people use for day-to-day personal finances

Question 16

Types of current account

Answer 16

• Standard
• Basic
• Premium
• Student

Question 17

Advantages of a standard account

Answer 17

• Widely Available
• Overdraft facility
• Range of Services

Question 18

Disadvantages of a standard account

Answer 18

• Limited additional benefits
• Charges on overdraft
• Late fees for overdue payments

Question 19

Advantages of a premium account

Answer 19

• Range of services
• Additional benefits
• Ease of controlling finances

Question 20

Disadvantages of a premium account

Answer 20

• Charges additional fees
• Generic rather than tailored to the individual so some of the added benefits may be useless

Question 21

Advantages of a basic account

Question 22

Disadvantages of a basic account

Question 23

Advantages of a student account

Question 24

Disadvantages of a student account

Question 25

Types of car purchase option

Answer 25

* Pay outright * Car Finance * Part exchange

Question 26

Types of car payment plans

Answer 26

* Hire purchase * Payment control plan

Question 27

What is a hire purchase?

Answer 27

A monthly payment plan with a deposit which after the last installment of the payment, the car is yours

Question 28

What is a payment control plan?

Answer 28

A monthly payment plan (low cost) with a deposit which after the last installment of the payment, you can pay a balloon payment to buy the car

Question 29

What is car finance?

Answer 29

A loan to pay for PCP agreement over 36 to 60 months

Question 30

What is an overdraft?

Answer 30

An overdraft lets you borrow money through your current account by taking out more money than you have in the account

Question 31

Advantages of an overdraft

Answer 31

* Only pay for the money borrowed * Quick and easy to arrange * No charge for paying off the overdraft * Only borrowed when required allowing for flexibility

Question 32

Disadvantages of an overdraft

Answer 32

* The bank can call it in at anytime

Question 33

What is a personal loan?

Answer 33

A set amount of money provided to an individual or couple, for a specific purpose, to be repaid with interest, over a set period of time and may be secured against an asset

Question 34

What is a mortgage?

Answer 34

A long-term loan to fund the purchase of an expensive item that will hold value over a long time

Question 35

What is a payday loan?

Answer 35

A short-term loan, for a relatively small amount of money, to be repaid, upon receipt of the lenders next wage

Question 36

What is investment?

Answer 36

When money is put into an asset to generate profit

Question 37

What does an ISA stands

Answer 37

Individual Saving Account