Specimen Paper B - Unit 2 - Practices of Managing Money (PMM)

Carina Storm
Quiz by Carina Storm, updated more than 1 year ago
Carina Storm
Created by Carina Storm about 2 years ago
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Level 2 PERSONAL FINANCE (CeFF) Quiz on Specimen Paper B - Unit 2 - Practices of Managing Money (PMM), created by Carina Storm on 03/23/2019.

Resource summary

Question 1

Question
Where would be the best place to keep money for an emergency fund?
Answer
  • In a long-term fixed deposit account
  • In a safe place at home
  • In an instant-access savings account
  • With an adviser

Question 2

Question
The best person to get impartial financial advice from would be:
Answer
  • a building society adviser
  • a friend or family member
  • a solicitor
  • an independent financial adviser

Question 3

Question
Planning can be undertaken for the short, medium or long term. What period of time would be classified as 'medium term'?
Answer
  • 1 to 12 months
  • 1 to 5 years
  • 7 to 15 years
  • 10 to 20 years

Question 4

Question
Which of the following is the most accurate definition of budgeting?
Answer
  • Borrowing money from the bank
  • Checking your bank statement regularly
  • Estimating money coming in and going out over a period of time
  • Using online banking to track transactions

Question 5

Question
Tom has a fixed-rate loan. If interest rates go up, what will be the immediate impact, if anything, on Tom's loan repayments? They will:
Answer
  • fall by the rate of inflation
  • go up
  • reduce, but rise over time
  • remain unchanged

Question 6

Question
A weakening in UK pound sterling would lead to:
Answer
  • a boost in the UK's economy
  • cheaper imports
  • more expensive exports
  • reduced production in the UK

Question 7

Question
In terms of the impact of personal spending on the economy, which of the following statements is true? Increased personal spending generally creates:
Answer
  • higher levels of unemployment
  • increased company profits
  • lower receipts for the government
  • reduced personal income

Question 8

Question
Where would you find a 'card security code'?
Answer
  • Along the bottom of a cheque
  • In the top right-hand corner of a cheque
  • On the back of a debit card
  • On the front of a debit card

Question 9

Question
What is someone looking for if they want to make sure they are getting the best goods for the cash they have available?
Answer
  • The longest guarantees
  • The lowest-priced deals
  • The most expensive goods
  • Value for money

Question 10

Question
When purchasing tickets online for a theatre show, what hidden charges might apply? The:
Answer
  • cost of a programme at the theatre
  • drinks during the interval at the show
  • face value of the ticket
  • online booking fee

Question 11

Question
Which of the following is the easiest and most effective way to shop around?
Answer
  • Reading the adverts in a local newspaper
  • Spending the afternoon in a large department store
  • Using price-comparison websites
  • Visiting the town centre for the day

Question 12

Question
Which of the following measures could a government take to help reduce personal spending?
Answer
  • A combination of raising taxes and cutting government spending
  • Cutting government spending
  • Neither cutting government spending nor raising
  • Raising taxes

Question 13

Question
An example of a 'good' debt is:
Answer
  • a mortgage to buy a house
  • a payday loan
  • using a credit card to pay for a holiday
  • using an overdraft to buy clothes for a night out

Question 14

Question
When would an overdraft be useful?
Answer
  • To buy a property
  • To buy an expensive item such as a car
  • When extra money is needed for a short period of time
  • Where extra money is required over a long period

Question 15

Question
Which of the following can be issued to an individual who is unable to pay a debt to another individual or company?
Answer
  • County court judgment
  • Debt confirmation receipt
  • Legal repayment instruction
  • Repayment request notice

