Free CISI Intro Practice Questions: Other Financial Products
Practice 10 free CISI Intro sample exam questions on Other Financial Products, with answers, explanations, practice tests, topic drills, and the Finance Prep next step.
Use this focused CISI Intro page as a short practice test for Other Financial Products. The items are original Finance Prep sample exam questions built for scenario-based practice, not trivia, puzzle questions, official CISI questions, copied live-exam content, or exam dumps.
Topic snapshot
| Field | Detail |
|---|---|
| Exam route | CISI Intro |
| Issuer | CISI |
| Topic area | Other Financial Products |
| Blueprint weight | 6% |
| Page purpose | Focused sample questions before returning to mixed practice |
How to use this topic drill
Use this page to isolate Other Financial Products for CISI Intro. Work through the 10 questions first, then review the explanations and return to mixed practice in Finance Prep.
| Pass | What to do | What to record |
|---|---|---|
| First attempt | Answer without checking the explanation first. | The fact, rule, calculation, or judgment point that controlled your answer. |
| Review | Read the explanation even when you were correct. | Why the best answer is stronger than the closest distractor. |
| Repair | Repeat only missed or uncertain items after a short break. | The pattern behind misses, not the answer letter. |
| Transfer | Return to mixed practice once the topic feels stable. | Whether the same skill holds up when the topic is no longer obvious. |
Blueprint context: 6% of the practice outline. A focused topic score can overstate readiness if you recognize the pattern too quickly, so use it as repair work before timed mixed sets.
Sample questions
These are original Finance Prep practice questions aligned to this topic area. They are not official CISI questions, copied live-exam content, or exam dumps. Use them to preview question style and explanation depth before continuing with topic drills, mixed sets, and timed mock exams in Finance Prep.
Question 1
Topic: Other Financial Products
Which statement correctly compares repayment, interest-only, and offset mortgages?
- A. Repayment and interest-only both reduce capital monthly; offset: interest is still charged on the full mortgage balance.
- B. Repayment: payments cover interest and capital; interest-only: capital usually stays outstanding until the end; offset: linked savings reduce the amount on which interest is charged, not the capital owed.
- C. Repayment leaves capital until maturity; interest-only clears the loan monthly; offset: any linked savings mean no mortgage interest is charged.
- D. Repayment: payments cover only interest; interest-only: capital reduces monthly; offset: linked savings automatically repay the capital owed.
Best answer: B
What this tests: Other Financial Products
Explanation: These mortgage types differ mainly in what the monthly payment achieves and how interest is calculated. With a repayment mortgage, each payment includes interest due plus some capital, so the outstanding balance falls over time. With an interest-only mortgage, the regular payment normally covers only the interest, so the capital balance usually remains until the end of the term and must then be repaid separately. With an offset mortgage, savings are linked to the mortgage and offset against it for interest purposes, so interest is charged on a lower net amount. However, those savings do not automatically reduce the mortgage capital unless they are actually used to repay it. The key distinction is between reducing the loan balance and merely reducing the interest charged.
- Reversed definitions: The version that says repayment covers only interest and interest-only reduces capital swaps the basic meanings of the two mortgage types.
- Offset confusion: The version that says interest is still charged on the full mortgage balance ignores the main feature of an offset mortgage, which is interest on the net balance after linked savings are set off.
- Overstatement: The version that says linked savings remove all mortgage interest is too absolute; savings only reduce interest up to the amount offset, not automatically to zero unless they fully match the loan.
This is the only option that correctly states how repayment reduces capital, how interest-only leaves capital outstanding, and how offset mortgages reduce interest by setting savings against the loan.
Question 2
Topic: Other Financial Products
Ella needs £4,000 for a training course. She wants the whole amount upfront and prefers regular monthly repayments over two years, rather than a flexible facility she can dip into repeatedly. Which borrowing product best fits this pattern?
