CHAPTER 1

Question 1

Which of the following is NOT a benefit of effective money management?

  1. the protection of personal data,
  2. the maintenance of a healthy credit score,
  3. the fulfilment of personal goals,
  4. improved health and wellbeing.

Correct answer / a.

Question 2

Consider the following statements:

Statement A

The term “financial literacy” refers to a set of competencies and capabilities that allows a person to make informed and effective decisions about their available financial resources

Statement B

The Data Protection Act 1998 is designed to protect personal information held about an individual, and regulates the processing of data relating to individuals.

Which of the following combinations is correct?

  1. Statement A is True and Statement B is True.
  2. Statement A is True and Statement B is False.
  3. Statement A is False and Statement B is True.
  4. Statement A is False and Statement B is False.

Correct answer / a.

Question 3

Processed personal data can:

  1. be retained indefinitely,
  2. be retained for a maximum of 6 years,
  3. be retained for no longer than it is necessary for processing purposes,
  4. not be retained.

Correct answer / c.

Question 4

Which of the following investments would be regarded as a low risk investment/saving?

  1. Company bonds,
  2. ISA’s,
  3. Shares,
  4. Off shore savings accounts.

Correct answer / b.

Question 5

Consider the following statements:

Statement A

Income tax is payable on earned income, employee related benefits in kind, and investment income

Statement B

Capital gains tax is payable on profits/gains made on the sale of property and other investment assets.

Statement C

Inheritance tax is payable on property and money acquired by gift, or by inheritance.

Which of the following combinations is correct?

  1. Statements A, B, and C are True.
  2. Statements A and B are True, and Statement C is False.
  3. Statements A and C are True and Statement B is False.
  4. Statements B and C are True and Statement A is False.

Correct answer / a.

Question 6

What is the purpose of the Data Protection Act 1998?

  1. To regulate the processing of data relating to a Data Subject.
  2. To ensure all data related to an individual in kept confidential.
  3. To ensure that all information related to an individual in kept secure.
  4. To regulate to use of electronic storage and recording of data.

Correct answer / a.

Question 7

How many data processing principles are contained in the Data Protection Act 1998?

  1. 2.
  2. 4.
  3. 6.
  4. 8.

Correct answer / d.

Question 8

Consider the following statements:

Statement A

The Data Protection Act 1998 defines personal data as any data from which it is possible to identify the Data Subject.

Statement B

The provisions of the Data Protection Act 1998 apply to data held on all persons - living and/or deceased.

Which of the following combinations is correct?

  1. Statement A is True and Statement B is True.
  2. Statement A is True and Statement B is False.
  3. Statement A is False and Statement B is True.
  4. Statement A is False and Statement B is False.

Correct answer / b.

Question 9

The Data Protection Act 1998 assigns rights to individuals in respect to personal data held about them by others.

Which of the following;

  1. the right to prevent processing likely to cause damage and/or distress,
  2. the right to take action for compensation if the individual suffers damage by any contravention of the Data Protection Act 1998 by a Data Controller,
  3. the right to take action to rectify, block, erase, and/or destroy inaccurate data,

does the Data Protection Act 1998 assign to Data Subjects?

  1. All of them.
  2. Only (a), and, (b).
  3. Only (b), and, (c).
  4. Only (a), and, (c).

Correct answer / a.

Question 10

Consider the following statements:

Statement A

Fraud is the use of false representation and/or criminal deception to either gain an unjust personal advantage, or avoid a legal or moral obligation.

Statement B

A credit score is a numerical representation of how much a person can borrow.

Which of the following combinations is correct?

  1. Statement A is True and Statement B is True.
  2. Statement A is True and Statement B is False.
  1. Statement A is False and Statement B is True.
  2. Statement A is False and Statement B is False.

Correct answer / b.

CHAPTER 2

Question 1

Although they are now rarely used, a cheque can remain legally valid for how many years?

  1. 3 years
  2. 6 years
  3. 9 years
  4. 12 years

Correct answer / b.

Question 2

Consider the following statements:

Statement A

A bank account is required to use a credit card.

Statement B

Charge cards are covered by the provisions of s75 Consumer Credit Act 1974.

Which of the following combinations is correct?

  1. Statement A is True and Statement B is True.
  2. Statement A is True and Statement B is False.
  3. Statement A is False and Statement B is True.
  1. Statement A is False and Statement B is False.

Correct answer / d.