Question 16

Question
Case Study 1 Viren has a full-time job with a bank in London. He has been studying part-time for a degree in accounting and finance, which he is confident will help him to achieve his career aspirations. He has a total annual gross salary of £31,000 which is paid directly by his employer at the end of each calendar month. His tax code is 1100L. While he has enjoyed working for the bank and has learned a lot, he is keen to leave and broaden his experience. In addition, he would like to get more involved with helping small businesses to grow. He has therefore decided to leave the bank and become a self-employed business consultant. He has handed in his notice at work and will leave the bank in one month’s time. Question: In his current job at the bank, what class of National Insurance contributions would Viren make?
Answer
  • Class 1
  • Class 2
  • Class 3
  • Class 4

Question 17

Question
Case Study 1 Viren has a full-time job with a bank in London. He has been studying part-time for a degree in accounting and finance, which he is confident will help him to achieve his career aspirations. He has a total annual gross salary of £31,000 which is paid directly by his employer at the end of each calendar month. His tax code is 1100L. While he has enjoyed working for the bank and has learned a lot, he is keen to leave and broaden his experience. In addition, he would like to get more involved with helping small businesses to grow. He has therefore decided to leave the bank and become a self-employed business consultant. He has handed in his notice at work and will leave the bank in one month’s time. Question: When Viren becomes self-employed, his tax year will run between which two dates?
Answer
  • 1 January one year to 31 December the same year
  • 31 January one year to 30 January the next year
  • 6 April one year to 5 April the next year
  • 1 July one year to 30 June the next year

Question 18

Question
Case Study 1 Viren has a full-time job with a bank in London. He has been studying part-time for a degree in accounting and finance, which he is confident will help him to achieve his career aspirations. He has a total annual gross salary of £31,000 which is paid directly by his employer at the end of each calendar month. His tax code is 1100L. While he has enjoyed working for the bank and has learned a lot, he is keen to leave and broaden his experience. In addition, he would like to get more involved with helping small businesses to grow. He has therefore decided to leave the bank and become a self-employed business consultant. He has handed in his notice at work and will leave the bank in one month’s time. Question: When Viren leaves his current job he will receive a:
Answer
  • P15
  • P45
  • P60
  • P90

Question 19

Question
Case Study 1 Viren has a full-time job with a bank in London. He has been studying part-time for a degree in accounting and finance, which he is confident will help him to achieve his career aspirations. He has a total annual gross salary of £31,000 which is paid directly by his employer at the end of each calendar month. His tax code is 1100L. While he has enjoyed working for the bank and has learned a lot, he is keen to leave and broaden his experience. In addition, he would like to get more involved with helping small businesses to grow. He has therefore decided to leave the bank and become a self-employed business consultant. He has handed in his notice at work and will leave the bank in one month’s time. Question: How much of Viren's current annual salary is subject to income tax?
Answer
  • £15,000
  • £20,000
  • £25,000
  • £30,000

Question 20

Question
Case Study 2 Christina and Derek need to buy a new car to commute each day. They have seen a car costing £9,000 but have yet to decide how to fund it. The choices available to them are:  Using their joint credit card (variable interest rate 18.9%), making minimum repayments each month.  Taking up the dealer’s offer of a fixed-rate personal loan at 9.9% over 5 years.  Borrowing the money, interest-free, from Derek’s parents.  Using their emergency fund. Christina and Derek also have a mortgage, which has just come to the end of its fixed rate. The current variable rate is 4.69%. They are concerned about how future interest rate rises might impact on their mortgage payments and on any car loan payments they might have. In addition, Derek has an outstanding student loan and Christina has an outstanding balance on her store card, which she uses to buy clothes. Question: Which of the following represents the most costly way for Christina and Derek to buy their new car?
Answer
  • The dealer's loan
  • The loan from Derek's parents
  • Their existing savings
  • Their joint credit card