- A. Store card borrowing
- B. Personal bank loan
- C. Credit card borrowing
- D. Arranged overdraft
Best answer: B
What this tests: Other Financial Products
Explanation: The key distinction is structure. A personal bank loan is fixed-sum, fixed-term borrowing: the lender advances the amount at the start and the borrower repays it through scheduled instalments, making the cost and end date easier to plan. An arranged overdraft is more flexible and sits on a current account, so it is usually better for short-term cash-flow gaps than for a defined two-year borrowing need. Credit card borrowing is revolving, meaning the balance can be reused as it is repaid, and it is generally used for card purchases rather than taking a planned lump sum with a clear repayment schedule. A known amount plus predictable instalments points most clearly to a bank loan.
- Overdraft: This is usually linked to a current account and is mainly used for short-term cash-flow gaps, not a planned two-year borrowing need.
- Credit card: This is revolving borrowing with flexible repayment, but it is less suited to a fixed lump sum with a clear repayment schedule.
- Store card: This is usually limited to a particular retailer’s purchases, so it does not fit a general need to fund a course fee.
A personal bank loan provides a fixed amount upfront with scheduled repayments over an agreed term.
Question 3
Topic: Other Financial Products
Which product is primarily intended to pay a lump sum if the insured person dies during a specified policy term?
- A. Whole-of-life assurance
- B. Term assurance
- C. Endowment assurance
- D. Payment protection insurance
Best answer: B
What this tests: Other Financial Products
Explanation: Protection products are distinguished mainly by the event that triggers a payout. Term assurance provides life cover for a fixed period and pays a lump sum if the insured person dies during that term. Whole-of-life assurance is also life cover, but it is designed to pay whenever death occurs, provided the policy remains in force. Endowment assurance combines life cover with an investment element and normally pays either on death within the term or at maturity. Payment protection insurance is different: it is intended to help meet loan or credit repayments if the insured cannot work due to specified events such as accident, sickness, or unemployment.
- Whole-of-life assurance is life cover, but the trigger is death whenever it occurs, not only within a fixed term.
- Endowment assurance may pay on death, but it also has a maturity benefit, so it is not pure fixed-term death cover.
- Payment protection insurance is linked to meeting repayments after specified inability-to-work events, not paying a death lump sum.
Term assurance pays out only if death occurs within the agreed term of the policy.
Question 4
Topic: Other Financial Products
Maya needs to borrow £10,000 for 12 months and will repay the full balance at the end of the year. Interest is charged once at year-end, there are no early-repayment issues, and any arrangement fee is paid separately at the outset and is not added to the loan balance.
- Lender A: 8% annual interest, no arrangement fee
- Lender B: 6% annual interest, £300 arrangement fee
Which conclusion best applies the borrowing-cost principle?
- A. Lender A has the lower total cost, because £800 interest is less than £600 interest plus the £300 fee.
- B. Lender B has the lower total cost, because 6% is below 8%.
- C. The arrangement fee can be ignored, because it is paid at the outset rather than at repayment.
- D. The offers have the same cost, because both run for 12 months on £10,000.
Best answer: A
What this tests: Other Financial Products
Explanation: Borrowing comparisons should focus on the total cost relevant to the borrower, not only the headline interest rate. Here, the amount borrowed, term, repayment structure, and compounding treatment are the same. The decisive factor is the mandatory fee. Lender A costs £10,000 × 8% = £800. Lender B costs £10,000 × 6% plus £300 = £900. Lender A is therefore cheaper, even though its quoted interest rate is higher. In wider credit comparisons, APR can help because it annualises borrowing costs and reflects compulsory charges, but where the figures are supplied, the principle is to include all required interest and fees.
- Choosing the lower quoted rate ignores the £300 fee that Maya must pay.
- Having the same loan size and term does not make the costs equal when rates and fees differ.
- Paying a fee at the outset does not remove it from the economic cost of borrowing.
Mandatory fees form part of the borrowing cost, so Lender A’s £800 total cost is lower than Lender B’s £900.
Question 5
Topic: Other Financial Products
In mortgage lending, what does a loan-to-value (LTV) ratio of 80% show?
