Chapter Based Questions: Systematic Savings and Investments | Introduction to Financial Markets for Class 9 PDF Download

Q.1. Choose the correct answer.

(i) Savings is the activity of setting aside a part of ______ for further use.
(a) Cash/Kind
(b) Life
(c) Investments

Correct Answer is Option (a) 

(ii) Savings can be defined as” the portion of disposable income not spent on_______
(a) Consumption
(b) Expenses
(c) Investment 

Correct Answer is Option (a)

(iii) _________ term investments are known as speculation
(a) Long
(b) Short
(c) Medium 

Correct Answer is Option (b)

(iv) Time value of money is a concept that addresses the way the value of _______ changes over a period of time.
(a) Life style
(b) Currency
(c) Money

Correct Answer is Option (c)

(v) _______ interest can be computed only on original amount borrowed.
(a) Compound
(b) Simple
(c) Weighted

Correct Answer is Option (b)

Q.2. Fill in the blanks.

(i)  Savings is _________ of income over expenditure
(ii) Investments are for _______ period.
(iii) Under Savings people use their ________ money.
(iv) Investments can be made in _______ or ______ assets.
(v) SIP is investment of a ______ amount in any of the financial asset at regular interval.

(i) Difference

(ii) Fixed

(iii) Wasteful

(iv) Real or financial

(v) Fixed

Q.3. Match the following.

(i) Saving - Bulls and Bears
(ii) Investor - Small amounts can also be invested
(iii) Speculation - Excess of income over expenditure
(iv) Investment - Sacrificing current consumption
(v) SIP - To earn above inflation

(i) Saving - Sacrificing current consumption
(ii) Investor - Excess of Income over expenditure
(iii) Speculation - Bulls and Bears
(iv) Investment - To earn above inflation
(v) SIP - Small amounts can also be invested

Q.4. True or False.

(i) Currency is a form of Real Asset.
(ii) Investment is to make losses out of money
(iii) Savings typically offer fixed returns.
(iv) A fixed some of money given now and given after a period of time has different values.
(v) Tax benefits are not available for SIP.

(i) True
(ii) False
(iii) False
(iv) True
(v) False

Q.5. Answer the following in one word or in a sentence.

1. Expand SIP.
   Ans: Systematic Investment Plan
2. Define Savings.
   Ans: Savings is the portion of disposable income not spent on consumption.
3. What is Speculation?
   Ans: Speculation is the investment of funds for a short period to gain high returns by taking high risks.
4. Define simple interest.
   Ans: Simple interest is interest calculated only on the principal amount.
5. What is compound interest?
   Ans: Compound interest is interest calculated on the principal and the accumulated interest from previous periods.

Q.6 Answer the following briefly

• Real estate
• Gold
• Silver

Financial Assets:

• Equity shares
• Mutual funds
• Bonds

2. What is Investment? What are the objectives behind Investment?

Ans: Investment: Investment is the employment of funds in financial or real assets with the expectation of earning a return or profit.

Objectives behind Investment:

• To earn returns in the form of dividends, interest, or capital gains.
• To beat inflation.
• To achieve financial goals and security.
• To safeguard funds from theft or depreciation.
• To gain tax advantages.

3. Differentiate between Simple Interest and Compound Interest

Ans: Simple Interest:

• Calculated only on the principal amount.
• Formula: Interest = Principal × ( Rate / 100 )×Time

Compound Interest:

• Calculated on the principal and the accumulated interest.
• Formula: 𝐴 = 𝑃 ( 1 + 𝑟 / 100)^η

4. Calculate the future value of today's investment of Rs. 100 after 1 year if the interest rate is 6% and compounded annually

Ans: 𝐹𝑉 = 𝑃𝑉 ( 1 + 𝑟 / 100)^η

Where 𝑃𝑉 = 100, 𝑟=6, and 𝑛=1 

𝐹𝑉 = 100 ( 1 + 6 / 100)¹

𝐹𝑉 = 100 × 1.06

FV=106

The future value is Rs. 106.