Question 3

Consider the following statements:

Statement A

Direct debit payments are free, providing the payer has a bank account.

Statement B

The bank account holder must authorise the creation of a direct debit.

Statement C

The company receiving the payment by direct debit cannot amend the amount paidto the company by a direct debit.

Which of the following combinations is correct?

  1. Statements A, B, and C are True.
  2. Statements A and B are True, and Statement C is False.
  3. Statements A and C are True and Statement B is False.
  4. Statements B and C are True and Statement A is False.

Correct answer / b.

Question 4

A fixed amount (usually specified in an employment contact) paid on a regular basis regardless of tasks completed, units produced, or hours worked is known as;

  1. a wage,
  2. a salary,
  3. a bonus,
  4. a commission.

Correct answer / b.

Question 5

Personal spending which focuses on the meanings and symbols attached to products and services is known as;

  1. judicious spending
  2. rational spending,
  3. symbolic spending,
  4. conspicuous spending.

Correct answer / c.

Question 6

A statement of net worth showing everything you own (assets) and everything you owe (liabilities) is known as a;

  1. a personal budget,
  2. a statement of financial position,
  3. an income statement,
  4. a statement of funds.

Correct answer / b.

Question 7

There are 4 key stages to preparing and using a personal cash budget. The preparation stage is concerned with which of the following?

  1. identifying and ascertaining overall income and wealth,
  2. prioritising commitments and expenses, and identifying any constraints,
  3. creating a budget/financial plan,
  4. review and comparing actual income and expenses to budgeted/planned income and expenses, and adjusting future expectations as necessary.

Correct answer / c.

Question 8

Consider the following statements:

Statement A

It is a legal requirement for all lenders/credit providers to provide information the APR on all loan products and credit facilities they offer.

Statement B

A representative APR must reflect what at least 61% of successful applicants will be charged.

Which of the following combinations is correct?

  1. Statement A is True and Statement B is True.
  2. Statement A is True and Statement B is False.
  3. Statement A is False and Statement B is True.
  4. Statement A is False and Statement B is False.

Correct answer / b.

Question 9

Assume a loan amount of £8,000 and an interest rate of 4% per annum. The loan and interest will be repaid in full in 4 years. Using compound interest, calculate the interest for the 4 years?

  1. £1,338.86.
  2. £1,358.86.
  3. £1,558.86.
  4. £1,388.86.

Correct answer / b.

Question 10

Consider the following statements:

Statement A

APR reflects how much a loan or credit facility will cost over a period of one year.

Statement B

AER reflects how much interest will be earned/accrued over a period of one year.

Which of the following combinations is correct?

  1. Statement A is True and Statement B is True.
  2. Statement A is True and Statement B is False.
  1. Statement A is False and Statement B is True.
  2. Statement A is False and Statement B is False.

Correct answer / a.

CHAPTER 3

Question 1

Member-owned financial co-operatives are often known as;

  1. Building Societies,
  2. Finance Companies,
  3. Credit Unions,
  4. Subprime Lenders.

Correct answer / c.

Question 2

Consider the following statements:

Statement A

An investment bank focuses primarily on providing services to large businesses, corporate entities and institutional clients.

Statement B

A retail bank focuses primarily on managing the savings and deposits, loans and mortgages, and insurance and credit facilities of individual customers and business banking services to small/medium sized non-corporate businesses.

Which of the following combinations is correct?

  1. Statement A is True and Statement B is True.
  2. Statement A is True and Statement B is False.
  3. Statement A is False and Statement B is True.
  4. Statement A is False and Statement B is False.

Correct answer / a.

Question 3

Which of the following is a secured subprime loan?

a.A payday loan

b.A logbook loan.

c.A doorstep loan

d.A guarantor loan.

Correct answer / b.

Question 4

Consider the following statements:

Statement A

Subprime lendersare sometimes referred to as predatory lenders.

Statement B

Student Loan repayments can only be made be made directly to the Student Loans Company.

Which of the following combinations is correct?

  1. Statement A is True and Statement B is True.
  2. Statement A is True and Statement B is False.
  3. Statement A is False and Statement B is True.
  4. Statement A is False and Statement B is False.

Correct answer / b.

Question 5

A mortgage which enables a property owner to release cash from the equity accumulated in their property is known as;

  1. a cash back mortgage,
  2. an equity release mortgage,
  3. an off-set mortgage,
  4. an endowment mortgage.

Correct answer / b.

Question 6

A legally binding agreement in which a purchaser agrees to pay for goods over a number of agreed payment periods, with title of the goods transferred to the purchaser once a sum equal to the purchase price of the goods and any accrued interest has been paid is known as;

  1. a hire purchase agreement,
  2. a credit sale agreement,
  3. a conditional sale agreement,
  4. a personal lease.

Correct answer / c.

Question 7

Which of the following would NOT help to improve a low credit score?

  1. changing bank account provider,
  2. making loan or credit card payments on time,
  3. cancelling unused credit cards/store cards,
  4. building a predictable credit history.

Correct answer / a.

Question 8

Credit Reference Agencies provide factual information to many institutions, organisations and agencies operating in the financial sector. They collect and store information about an individuals’ personal financial history.

Which of the following types of personal information would you NOT normally find collected/stored by a Credit Reference Agency?

  1. information held on public record(CCJ’s, IVA’s, Bankruptcies, DRO’s, and Administration Orders)
  2. account information provided by banks, building societies and other financial institutions
  3. information held on the Gone Away Information Network (GAIN)
  4. information on local council tax arrears, parking fines or driving fines

Correct answer / d.

Question 9

Which of the following is not a Credit Reference Agency?

  1. Experian Ltd,
  2. Equifax plc,
  3. Callcredit plc,
  4. Hiscox plc.

Correct answer / d.

Question 10

Which of the following is correct? Credit Reference Agencies;

  1. make lending decisions on behalf of lenders,
  2. hold lists of lending applications that have been successful,
  3. share credit related information (for example credit agreements, credit arrears, and CCJs) to help lenders lend responsibly,
  4. are responsible for credit rating/scoring potential borrowers.

Correct answer / c.

CHAPTER 4

Question 1

Which of the following is NOT a responsibility of HM Revenue and Customs?

  1. the collection of taxes,
  2. the supervision of the self-assessment system,
  3. the strategic supervision of the UK’s tax system
  4. the assessment of tax liabilities.

Correct answer / c.

Question 2

Which of the following is NOT a direct tax?

  1. Income Tax.
  2. Capital Gains Tax.
  3. Inheritance Tax.
  4. Value Added Tax.

Correct answer / d.

Question 3

Value Added Tax (VAT) is a tax paid on the taxable supplies of goodsand servicesmade in the UK by a taxable person. How many different rates of VAT are there?

  1. 2.
  2. 3.
  3. 4.
  4. 5.

Correct answer / b.

Question 4

Which of the following properties are NOT currently exempt from council tax?

  1. Properties occupied entirely by full-time students.
  2. Properties occupied by people overthe age of 65 only.
  3. Armed forces accommodation.
  4. Unoccupied and repossessed property.

Correct answer / b.

Question 5

Consider the following statements:

Statement A

There are 3 types of tax allowances are allowances that reduce the amount of tax a person has to pay.

Statement B

The amount a national insurance contributions payable depends on the class of national insurance payable, the level of income and/or profit, and the nature of the employment.

Which of the following combinations is correct?

  1. Statement A is True and Statement B is True.
  2. Statement A is True and Statement B is False.
  3. Statement A is False and Statement B is True.
  4. Statement A is False and Statement B is False.

Correct answer / c.

Question 6

The letter (or letters and numbers) in a tax code helps an employer/pension provider to calculate how much income tax should be deducted from any wages/salaries or pension. In a tax code what would D0 mean?

  1. The tax payer is entitled to the basic tax-free personal allowance.
  2. The taxpayer was born before 6 April 1938 and is entitled to a larger full tax-free personal allowance.
  3. All the taxpayers’ income is taxed at the 45% additional rate.
  4. The taxpayer has untaxed income (or benefits) that exceeds their personal allowance.

Correct answer / c.

Question 7

The form which provides details of income and income tax for a tax year is called;

  1. P45,
  2. P50,
  3. P55,
  4. P60.

Correct answer / a.

Question 8

Consider the following statements:

Statement A

If a person works for an employer, receives an employment based pension, orreceives a personal pension, any income tax or national insurance contributions payable is normally collect using the PAYE scheme.

Statement B

Personal tax codes are used by employers and pension providers to calculate how much income tax should be deducted from any payment of wages/salaries or pension.

Which of the following combinations is correct?

  1. Statement A is True and Statement B is True.
  2. Statement A is True and Statement B is False.
  3. Statement A is False and Statement B is True.
  4. Statement A is False and Statement B is False.

