Finance unit 2

• What are investment companies designed for?

  To invest money for profit
• What is the purpose of insurance products?

  To provide financial protection against risks
• What is the premium in an insurance policy?

  It is the payment made for coverage
• How do savings accounts work?

  They provide interest on deposited money
• What is the advantage of pooling money in investment companies?

  It reduces the risk for individual investors
• What is the main role of building societies?

  To provide savings and loan facilities
• What is the difference between current accounts and savings accounts?

  Current accounts allow daily transactions
• What is a mortgage?

  A loan for purchasing property
• What is the purpose of financial planning?

  To manage money and achieve goals
• How does risk affect investment decisions?

  Higher risk can lead to higher returns
• What are gilts?

  Government-issued bonds for investment
• What is the main benefit of diversifying investments?

  It reduces the overall risk of loss
• What is the difference between needs and wants in financial planning?

  Needs are essential; wants are optional
• What is the significance of setting measurable financial objectives?

  It helps track progress towards goals
• How do personal circumstances affect financial planning?

  They determine the individual's financial goals
• What is compounding in finance?

  Interest calculated on initial principal
• What is the role of the Prudential Regulation Authority (PRA)?

  To regulate financial institutions in the UK
• What does AER stand for in finance?

  Annual Equivalent Rate
• What is the purpose of a credit union?

  To provide savings and loan services to members
• How does age affect financial planning?

  It influences financial goals and needs
• What is the main purpose of bonds?

  To provide fixed interest income
• What is the impact of interest rates on savings?

  Higher rates increase savings growth
• How do financial objectives change over time?

  They adapt to life stages and circumstances
• What is the function of the Financial Conduct Authority (FCA)?

  To regulate financial markets and protect consumers
• What is the significance of having an emergency fund?

  It provides financial security during crises
• How does the risk of political interference affect investments?

  It increases uncertainty and potential losses
• What is the main role of banks?

  To provide financial services and loans
• What is the difference between short-term and long-term financial planning?

  Short-term is under 12 months; long-term is over 5 years
• How do financial objectives help in personal financial planning?

  They guide decisions and resource allocation
• What is the purpose of a personal allowance in income tax?

  To determine tax-free income amount
• What is the role of a financial planner?

  To help individuals set and achieve financial goals
• How does the concept of risk tolerance affect investment choices?

  It determines the level of acceptable risk
• What is the main benefit of having a diversified investment portfolio?

  It minimizes risk across different assets
• What is the significance of setting financial priorities?

  It helps focus on achieving important goals
• How do life stages influence financial planning?

  They affect financial needs and objectives
• What is the purpose of a financial co-operative?

  To benefit its members through shared services
• What is the impact of economic history on investment risk?

  It influences investor confidence and stability
• How does the risk of corruption affect investment in small countries?

  It increases the perceived risk of loss
• What is the main purpose of specialist investments?

  To achieve high returns through high risk
• What is the difference between short-term and long-term financial objectives?

  Short-term objectives are immediate; long-term are future-focused