Question 21

Question
Case Study 2 Christina and Derek need to buy a new car to commute each day. They have seen a car costing £9,000 but have yet to decide how to fund it. The choices available to them are:  Using their joint credit card (variable interest rate 18.9%), making minimum repayments each month.  Taking up the dealer’s offer of a fixed-rate personal loan at 9.9% over 5 years.  Borrowing the money, interest-free, from Derek’s parents.  Using their emergency fund. Christina and Derek also have a mortgage, which has just come to the end of its fixed rate. The current variable rate is 4.69%. They are concerned about how future interest rate rises might impact on their mortgage payments and on any car loan payments they might have. In addition, Derek has an outstanding student loan and Christina has an outstanding balance on her store card, which she uses to buy clothes. Question: If interest rates increase, what will be the impact on Christina and Derek's budget?
Answer
  • A decrease in monthly mortgage repayments and therefore more spending money
  • An increase in monthly mortgage repayments and therefore an increase in spending money
  • An increase in monthly mortgage repayments and therefore less spending money
  • No impact on monthly mortgage repayments or spending money

Question 22

Question
Case Study 2 Christina and Derek need to buy a new car to commute each day. They have seen a car costing £9,000 but have yet to decide how to fund it. The choices available to them are:  Using their joint credit card (variable interest rate 18.9%), making minimum repayments each month.  Taking up the dealer’s offer of a fixed-rate personal loan at 9.9% over 5 years.  Borrowing the money, interest-free, from Derek’s parents.  Using their emergency fund. Christina and Derek also have a mortgage, which has just come to the end of its fixed rate. The current variable rate is 4.69%. They are concerned about how future interest rate rises might impact on their mortgage payments and on any car loan payments they might have. In addition, Derek has an outstanding student loan and Christina has an outstanding balance on her store card, which she uses to buy clothes. Question: Which of Derek and Christina's debts would be classified as a 'bad' debt?
Answer
  • Christina's outstanding store card balance
  • Derek's student loan
  • The proposed car loan
  • Their mortgage

Question 23

Question
Case Study 2 Christina and Derek need to buy a new car to commute each day. They have seen a car costing £9,000 but have yet to decide how to fund it. The choices available to them are:  Using their joint credit card (variable interest rate 18.9%), making minimum repayments each month.  Taking up the dealer’s offer of a fixed-rate personal loan at 9.9% over 5 years.  Borrowing the money, interest-free, from Derek’s parents.  Using their emergency fund. Christina and Derek also have a mortgage, which has just come to the end of its fixed rate. The current variable rate is 4.69%. They are concerned about how future interest rate rises might impact on their mortgage payments and on any car loan payments they might have. In addition, Derek has an outstanding student loan and Christina has an outstanding balance on her store card, which she uses to buy clothes. Question: If consumer spending slows down overall, how will this benefit Derek and Christina? It is likely to lead to:
Answer
  • economic growth
  • higher inflation
  • higher interest rates
  • lower interest rates

Question 24

Question
Case Study 3 Max, aged 49, lives in a rented flat ten miles away from the university where he works. There is no public transport and Max needs his car to travel to and from work each day. Max had debt problems after losing his previous job in 2009 due to the financial crisis, but has managed to avoid borrowing money for the last four years. As a result, his credit rating is now satisfactory and he has access to a £150 overdraft facility with his bank. He has no savings and has only £120 in his bank account. Max is due to receive his monthly salary into his account in two weeks’ time, but his car has just broken down and will cost £340 to repair. The garage has offered to lend him a car while the repairs are carried out. Question: Which of the following represents the cost to Max of borrowing money using his overdraft?
Answer
  • Inflation
  • Interest
  • Principle
  • Repayments

Question 25

Question
Case Study 3 Max, aged 49, lives in a rented flat ten miles away from the university where he works. There is no public transport and Max needs his car to travel to and from work each day. Max had debt problems after losing his previous job in 2009 due to the financial crisis, but has managed to avoid borrowing money for the last four years. As a result, his credit rating is now satisfactory and he has access to a £150 overdraft facility with his bank. He has no savings and has only £120 in his bank account. Max is due to receive his monthly salary into his account in two weeks’ time, but his car has just broken down and will cost £340 to repair. The garage has offered to lend him a car while the repairs are carried out. Question: Max uses his overdraft to pay for the car repairs, what will he have to do in future months?
Answer
  • Decrease his discretionary spending
  • Decrease his mandatory expenditure
  • Increase his discretionary spending
  • Increase his mandatory expenditure

