Activity 4 Charging Structures2.doc - What are they Fixed...

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What are they? When might they be used? Fixed charges % based fees Interest Margin on interest Commission Bid-offer spread Initial charges
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What are they? When might they be used? Fixed charges A set amount that has to be charged every time a certain action has to be carried out A bank which charges you £1 every time you need a replacement bank statement % based fees An amount charged periodically by calculating a certain percentage of your total investment A portfolio manager who charges you 1% per annum, based on the value of your portfolio at a certain date Interest An amount charged to you by a lender, calculated as a percentage of the sum you are borrowing A credit card provider which charges you a percentage of the balance you have borrowed each month Margin on interest The difference between the interest rate a provider charges on loans, and that which it pays on deposits A building society that charges to a higher rate
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Unformatted text preview: than the ‘base rate’ on a loan or mortgage, and pays you a rate somewhat below base on any deposits you have with it Commission A charge calculated as a percentage of a one-off transaction A stockbroker who charges you 1.25% on the value of shares you have asked him to buy for you Bid-offer spread The difference between the buying and the selling price of a packaged investment product I unit trust manager who will sell you units in its UK Equity Fund at 100 pence per unit, but on the same day would only buy them back from you at 95p Initial charges A charge levied by many product providers when you buy their ‘packaged products’ – usually a percentage of the amount you are investing A unit trust manager takes a 5% initial charge, whenh you invest in one of its unit trusts. A life company charges you 5% when you buy an endowment policy...
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