- A. The monthly repayment uses 80% of the borrower’s income.
- B. The interest rate is 80% of the lender’s standard rate.
- C. The mortgage is 80% of the property’s value.
- D. The borrower provides 80% as a deposit.
Best answer: C
What this tests: Other Financial Products
Explanation: The core concept is that loan-to-value is a ratio of loan amount to property value. If a property is worth £200,000 and the mortgage is £160,000, the LTV is 80%. This is why LTV is used by lenders to assess risk: a lower LTV usually means the borrower has more equity in the property and the lender has a bigger cushion if prices fall.
The figure does not describe the interest rate, repayment burden, or the share of income used for payments. It simply shows how much of the property’s value is being financed by borrowing.
The closest confusion is with the deposit: at 80% LTV, the deposit is typically 20%, not 80%.
- Deposit confusion: 80% LTV does not mean an 80% deposit; it means the loan is 80% and the deposit is usually the remaining 20%.
- Rate confusion: LTV is not a way of expressing mortgage interest rates or comparing them with a standard variable rate.
- Affordability confusion: A payment taking 80% of income would be an affordability measure, not a loan-to-value measure.
LTV compares the amount borrowed with the property’s value, so 80% LTV means the loan covers 80% of that value.
Question 6
Topic: Other Financial Products
A customer wants a product that will pay a lump sum only if they die within the next 15 years. They do not want a product designed to earn interest or build an investment value. Which product best matches this need?
- A. Term assurance policy
- B. Cash ISA account
- C. Fixed-term deposit account
- D. OEIC fund
Best answer: A
What this tests: Other Financial Products
Explanation: Life assurance is different from investment and deposit products because its primary purpose is protection, usually through a payment on death or another insured event. In the stem, the customer wants a lump sum payable only if death occurs within 15 years and explicitly does not want interest or investment growth. That matches term assurance, where premiums buy cover for a fixed period and there is usually no payout if the insured person survives the term.
A fixed-term deposit account and a cash ISA account are savings or deposit arrangements, so their focus is holding cash and paying interest. An OEIC fund is a pooled investment, so its value depends on the performance of the underlying assets. The key distinction is event-based protection versus capital accumulation.
- Fixed-term deposit account: This is a deposit product that returns cash plus interest, not a death benefit linked to an insured event.
- OEIC fund: This is a pooled investment product designed for growth or income, not for life cover.
- Cash ISA account: This is a tax wrapper for cash savings, so it shelters interest but does not provide life assurance cover.
A term assurance policy is life cover that pays on death during a specified term rather than acting as a savings or investment product.
Question 7
Topic: Other Financial Products
A UK lender quotes a personal loan at 12% a year, with interest charged monthly. A borrower wants the figure that best reflects the true annual borrowing cost for comparing loans. What is the effective annual rate, rounded to two decimal places?
- A. 12.00%
- B. 13.00%
- C. 12.68%
- D. 12.55%
Best answer: C
What this tests: Other Financial Products
Explanation: The core concept is compounding. When a lender quotes a nominal annual rate but charges interest more frequently than once a year, the effective annual rate is higher because interest is added during the year and then charged on that higher balance.
\[ \begin{aligned} EAR &= \left(1+\frac{0.12}{12}\right)^{12}-1 \\ &= (1.01)^{12}-1 \\ &\approx 0.1268 = 12.68\% \end{aligned} \]So the best figure for comparing the true annual borrowing cost is 12.68%, not the nominal 12.00%.
- Treating 12.00% as correct ignores compounding; that is the quoted nominal rate, not the true annual cost.
- Using 12.55% applies the compounding idea to the wrong frequency, as if interest were added quarterly rather than monthly.
- Using 13.00% overstates the cost by adding rates arithmetically instead of compounding the monthly rate correctly.
Monthly compounding makes the true annual cost slightly higher than the 12% nominal rate, giving about 12.68%.
Question 8
Topic: Other Financial Products
A lender advertises its lowest mortgage interest rate for loans of up to 60% loan-to-value (LTV). Which borrowing arrangement fits that band?
