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

Where would be the best place to keep money for an emergency fund?

The best person to get impartial financial advice from would be:

Planning can be undertaken for the short, medium or long term. What period of time would be classified as 'medium term'?

Which of the following is the most accurate definition of budgeting?

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:

A weakening in UK pound sterling would lead to:

In terms of the impact of personal spending on the economy, which of the following statements is true? Increased personal spending generally creates:

Where would you find a 'card security code'?

What is someone looking for if they want to make sure they are getting the best goods for the cash they have available?

When purchasing tickets online for a theatre show, what hidden charges might apply? The:

Which of the following is the easiest and most effective way to shop around?

Which of the following measures could a government take to help reduce personal spending?

An example of a 'good' debt is:

When would an overdraft be useful?

Which of the following can be issued to an individual who is unable to pay a debt to another individual or company?

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?

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?

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:

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?

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?

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?

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?

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:

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?

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?

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:

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:

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?

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?

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?

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?

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?

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?

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:

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?