D367 Innovation in Finance
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Free D367 Innovation in Finance Questions
If a government were to lose the public's trust in its ability to manage the economy, what potential effects could this have on the value of its fiat currency?
- The value of the fiat currency would likely increase due to increased demand
- The value of the fiat currency could decrease, leading to inflation
- The fiat currency would be replaced by a commodity-backed currency
- The value of the fiat currency would remain stable regardless of public trust
Explanation
Public trust is crucial for maintaining the value of fiat currency. If people lose confidence in a government’s ability to manage the economy, demand for the currency may decline. This can reduce its purchasing power and lead to inflation, as more currency is needed to buy the same goods and services. Maintaining trust ensures stability and supports the effective use of fiat money in the economy.
Correct Answer Is:
The value of the fiat currency could decrease, leading to inflation
What is an example of a decision artificial intelligence (AI) model?
- Predicts customer churn patterns
- Plaittrack forecasts Omar's most likely next purchase based on patterns
- Recommends portfolio adjustments automatically
- Detects fraudulent transactions in real time
Explanation
A decision AI model uses algorithms to analyze data and predict outcomes or behaviors to support decision-making. For example, Plaittrack forecasts an individual’s most likely next purchase based on historical patterns. This allows companies to anticipate customer behavior, tailor recommendations, and improve engagement. Decision AI models apply analytics to make informed, data-driven predictions that can guide business strategy and operational actions.
Correct Answer Is:
Plaittrack forecasts Omar's most likely next purchase based on patterns
A fintech company used its financial information to actively promote its product in various print and online platforms, but the intended audience did not support the company's products. This, in turn, resulted in the demise of the company. Why did this fintech company fail?
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Poor marketing strategy
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The firm chose the wrong innovative concept to nurture the product
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Inadequate team expertise
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Regulatory noncompliance
Explanation
Explanation:
The fintech company failed because it selected an innovative concept that was not aligned with market demand. Even with effective promotion and financial resources, nurturing a product around the wrong concept can result in insufficient customer adoption and ultimately business failure. Correctly evaluating market needs and validating the product idea before scaling is critical to a fintech start-up’s success.
Correct Answer:
The firm chose the wrong innovative concept to nurture the product
Explain how the backing of fiat currency by the government influences its acceptance in the economy.
- It ensures that the currency can be traded for commodities
- It creates trust among users, leading to widespread acceptance
- It allows the currency to fluctuate freely without regulation
- It limits the currency's use to government transactions only
Explanation
Fiat currency has no intrinsic value and is not backed by physical commodities; its value comes from government authority and regulation. Government backing creates trust among users, assuring them that the currency will be accepted for goods and services. This trust is essential for the currency’s widespread acceptance, enabling it to function effectively as a medium of exchange, store of value, and unit of account within the economy.
Correct Answer Is:
It creates trust among users, leading to widespread acceptance
What does the term "DeFi" refer to in the cryptocurrency space?
- Digital Finance
- Distributed Financial System
- Decentralized Finance
- Dynamic Financial Integration
Explanation
DeFi, or Decentralized Finance, refers to a system of financial applications built on blockchain technology that operates without centralized intermediaries like banks. DeFi platforms enable peer-to-peer lending, trading, and other financial services directly on the blockchain, increasing accessibility, transparency, and efficiency in the cryptocurrency space. This decentralized approach challenges traditional financial systems by allowing users to interact and transact autonomously.
Correct Answer Is:
Decentralized Finance
What is an advantage of using a robo-advisor platform over a traditional advisory relationship?
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Automated rebalancing
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Reduced fees
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AI recommendations
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Real-time tracking
Explanation
Explanation:
Robo-advisors provide a cost-efficient alternative to traditional financial advisors, primarily by offering reduced fees. These platforms automate portfolio management and provide algorithm-based investment guidance without the high overhead costs associated with human advisors. Lower fees make professional financial advice more accessible to a broader audience while maintaining efficient and strategic portfolio management.
Correct Answer:
Reduced fees
Which benefit does near field communication (NFC) offer retailers?
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Faster checkout
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Transaction speed
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Contactless payments
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Seamless scanning
Explanation
Explanation:
Near-field communication (NFC) technology enables retailers to process payments quickly and securely by allowing customers to tap their devices at the point of sale. This reduces transaction time, minimizes queues, and enhances the overall shopping experience. The speed and convenience provided by NFC improve operational efficiency and customer satisfaction, making it a valuable tool in modern retail environments.
Correct Answer:
Transaction speed
What is the primary purpose of estate planning in the context of inter-generational wealth transfer?
- To minimize tax liabilities
- To ensure assets are passed on according to the individual's wishes
- To increase the value of the estate
- To create a family business
Explanation
The primary purpose of estate planning is to ensure that an individual’s assets are distributed according to their wishes after death. This involves creating wills, trusts, and other legal structures to transfer wealth smoothly to heirs, minimize disputes, and protect beneficiaries. While tax minimization may be a component, the main goal is to honor the individual’s intentions and provide clarity and security for the next generation.
Correct Answer Is:
To ensure assets are passed on according to the individual's wishes
What have fintechs done to transform the point-of-sale system and the shopping experience for customers?
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They integrate AI-driven personalized recommendations at checkout to enhance shopping experiences.
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They let customers pay from anywhere in the store with tablets, instead of waiting in a single checkout line.
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They provide advanced inventory management systems to ensure product availability in real time.
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They implement mobile apps that allow pre-ordering and curbside pickup for faster service.
Explanation
Explanation:
Fintech innovations have significantly changed the point-of-sale (POS) experience by making transactions more flexible and efficient. By enabling customers to pay from anywhere in the store using tablets or mobile devices, fintechs eliminate long queues and improve convenience. This transformation not only enhances the shopping experience but also allows retailers to integrate additional services such as personalized promotions, digital receipts, and loyalty program management, creating a seamless, customer-centric shopping environment.
Correct Answer:
They let customers pay from anywhere in the store with tablets, instead of waiting in a single checkout line.
What is a central bank digital currency used for?
- For taxpayers to make international virtual currency transactions
- As a stable store of value for investors
- To facilitate trading, lending, or borrowing of other digital assets
- For interbank transactions
Explanation
Central bank digital currencies (CBDCs) are digital forms of a nation’s fiat currency issued and regulated by the central bank. They are primarily used for interbank transactions, enabling faster, more secure, and efficient settlement of funds between financial institutions. CBDCs can improve liquidity, reduce transaction costs, and support the stability and efficiency of the national payment system, while maintaining regulatory oversight and trust in the currency.
Correct Answer Is:
For interbank transactions
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