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UK GCSE 2010 : Unit 3 Financial Services * Pilot Vocational, The Operation of the Financial Services Industry

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Centre Number 71 Candidate Number General Certificate of Secondary Education 2010 Unit 3: The Operation of the Financial Services Industry GSF31 Financial Services: Single Award [GSF31] MONDAY 17 MAY, MORNING TIME 1 hour. INSTRUCTIONS TO CANDIDATES Write your Centre Number and Candidate Number in the spaces provided at the top of this page. Write your answers in the spaces provided in this question paper. Answer all five questions. This paper is accompanied by a Case Study. You must not use your own annotated copy of this Case Study. INFORMATION FOR CANDIDATES The total mark for this paper is 100. Quality of written communication will be assessed in Section B, Q5. Electronic calculators may be used in this examination but all working of answers involving calculations must be shown. Figures in brackets printed down the right-hand side of pages indicate the marks awarded to each question or part question. ADVICE TO CANDIDATES You are recommended to study the mark allocation for each question and part question and to allocate your time accordingly. 5162 For Examiner s use only Question Number 1 2 3 4 5 Total Marks Marks Section A Examiner Only Marks Remark Answer both questions in this section. 1 The following article (Fig. 1), about the promotion of financial products appeared on an Internet website: Some credit companies are breaking advertising rules when they use social networking sites to tout for business , a charity has warned. Credit Action, a national charity which aims to educate people about money, has written to the Office of Fair Trading about the advert. It is claimed that some adverts do not give an Annual Percentage Rate (APR) for interest on the loan. The APR must be included if an advert offers incentives like a payment-free period or a free gift. The interest rate must also be shown in the advert, if it suggests it offers a better rate of credit than other companies or if it implies its loans are suitable for people with a poor credit history. Source:adapted from http://news.aol.co.uk/loan-ads-on-facebook-prompt-warning/article/20080512035509990046 Fig. 1: The promotion of financial products (a) With reference to Fig. 1, explain what is meant by the following terms: (i) Promotion: _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [2] (ii) Advertising: _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [2] 5162 2 [Turn over (iii) Loan: Examiner Only Marks Remark _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [2] (iv) Annual Percentage Rate: _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [2] (v) Credit history: _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [2] 5162 3 [Turn over (b) Explain how each of the following organisations can help protect consumers of financial services: Examiner Only Marks Remark (i) Office of Fair Trading _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [2] (ii) Consumer Council for Northern Ireland _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [2] (iii) Citizens Advice Bureau _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [2] 5162 4 [Turn over (c) What is the role of the Financial Ombudsman Service? Illustrate your answer with an example. Examiner Only Marks Remark _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _______________________________________________________[4] 5162 5 [Turn over 2 Betty will be leaving school shortly, after she completes her A Level examinations. She is interested in a career in financial services. Examiner Only Marks Remark Whilst browsing the Internet recently, Betty found a recruitment site, belonging to a large insurance company. The company is advertising for school-leavers to work in a local call centre. The work involves selling motor insurance policies to a range of customers. (a) Suggest three ways in which the company could segment its market: 1. _______________________________________________________ _________________________________________________________ _________________________________________________________ _______________________________________________________ [2] 2. _______________________________________________________ _________________________________________________________ _________________________________________________________ _______________________________________________________ [2] 3. _______________________________________________________ _________________________________________________________ _________________________________________________________ _______________________________________________________ [2] 5162 6 [Turn over (b) State two items you would expect to be included in a job description for a member of staff working in the call centre. Illustrate each with a relevant example: Examiner Only Marks Remark 1. _______________________________________________________ _________________________________________________________ _________________________________________________________ _______________________________________________________ [2] 2. _______________________________________________________ _________________________________________________________ _________________________________________________________ _______________________________________________________ [2] (c) The insurance company indicated that it would provide training for successful applicants. Explain what is meant by: 1. On-the-job training: _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _______________________________________________________ [3] 2. Off-the-job training: _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _______________________________________________________ [3] 5162 7 [Turn over (d) Betty has been told that, if appointed, part of her salary will be earned on a commission basis. Explain what this means. Examiner Only Marks Remark _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _______________________________________________________ [4] 5162 8 [Turn over Section B Examiner Only Marks Remark Answer all three questions in this section. Case Study 3 (a) With reference to the case study, explain what is meant by each of the following terms: (i) Gross Domestic Product (GDP): _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [2] (ii) Unemployment: _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [2] (iii) Economic Growth: _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [2] 5162 9 [Turn over (iv) Exchange Rates: Examiner Only Marks Remark _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [2] (v) Interest Rates: _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [2] (vi) Inflation Rate: _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [2] (vii)Exports: _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [2] 5162 10 [Turn over (b) Analyse how the financial services industry might contribute to each of the following: Examiner Only Marks Remark (i) Economic Growth: _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [5] (ii) Unemployment: _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [5] 5162 11 [Turn over 4 (a) Using the UK economy as an example, explain what is meant by the following terms: Examiner Only Marks Remark (i) Investment: _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [4] (ii) Balance of Payments: _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [4] 5162 12 [Turn over (b) Analyse one way in which each of the following would affect a person who pays a mortgage every month: Examiner Only Marks Remark (i) An increase in the level of interest rates: _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [4] (ii) An increase in the level of inflation: _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ ___________________________________________________ [4] 5162 13 [Turn over 5 With reference to the case study, discuss the main benefits and drawbacks of the high levels of investment which have taken place within the UK economy over the last ten years. [20] Examiner Only Marks Remark ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ 5162 14 [Turn over Examiner Only ____________________________________________________________ Marks Remark ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ 5162 15 [Turn over Examiner Only ____________________________________________________________ Marks Remark ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ 5162 16 [Turn over THIS IS THE END OF THE QUESTION PAPER 5162 17 General Certificate of Secondary Education 2010 Financial Services: Single Award Case Study Section B of Unit 3: The Operation of the Financial Services Industry GSF31 for use with [GSF31] MONDAY 17 MAY, MORNING You must use this clean copy of the Case Study in the examination and not your own annotated copy. 5162.02 Section B Case Study The UK Economy and Investment Source 1: The UK Economy In 2006, the UK economy was the fifth largest in the world. The following data summarises the key features of the UK economy: Population: 60.6 million (Source: ONS, 2007) Gross Domestic Product (GDP) of US$2,345 billion (Source: World Bank, 2007) Investment into the UK by foreign nationals/entities: US$171.1 billion (Source:UNCTAD, 2008) Global Trade: the UK is a leading global trading nation it accounts for 7 per cent of world trade in services (Source: WTO, 2005) Unemployment: UK unemployment rate is below the European Union average (6.8 per cent) (Source: ONS, 2008) Crown Copyright www.uktradeinvest.gov.uk Source 2: Key Economic Information Economic Growth: Economic Growth in the UK was 1.8 per cent in 2005 (Source: ONS, 2006) and rose to 3.1 per cent in 2007 (Source: HM Treasury, 2008). Over the last ten years, GDP growth in the UK has regularly outpaced growth in the European Union. Exchange Rates: The UK Government has policies that encourage a stable and competitive pound ( ), compared to other important world currencies including the US Dollar ($) and Euro ( ). The aim of this is to ensure price stability of goods and services traded with other nations. Interest Rates: In November 2008, the UK s offical interest rate was reduced to 3.0 per cent. At that time, this was the lowest rate since the 1950s. Inflation Rates: Inflation rates within the UK economy tend to be low, typically within the range of 2 3.5%. The UK government has a target inflation rate of 2 per cent per annum. In March 2008, the CPI stood at 2.5 per cent. Crown Copyright www.uktradeinvest.gov.uk 5162.02 2 [Turn over Source 3: Investment from Abroad In the year 2007/08, there were 1573 new investments made in the UK from abroad. This represented an increase of 10% on the previous year. Of these new investments: 42% were new projects/companies setting up in the UK 28% were expansions by existing companies 30% were the result of mergers and takeovers The effect on employment levels was as follows: 45 000 new jobs created 58 000 existing jobs secured In 2007, the inward investment to the UK (US$171.1 billion), represented 26% of all inward investment into the EU (Source: UNCTAD, 2008). It is thought that foreign takeovers improve the productivity of firms and increase investment in capital. As the global economy becomes more competitive, investment in industries such as multimedia, software and financial services is increasingly important to the UK. It is interesting to note that inward investors are responsible for 40 per cent of UK exports. Crown Copyright www.uktradeinvest.gov.uk Some economists point out that: Direct job creation does not always happen Not all investment creates well paid jobs It is easy to rely too heavily on overseas investment into the local economy support must also be given to locally-based businesses who invest in the economy. Source adapted from: http://www.tutor2u.net/economics/content/topics/trade/inward_investment_uk.htm 5162.02 3 [Turn over Permission to reproduce all copyright material has been applied for. In some cases, efforts to contact copyright holders may have been unsuccessful and CCEA will be happy to rectify any omissions of acknowledgement in future if notified. 5162.02 [Turn over

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