Question 26

Question
Case Study 3 Max, aged 49, lives in a rented flat ten miles away from the university where he works. There is no public transport and Max needs his car to travel to and from work each day. Max had debt problems after losing his previous job in 2009 due to the financial crisis, but has managed to avoid borrowing money for the last four years. As a result, his credit rating is now satisfactory and he has access to a £150 overdraft facility with his bank. He has no savings and has only £120 in his bank account. Max is due to receive his monthly salary into his account in two weeks’ time, but his car has just broken down and will cost £340 to repair. The garage has offered to lend him a car while the repairs are carried out. Question: The financial crisis of 2009 was partially caused by too many people:
Answer
  • being employed in the manufacturing sector
  • being employed in the service sector
  • borrowing money at low interest rates
  • emigrating overseas

Question 27

Question
Case Study 3 Max, aged 49, lives in a rented flat ten miles away from the university where he works. There is no public transport and Max needs his car to travel to and from work each day. Max had debt problems after losing his previous job in 2009 due to the financial crisis, but has managed to avoid borrowing money for the last four years. As a result, his credit rating is now satisfactory and he has access to a £150 overdraft facility with his bank. He has no savings and has only £120 in his bank account. Max is due to receive his monthly salary into his account in two weeks’ time, but his car has just broken down and will cost £340 to repair. The garage has offered to lend him a car while the repairs are carried out. Question: Max exceeds his authorised overdraft without first agreeing it with the bank. The immediate consequence of this will be:
Answer
  • his car being repossessed by bailiffs
  • Max applying for a bankruptcy order
  • Max incurring extra fees and charges from the bank
  • the bank applying for a debt relief order

Question 28

Question
Case Study 4 After 35 years of continuous employment, Alan has stopped working and is now reliant on the state pension and a small private pension for his income. While he is in good overall health, his hearing deteriorated in recent years and he is now deaf. He has always been a good financial planner and is very cautious. For many years he has managed to put some money aside each month in case anything goes wrong at home unexpectedly. As Alan lives in an isolated area, he is grateful that he has managed to keep pace with changes in technology, and he enjoys Skyping his children. If something can be done via the internet then that is his preference. He would now like to learn how to use an online budget planner and wonders where he could find one. Question: Which government-appointed body can offer Alan online tools to help him plan his finances?
Answer
  • Financial Conduct Authority
  • Financial Services Compensation Scheme
  • Money Advice Service
  • StepChange Debt Charity

Question 29

Question
Case Study 4 After 35 years of continuous employment, Alan has stopped working and is now reliant on the state pension and a small private pension for his income. While he is in good overall health, his hearing deteriorated in recent years and he is now deaf. He has always been a good financial planner and is very cautious. For many years he has managed to put some money aside each month in case anything goes wrong at home unexpectedly. As Alan lives in an isolated area, he is grateful that he has managed to keep pace with changes in technology, and he enjoys Skyping his children. If something can be done via the internet then that is his preference. He would now like to learn how to use an online budget planner and wonders where he could find one. Question: At which stage of the personal life cycle is Alan?
Answer
  • Mature adult
  • Middle age
  • Old age
  • Young adult

Question 30

Question
Case Study 4 After 35 years of continuous employment, Alan has stopped working and is now reliant on the state pension and a small private pension for his income. While he is in good overall health, his hearing deteriorated in recent years and he is now deaf. He has always been a good financial planner and is very cautious. For many years he has managed to put some money aside each month in case anything goes wrong at home unexpectedly. As Alan lives in an isolated area, he is grateful that he has managed to keep pace with changes in technology, and he enjoys Skyping his children. If something can be done via the internet then that is his preference. He would now like to learn how to use an online budget planner and wonders where he could find one. Question: Given his circumstances, which of the following methods of banking is Alan likely to prefer?
Answer
  • Branch-based banking
  • Online banking
  • Postal banking
  • Telephone banking