- A. £150,000 loan on a £250,000 property
- B. £180,000 loan on a £250,000 property
- C. £165,000 loan on a £250,000 property
- D. £200,000 loan on a £250,000 property
Best answer: A
What this tests: Other Financial Products
Explanation: The core concept is loan-to-value, which is calculated as the mortgage loan divided by the property value. Here, the lender’s cheapest rate applies only up to 60% LTV, so the correct arrangement must produce 60% or less.
Using the formula:
- £150,000 ÷ £250,000 = 60%
- £165,000 ÷ £250,000 = 66%
- £180,000 ÷ £250,000 = 72%
- £200,000 ÷ £250,000 = 80%
Only the £150,000 loan fits the stated band. In general, a lower LTV means the borrower has a larger deposit and the lender has more protection if property prices fall, so the interest rate is often lower than on higher-LTV mortgages.
- 66% LTV: A £165,000 loan is above the 60% limit, so it would not qualify for the lowest-rate band.
- 72% LTV: A £180,000 loan requires a smaller deposit and creates more lender risk than a 60% LTV loan.
- 80% LTV: A £200,000 loan is much higher than the stated threshold, so it is least likely to access the lowest rate.
This gives an LTV of 60% because £150,000 ÷ £250,000 = 0.60.
Question 9
Topic: Other Financial Products
A mortgage adviser has completed an initial fact-find with a first-time buyer. The buyer wants the loan balance to reduce steadily and wants the mortgage to be fully repaid by the end of the term through the regular monthly payments, without relying on a separate investment or sale of the property.
Which mortgage structure should the adviser consider next?
- A. Lifetime mortgage
- B. Capital repayment mortgage
- C. Buy-to-let mortgage
- D. Interest-only mortgage
Best answer: B
What this tests: Other Financial Products
Explanation: A capital repayment mortgage is designed so that monthly payments cover both the interest due and part of the original loan. If payments are maintained, the outstanding balance should reduce over the term and be cleared by the end. This fits a borrower who wants the debt to fall through normal monthly payments and does not want to depend on a separate repayment vehicle. An interest-only mortgage usually requires a credible separate plan to repay the capital at the end. Buy-to-let mortgages are intended for property let to tenants, not a standard first-time buyer’s home purchase. Lifetime mortgages are equity-release products normally associated with older homeowners, so they do not fit this borrowing need.
- Interest-only borrowing would not reduce the capital through the normal monthly payments.
- Buy-to-let borrowing is linked to rental property, not an owner-occupier first-time buyer in this fact pattern.
- Lifetime mortgages are equity-release arrangements and are not the normal next structure for this buyer’s repayment pattern.
A capital repayment mortgage matches the need because each regular payment includes interest and repayment of part of the loan capital.
Question 10
Topic: Other Financial Products
Which product is designed to reduce its cover broadly in line with a repayment mortgage balance, so that the mortgage can be repaid if the borrower dies during the term?
- A. Income protection insurance
- B. Decreasing term assurance
- C. Level term assurance
- D. Whole-of-life assurance
Best answer: B
What this tests: Other Financial Products
Explanation: A repayment mortgage balance normally falls over the mortgage term as capital is repaid. Decreasing term assurance is commonly used to match that reducing liability. If the insured person dies during the term, the policy is intended to provide enough cover to repay the outstanding mortgage, subject to the policy terms. It is different from cover designed to provide a fixed lump sum, lifetime cover, or replacement income during illness.
- Level term assurance pays a fixed sum during a fixed term, so it may be used for family protection or an interest-only mortgage, but it does not naturally reduce with a repayment mortgage.
- Whole-of-life assurance is intended to provide cover for the whole of life, not just a reducing mortgage term.
- Income protection insurance replaces income after illness or incapacity; it is not primarily a mortgage death-benefit product.
Decreasing term assurance is designed for a fixed period with cover that falls over time, matching the reducing balance of a repayment mortgage.
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