Worksheet
Chapter 10: Financial Planning, Investment and Taxation
A. Multiple Choice Questions (MCQs)
Personal Financial Management mainly deals with:
a) Sports activities
b) Managing money and financial resources
c) Farming activities
d) Manufacturing goods
Which of the following is a need?
a) Video game
b) Designer shoes
c) Food
d) Smartwatch
A goal that can be achieved within one year is called:
a) Long-term goal
b) Medium-term goal
c) Short-term goal
d) Business goal
Inflation refers to:
a) Fall in prices
b) Increase in average prices
c) Increase in income
d) Reduction in taxes
Simple Interest is calculated on:
a) Principal only
b) Principal and previous interest
c) Profit only
d) Income only
Which investment option represents ownership in a company?
a) Bond
b) Fixed Deposit
c) Stock
d) Savings Account
Which of the following is a low-risk saving option?
a) Shares
b) Savings Account
c) Equity Fund
d) ETF
Which insurance covers medical expenses?
a) Home Insurance
b) Motor Insurance
c) Health Insurance
d) Life Insurance
PPF stands for:
a) Public Provident Fund
b) Personal Provident Fund
c) Public Protection Fund
d) Personal Protection Fund
Income tax is imposed on:
a) Goods only
b) Income earned by individuals
c) Imports only
d) Exports only
B. Fill in the Blanks
- __________ refers to the general increase in prices over time.
- Money set aside for future use is called __________.
- __________ Interest is calculated only on the principal amount.
- A __________ Deposit requires regular monthly deposits.
- The amount earned from an investment is called __________.
- Stocks are also known as __________.
- __________ Insurance protects against vehicle-related losses.
- A budget helps control __________ and expenses.
- NSC stands for __________ Savings Certificate.
- Paying taxes is a citizen's __________ responsibility.
C. True or False
- Wants are more important than needs. _______
- