Carina Storm
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Level 2 PERSONAL FINANCE (CeFF) Quiz on Specimen Paper A - Unit 2 - Practices of Managing Money (FIS), created by Carina Storm on 10/02/2019.

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Specimen Paper A - Unit 2 - Practices of Managing Money (FIS)

Question 1 of 35

1

A sensible minimum amount for an emergency fund for most families would be three to six months':

Select one of the following:

  • discretionary expenditure

  • disposable income

  • essential expenditure

  • gross income

Explanation

Question 2 of 35

1

Collective funds are typically offered by:

Select one of the following:

  • building societies

  • insurance companies

  • investment companies

  • mortgage brokers

Explanation

Question 3 of 35

1

For a young adult, which of the following would typically be classed as a long-term financial plan?
Saving for:

Select one of the following:

  • a holiday in 12 months' time

  • a new car

  • college

  • their retirement

Explanation

Question 4 of 35

1

An example of unearned income is:

Select one of the following:

  • Bonuses

  • Overtime

  • Rental income

  • Sales commission

Explanation

Question 5 of 35

1

An increase in interest rates could lead to a budget deficit for an individual with which of the following financial products?

Select one of the following:

  • Fixed-rate mortgage

  • Fixed-rate savings

  • Variable-rate mortgage

  • Variable-rate savings

Explanation

Question 6 of 35

1

If the pound weakens against the euro then:

Select one of the following:

  • Exports from the UK to the eurozone become cheaper

  • Fewer tourists will visit the UK from eurozone countries

  • Imports from the eurozone to the UK become cheaper

  • Interest rates in the UK will rise

Explanation

Question 7 of 35

1

Increased company profits generally lead to:

Select one of the following:

  • Higher levels of unemployment

  • Lower government tax receipts

  • Lower personal income

  • Reduced government borrowing

Explanation

Question 8 of 35

1

Which of the following is a way to pay regular bills that vary in amount?

Select one of the following:

  • Bacs

  • Direct debit

  • Faster Payments

  • Standing order

Explanation

Question 9 of 35

1

Which of the following is a correct definition of 'value for money'?

Select one of the following:

  • A budget product

  • A low-cost brand

  • The cheapest product

  • The right product at the right price

Explanation

Question 10 of 35

1

Which of the following taxes is included in the price of many of the goods we buy?

Select one of the following:

  • Capital gains tax

  • Corporation tax

  • Income tax

  • Value added tax

Explanation

Question 11 of 35

1

Which of the following transactions is likely to incur a service charge?

Select one of the following:

  • A face-to-face train ticket purchase

  • An online air-ticket purchase via credit card

  • Children's clothes bought on the high street

  • Food purchased from a supermarket

Explanation

Question 12 of 35

1

An impact of reduced consumer spending is increased levels of:

Select one of the following:

  • Employment

  • Government borrowing

  • Personal income

  • Taxation receipts

Explanation

Question 13 of 35

1

An example of a good debt is:

Select one of the following:

  • A car loan for business use

  • A payday loan

  • Borrowing for a holiday

  • Borrowing for designer clothes

Explanation

Question 14 of 35

1

Which of the following payment methods makes it harder to stick to a budget?

Select one of the following:

  • Coins

  • Credit card

  • Debit card

  • Notes

Explanation

Question 15 of 35

1

Which of the following is a legal option that can be used by those with unmanageable debts and an income of less than £50 per month after household expenses?

Select one of the following:

  • Bankruptcy

  • County court judgment

  • Debt relief order

  • Individual voluntary arrangement

Explanation

Question 16 of 35

1

Case Study 1
Joe and Natalie have been married for two years and live in a small flat. Natalie runs a mobile hairdressing business and is self-employed. Last year she earned an income of £17,000 and incurred business expenses of £2,000. Joe owns a second property, which he inherited from his aunt. He rents this property out through an agency and receives £600 a month rental income from the agency directly into his current account.
Joe is a construction worker and earns a salary of £18,000. His contract states that he must work 38 hours a week; if he works more than 38 hours a week he may claim overtime. The workers at Joe’s firm also receive a quarterly bonus when jobs are completed on time. Joe’s last monthly payslip included the following information:

Tax code: 1185L
 Basic pay: £1,500
 Overtime: £500

Question:
Which of the following sources of income will not appear on Joe's payslip?

Select one of the following:

  • Bonus

  • Income tax

  • Property

  • Salary

Explanation

Question 17 of 35

1

Case Study 1
Joe and Natalie have been married for two years and live in a small flat. Natalie runs a mobile hairdressing business and is self-employed. Last year she earned an income of £17,000 and incurred business expenses of £2,000. Joe owns a second property, which he inherited from his aunt. He rents this property out through an agency and receives £600 a month rental income from the agency directly into his current account.
Joe is a construction worker and earns a salary of £18,000. His contract states that he must work 38 hours a week; if he works more than 38 hours a week he may claim overtime. The workers at Joe’s firm also receive a quarterly bonus when jobs are completed on time. Joe’s last monthly payslip included the following information:

Tax code: 1185L
 Basic pay: £1,500
 Overtime: £500

Question:
Because Natalie is self-employed she will pay tax based on her:

Select one of the following:

  • Annual income

  • Annual income after deductible business expenses

  • Monthly income

  • Monthly income after deductible business expenses

Explanation

Question 18 of 35

1

Case Study 1
Joe and Natalie have been married for two years and live in a small flat. Natalie runs a mobile hairdressing business and is self-employed. Last year she earned an income of £17,000 and incurred business expenses of £2,000. Joe owns a second property, which he inherited from his aunt. He rents this property out through an agency and receives £600 a month rental income from the agency directly into his current account.
Joe is a construction worker and earns a salary of £18,000. His contract states that he must work 38 hours a week; if he works more than 38 hours a week he may claim overtime. The workers at Joe’s firm also receive a quarterly bonus when jobs are completed on time. Joe’s last monthly payslip included the following information:

Tax code: 1185L
 Basic pay: £1,500
 Overtime: £500

Question:
What form will Joe's employer send to him after the end of each tax year to confirm his annual earnings and deductions?

Select one of the following:

  • P45

  • P60

  • Payslip

  • Self-assessment

Explanation

Question 19 of 35

1

Case Study 1
Joe and Natalie have been married for two years and live in a small flat. Natalie runs a mobile hairdressing business and is self-employed. Last year she earned an income of £17,000 and incurred business expenses of £2,000. Joe owns a second property, which he inherited from his aunt. He rents this property out through an agency and receives £600 a month rental income from the agency directly into his current account.
Joe is a construction worker and earns a salary of £18,000. His contract states that he must work 38 hours a week; if he works more than 38 hours a week he may claim overtime. The workers at Joe’s firm also receive a quarterly bonus when jobs are completed on time. Joe’s last monthly payslip included the following information:

Tax code: 1185L
 Basic pay: £1,500
 Overtime: £500

Question:
According to Joe's payslip, how much tax-free income is he entitled to in the current tax year?

Select one of the following:

  • £1,185

  • £1,500

  • £11,850

  • £15,000

Explanation

Question 20 of 35

1

Case Study 2
Karen and Ian have decided to update their kitchen. Their dream kitchen will cost £12,000 to buy.
They have £12,300 in a savings account earning interest at a rate of 3.5% per annum. They are thinking about using these savings but are considering other options as they are concerned that this course of action would use up most of their emergency fund.
They are worried that, in the event of a further recession, one or both of them might lose their jobs. If they did use their existing savings, they would want to immediately start putting money aside each month to build them back up again. The other options are:
- using their joint credit card with a variable interest rate of 18.9%, making the minimum repayments each month and then whatever extra they can afford.
- taking up the store credit offer of paying nothing for 12 months and then paying off the kitchen over 4 years at a fixed rate of 9.9%.
- taking out a personal loan at a fixed rate of 8.9% for 5 years.

Question:
Which of the following would be the cheapest way for Karen and Ian to buy their new kitchen?

Select one of the following:

  • A personal loan

  • The store loan

  • Their credit card

  • Their existing savings

Explanation

Question 21 of 35

1

Case Study 2
Karen and Ian have decided to update their kitchen. Their dream kitchen will cost £12,000 to buy.
They have £12,300 in a savings account earning interest at a rate of 3.5% per annum. They are thinking about using these savings but are considering other options as they are concerned that this course of action would use up most of their emergency fund.
They are worried that, in the event of a further recession, one or both of them might lose their jobs. If they did use their existing savings, they would want to immediately start putting money aside each month to build them back up again. The other options are:
- using their joint credit card with a variable interest rate of 18.9%, making the minimum repayments each month and then whatever extra they can afford.
- taking up the store credit offer of paying nothing for 12 months and then paying off the kitchen over 4 years at a fixed rate of 9.9%.
- taking out a personal loan at a fixed rate of 8.9% for 5 years.

Question:
Which of the available options would have the least impact on Karen and Ian's financial budget in the short term?

Select one of the following:

  • Credit card

  • Existing savings

  • Personal loan

  • Store loan

Explanation

Question 22 of 35

1

Case Study 2
Karen and Ian have decided to update their kitchen. Their dream kitchen will cost £12,000 to buy.
They have £12,300 in a savings account earning interest at a rate of 3.5% per annum. They are thinking about using these savings but are considering other options as they are concerned that this course of action would use up most of their emergency fund.
They are worried that, in the event of a further recession, one or both of them might lose their jobs. If they did use their existing savings, they would want to immediately start putting money aside each month to build them back up again. The other options are:
- using their joint credit card with a variable interest rate of 18.9%, making the minimum repayments each month and then whatever extra they can afford.
- taking up the store credit offer of paying nothing for 12 months and then paying off the kitchen over 4 years at a fixed rate of 9.9%.
- taking out a personal loan at a fixed rate of 8.9% for 5 years.

Question:
Which of the available options would cause the most damage to Karen and Ian's budget in the event of interest rate rises?

Select one of the following:

  • Credit card

  • Existing savings

  • Personal loan

  • Store loan

Explanation

Question 23 of 35

1

Case Study 2
Karen and Ian have decided to update their kitchen. Their dream kitchen will cost £12,000 to buy.
They have £12,300 in a savings account earning interest at a rate of 3.5% per annum. They are thinking about using these savings but are considering other options as they are concerned that this course of action would use up most of their emergency fund.
They are worried that, in the event of a further recession, one or both of them might lose their jobs. If they did use their existing savings, they would want to immediately start putting money aside each month to build them back up again. The other options are:
- using their joint credit card with a variable interest rate of 18.9%, making the minimum repayments each month and then whatever extra they can afford.
- taking up the store credit offer of paying nothing for 12 months and then paying off the kitchen over 4 years at a fixed rate of 9.9%.
- taking out a personal loan at a fixed rate of 8.9% for 5 years.

Question:
Although they are right to be concerned about a future recession, Karen and Ian might be interested to learn that consumer spending tends to:

Select one of the following:

  • Decrease employment levels

  • Increase employment level

  • Lead to a weakening of the economy

  • Lead to an economic slump

Explanation

Question 24 of 35

1

Case Study 3
Shona has a full-time job earning £25,000 a year. She currently lives with her mum and dad and pays them £200 a month in rent. She has calculated that if she lived in a flat of her own, she would spend
£12,000 a year on mortgage payments and other bills, leaving her with plenty of disposable income.
Her mum has checked over her figures but is concerned that Shona’s finances would become stretched if interest rates were to rise.
Shona has a one-year loan for £1,000 with an annual interest rate of 8%. Shona’s mum has suggested that Shona meet with a financial adviser to talk about what would happen if she became ill and was not able to meet her mortgage payments.

Question:
How much interest is Shona paying on her personal loan each month?

Select one of the following:

  • £6.67

  • £8.00

  • £66.70

  • £80.00

Explanation

Question 25 of 35

1

Case Study 3
Shona has a full-time job earning £25,000 a year. She currently lives with her mum and dad and pays them £200 a month in rent. She has calculated that if she lived in a flat of her own, she would spend
£12,000 a year on mortgage payments and other bills, leaving her with plenty of disposable income.
Her mum has checked over her figures but is concerned that Shona’s finances would become stretched if interest rates were to rise.
Shona has a one-year loan for £1,000 with an annual interest rate of 8%. Shona’s mum has suggested that Shona meet with a financial adviser to talk about what would happen if she became ill and was not able to meet her mortgage payments.

Question:
Whose legal responsibility is it to check that Shona will be able to continue to afford her monthly mortgage repayments if interest rates rise?

Select one of the following:

  • Shona herself

  • Shona's financial adviser

  • Shona's mortgage lender

  • Shona's mum and dad

Explanation

Question 26 of 35

1

Case Study 3
Shona has a full-time job earning £25,000 a year. She currently lives with her mum and dad and pays them £200 a month in rent. She has calculated that if she lived in a flat of her own, she would spend
£12,000 a year on mortgage payments and other bills, leaving her with plenty of disposable income.
Her mum has checked over her figures but is concerned that Shona’s finances would become stretched if interest rates were to rise.
Shona has a one-year loan for £1,000 with an annual interest rate of 8%. Shona’s mum has suggested that Shona meet with a financial adviser to talk about what would happen if she became ill and was not able to meet her mortgage payments.

Question:
If interest rates were to rise before she took out the mortgage, what impact would this have on Shona's ability to borrow?

Select one of the following:

  • It would be easier for Shona to borrow the amount she wants

  • It would be harder for Shona to borrow the amount she wants

  • It would have no impact on Shona's ability to borrow

  • It would prevent Shona from taking out a mortgage

Explanation

Question 27 of 35

1

Case Study 3
Shona has a full-time job earning £25,000 a year. She currently lives with her mum and dad and pays them £200 a month in rent. She has calculated that if she lived in a flat of her own, she would spend
£12,000 a year on mortgage payments and other bills, leaving her with plenty of disposable income.
Her mum has checked over her figures but is concerned that Shona’s finances would become stretched if interest rates were to rise.
Shona has a one-year loan for £1,000 with an annual interest rate of 8%. Shona’s mum has suggested that Shona meet with a financial adviser to talk about what would happen if she became ill and was not able to meet her mortgage payments.

Question:
If Shona started to miss payments on her personal loan, which of the following would be the first legal step taken by her loan provider? To apply for:

Select one of the following:

  • a county court judgment

  • a debt relief order

  • an individual voluntary arrangement

  • her bankruptcy

Explanation

Question 28 of 35

1

Case Study 4
Sue and Deepak have just retired and both receive a full state pension. Deepak also receives a pension from his previous employer. However, due to Sue’s state of health they are mostly housebound. Their daughter has left home and she has a son aged two.
Sue and Deepak want to make sure that their grandson is well provided for; they have set aside £100 a month for this financial goal. They have been speaking to a financial adviser from their local building society who, because of Sue’s mobility issues, came to visit them in their own home. He explained that he would only be able to recommend a product from the building society’s own product range, but was sure that he would have a suitable savings account for their grandson.

Question:
What type of financial adviser do Sue and Deepak have?

Select one of the following:

  • A multi-tied adviser

  • A restricted adviser

  • A whole-of-market adviser

  • An independent financial adviser

Explanation

Question 29 of 35

1

Case Study 4
Sue and Deepak have just retired and both receive a full state pension. Deepak also receives a pension from his previous employer. However, due to Sue’s state of health they are mostly housebound. Their daughter has left home and she has a son aged two.
Sue and Deepak want to make sure that their grandson is well provided for; they have set aside £100 a month for this financial goal. They have been speaking to a financial adviser from their local building society who, because of Sue’s mobility issues, came to visit them in their own home. He explained that he would only be able to recommend a product from the building society’s own product range, but was sure that he would have a suitable savings account for their grandson.

Question:
Given their stage in the life cycle, which of the following is likely to be a priority for Sue and Deepak?

Select one of the following:

  • Inheritance tax

  • Protecting their income from accidents

  • Protecting their income from illness

  • Saving for their child

Explanation

Question 30 of 35

1

Case Study 4
Sue and Deepak have just retired and both receive a full state pension. Deepak also receives a pension from his previous employer. However, due to Sue’s state of health they are mostly housebound. Their daughter has left home and she has a son aged two.
Sue and Deepak want to make sure that their grandson is well provided for; they have set aside £100 a month for this financial goal. They have been speaking to a financial adviser from their local building society who, because of Sue’s mobility issues, came to visit them in their own home. He explained that he would only be able to recommend a product from the building society’s own product range, but was sure that he would have a suitable savings account for their grandson.

Question:
Given their circumstances, what type of banking is least suitable for Sue and Deepak?

Select one of the following:

  • Branch

  • Mobile

  • Online

  • Telephone

Explanation

Question 31 of 35

1

Case Study 4
Sue and Deepak have just retired and both receive a full state pension. Deepak also receives a pension from his previous employer. However, due to Sue’s state of health they are mostly housebound. Their daughter has left home and she has a son aged two.
Sue and Deepak want to make sure that their grandson is well provided for; they have set aside £100 a month for this financial goal. They have been speaking to a financial adviser from their local building society who, because of Sue’s mobility issues, came to visit them in their own home. He explained that he would only be able to recommend a product from the building society’s own product range, but was sure that he would have a suitable savings account for their grandson.

Question:
Which of the following would be the most appropriate way to transfer £100 each month into their grandson's savings account?

Select one of the following:

  • Credit card

  • Debit card

  • Faster Payments

  • Standing order

Explanation

Question 32 of 35

1

Case Study 5
Priscilla and John are both self-employed. John struggles to pay his bills even though he typically earns £30,000 per year. He earns enough to meet his financial needs, but his earnings are irregular, which causes a cash-flow problem. Therefore, he sometimes uses the overdraft facility on his current account.
Priscilla also earns around £30,000 but her income is more regular. She is in her 50s and is thinking about working less. She is financially secure, her mortgage is paid off, and she has money left over each month. She is thinking about going to see a financial adviser to discuss what her financial priorities should now be.

Question:
Which of the following personal circumstances makes it harder for John to make financial plans than Priscilla?

Select one of the following:

  • Amount of debt held

  • Amount of savings

  • Life events

  • Pattern of income

Explanation

Question 33 of 35

1

Case Study 5
Priscilla and John are both self-employed. John struggles to pay his bills even though he typically earns £30,000 per year. He earns enough to meet his financial needs, but his earnings are irregular, which causes a cash-flow problem. Therefore, he sometimes uses the overdraft facility on his current account.
Priscilla also earns around £30,000 but her income is more regular. She is in her 50s and is thinking about working less. She is financially secure, her mortgage is paid off, and she has money left over each month. She is thinking about going to see a financial adviser to discuss what her financial priorities should now be.

Question:
Given her stage in the life cycle, which of the following is likely to be Priscilla's main priority?

Select one of the following:

  • Buying a home

  • Protecting her mortgage

  • Saving for retirement

  • Supplementing her income

Explanation

Question 34 of 35

1

Case Study 5
Priscilla and John are both self-employed. John struggles to pay his bills even though he typically earns £30,000 per year. He earns enough to meet his financial needs, but his earnings are irregular, which causes a cash-flow problem. Therefore, he sometimes uses the overdraft facility on his current account.
Priscilla also earns around £30,000 but her income is more regular. She is in her 50s and is thinking about working less. She is financially secure, her mortgage is paid off, and she has money left over each month. She is thinking about going to see a financial adviser to discuss what her financial priorities should now be.

Question:
Which of the following is a way in which Priscilla could make best use of her monthly financial surplus?

Select one of the following:

  • Increase her discretionary spending

  • Reduce the cost of her borrowings

  • Save extra each month into a savings account

  • Shop around for the best prices

Explanation

Question 35 of 35

1

Case Study 5
Priscilla and John are both self-employed. John struggles to pay his bills even though he typically earns £30,000 per year. He earns enough to meet his financial needs, but his earnings are irregular, which causes a cash-flow problem. Therefore, he sometimes uses the overdraft facility on his current account.
Priscilla also earns around £30,000 but her income is more regular. She is in her 50s and is thinking about working less. She is financially secure, her mortgage is paid off, and she has money left over each month. She is thinking about going to see a financial adviser to discuss what her financial priorities should now be.

Question:
Which financial tool could help John by enabling him to predict how much cash will be in his bank account at any given point in time?

Select one of the following:

  • Cash-flow forecasting

  • Envelope budgeting

  • Online banking

  • Zero-based budgeting

Explanation

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