Unit 3 LA A Quiz

What is the key function of money that allows trade?

• Legal tender

• Unit of account

• Store of value

• Means of exchange

Answer explanation

Money serves as a means of exchange, facilitating trade by allowing individuals to buy and sell goods and services.

What factors can influence a person's approach to financial management?

• Investment options

• Credit score

• Bank account type

• Physical currency

What is the main advantage of using a credit card?

• No need to carry cash

• Secure method of payment

• Widely accepted

• Allows period of credit e.g. 1 month

What is the main disadvantage of using a payday loan?

• Helps solve immediate short term cash flow problems

• Relatively easy to secure

• Interest rates are very high & the cumulative amount can spiral out of control

• Can be paid off without penalties

What is the main advantage of having an Individual Savings Account (ISA)?

• Interest rates are sometimes slightly higher than in alternative savings accounts

• Tax is not charged on interest earned allowing saver to keep all of the reward for saving

• No guaranteed return on investment

• Chance of winning substantially more than could be earned in interest

What is a significant drawback of maintaining a home insurance policy?

• It provides coverage for personal belongings both inside and outside the house

• It offers protection against costly damages that could lead to loss of the house

• Insurance premiums add to the overall cost of owning a home

• Some items cannot be replaced due to a value beyond the financial worth e.g. jewellery

What is the main advantage of having a life assurance & insurance?

• Provides peace of mind to family following the bereavement of a homeowner

• Protects self against theft or damage

• Protects against cancellation & sometimes delays

• Meets legal requirements

What is the main disadvantage of having a pet insurance?

• Avoids expensive vet fees

• If vet fees are too high, there may be no alternative to having a pet put down – insurance may avoid this

• An additional monthly expense to protect against the unexpected

• Protects against damage which may otherwise be too expensive to repair resulting in the loss of a home

What is the main advantage of having a health insurance?

• If using private care, this often results in quicker treatment & better facilities

• Some compensation is provided when ill which can reduce the financial burden & stress allowing the patient to concentrate on recovery rather than financial worries

• Premiums can be expensive depending upon the degree of cover required

• Paying for something that you hope you will not use

What is the main risk of investing in shares?

• Returns can include dividend payments

• Can go wrong & all or some of the value may be lost

• No guarantee of any reward or return as all of an investment can be lost

• Share price fluctuates offering a potentially high reward