Correct answer / a.

Question 9

For self-assessment purposes, if the taxpayer is eligible, HM Revenue and Customs can collect any tax owed through the PAYE scheme, providing the amount owed is less than;

  1. £2,000,
  2. £3,000,
  3. £4,000,
  4. £5,000.

Correct answer / b.

Question 10

Consider the following statements:

Statement A

Tax evasion is the conscious organisation of personal financial affairs to minimise a possible tax liability.

Statement B

Tax avoidance is the illegal non-payment or under-payment of tax including the dishonest claiming of tax allowances,

Which of the following combinations is correct?

  1. Statement A is True and Statement B is True.
  2. Statement A is True and Statement B is False.
  3. Statement A is False and Statement B is True.
  4. Statement A is False and Statement B is False.

Correct answer / d.

CHAPTER 5

Question 1

Which of the following social/welfare benefits is NOT tax free?

  1. Child benefit.
  2. Pension credit.
  3. Carer’s allowance.
  4. Universal credit.

Correct answer / c.

Question 2

Consider the following statements:

Statement A

The distinction between employment and self-employment is employment involves a contract of services, whereas self-employment involves a contract for services.

Statement B

Income for employment includes a salary, a wage, a fee, a commission, a gratuity, a profit, or an incidental benefit (that has monetary value).

Which of the following combinations is correct?

  1. Statement A is True and Statement B is True.
  2. Statement A is True and Statement B is False.
  3. Statement A is False and Statement B is True.
  4. Statement A is False and Statement B is False.

Correct answer / a.

Question 3

Which of following benefits

  1. contributions paid by an employer into an approved occupational or personal pension scheme for an employee,
  2. supplies and services provided on an employer’s business premises so an employee can perform their employment duties/activities,
  3. accommodation necessary for the proper performance of an employee’s duties/activities,

are non-taxable (ortax-free) benefits in kind?

  1. All of them.
  2. Only (a) and (b).
  3. Only (b) and (c)
  4. Only (a) and (c).

Correct answer / a.

Question 4

A HM Revenue and Customs form completed by an employer for an employee detailing all expenses and benefits received by the employee is called:

  1. P10D,
  2. P11D,
  3. P12D,
  4. P13D.

Correct answer / b.

Question 5

Rent-a-room relief is available where an individual lets a furnished room (or furnished rooms) in their main residence as living accommodation. The maximum amount of rent-a-relief (from April 2016) is:

  1. £3,500,
  2. £5,500,
  3. £7,500,
  4. £9,500.

Correct answer / c.

Question 6

Which of the following savings and investments income is received after the deduction of income tax?

  1. Interest on National Savings and Investments related accounts.
  2. Interest on loan-based stock from companies listed on a recognised stock exchange.
  3. Interest on Government securities (Gilts).
  4. Interest on bank and building society accounts.

Correct answer / d.

Question 7

Which of the following types of miscellaneous income;

  1. National Lottery winnings,
  2. Premium bond prizes,
  3. winnings from gambling/betting,

are tax free?

a.All of them.

b.Only (a) and (b).

c.Only (b) and (c).

d.Only (a) and (c).

Correct answer / a.

Question 8

Class 4 National Insurance contributions is payable by which of the following?

  1. Individuals not in employment.
  2. Individuals exempt from, Class 1 or Class 2 contributions.
  3. Individuals who are self-employed.
  4. Individual lives or is employed overseas.

Correct answer / c.

Question 9

Michael is a higher rate (40%) taxpayer. In January 2016 he received a dividend of £3,600.

What additional tax would Michael have to pay?

  1. £600
  2. £900
  3. £1,000
  4. £1,200

Correct answer / b.

Question 10

Consider the following statements:

Statement A

The effect of a tax relief is that an individual will either pay less tax orreceive a tax refund/rebate.

Statement B

Parents (aged over 16) who receive child benefit and are caring for a child under the age of 12 automatically receive Class 3 national insurance credits.

Which of the following combinations is correct?

  1. Statement A is True and Statement B is True.
  2. Statement A is True and Statement B is False.
  3. Statement A is False and Statement B is True.
  4. Statement A is False and Statement B is False.

Correct answer / a.

CHAPTER 6

Question 1

For income tax purposes which of the following expenses are NOT allowable business expenses?

a.Accountancy fees.

b.Marketing costs.

c.Office costs.

d.Depreciation costs.

Correct answer / d.

Question 2