Question 31

Question
Case Study 4 After 35 years of continuous employment, Alan has stopped working and is now reliant on the state pension and a small private pension for his income. While he is in good overall health, his hearing deteriorated in recent years and he is now deaf. He has always been a good financial planner and is very cautious. For many years he has managed to put some money aside each month in case anything goes wrong at home unexpectedly. As Alan lives in an isolated area, he is grateful that he has managed to keep pace with changes in technology, and he enjoys Skyping his children. If something can be done via the internet then that is his preference. He would now like to learn how to use an online budget planner and wonders where he could find one. Question: Alan's electricity bill varies considerably each month. Which is the most convenient payment method for him to use to pay the bill?
Answer
  • Cash
  • Cheque
  • Direct debit
  • Standing order

Question 32

Question
Case Study 5 Suzi, a full-time student, has just celebrated her 21st birthday. For her birthday she received £1,000 cash, which she plans to use to buy a new coat, some shoes and sunglasses. Suzi's parents had hoped that she would save at least some of the money, but Suzi wants to treat herself as it is a special birthday. Suzi’s parents are more than a little concerned about Suzi’s finances in general, as she tends to have more money going out each month than she has coming in. Suzi is interested in fashion and is always reading magazines featuring the latest brands and trends, but she understands the importance of shopping around and hopes to have at least a little money left over. Question: Which of the following factors most shapes Suzi's spending habits?
Answer
  • Anticipated changes in interest rates
  • Government predictions for inflation
  • Suzi's own attitude towards money
  • Suzi's parents' attitudes towards money

Question 33

Question
Case Study 5 Suzi, a full-time student, has just celebrated her 21st birthday. For her birthday she received £1,000 cash, which she plans to use to buy a new coat, some shoes and sunglasses. Suzi's parents had hoped that she would save at least some of the money, but Suzi wants to treat herself as it is a special birthday. Suzi’s parents are more than a little concerned about Suzi’s finances in general, as she tends to have more money going out each month than she has coming in. Suzi is interested in fashion and is always reading magazines featuring the latest brands and trends, but she understands the importance of shopping around and hopes to have at least a little money left over. Question: At Suzi's stage of the personal life cycle, which of the following is likely to be of most importance to her?
Answer
  • Protecting her income in the event of death
  • Protecting her income in the event of illness
  • Saving for retirement
  • The need for independence and her own space

Question 34

Question
Case Study 5 Suzi, a full-time student, has just celebrated her 21st birthday. For her birthday she received £1,000 cash, which she plans to use to buy a new coat, some shoes and sunglasses. Suzi's parents had hoped that she would save at least some of the money, but Suzi wants to treat herself as it is a special birthday. Suzi’s parents are more than a little concerned about Suzi’s finances in general, as she tends to have more money going out each month than she has coming in. Suzi is interested in fashion and is always reading magazines featuring the latest brands and trends, but she understands the importance of shopping around and hopes to have at least a little money left over. Question: Suzi's approach of shopping around could help her avoid:
Answer
  • a budget deficit
  • a budget surplus
  • a credit rating
  • value added tax

Question 35

Question
Case Study 5 Suzi, a full-time student, has just celebrated her 21st birthday. For her birthday she received £1,000 cash, which she plans to use to buy a new coat, some shoes and sunglasses. Suzi's parents had hoped that she would save at least some of the money, but Suzi wants to treat herself as it is a special birthday. Suzi’s parents are more than a little concerned about Suzi’s finances in general, as she tends to have more money going out each month than she has coming in. Suzi is interested in fashion and is always reading magazines featuring the latest brands and trends, but she understands the importance of shopping around and hopes to have at least a little money left over. Question: Cutting back on what type of expenditure would be the most effective way for Suzi to deal with any budget deficit?
Answer
  • Compulsory
  • Discretionary
  • Essential
  • Mandatory
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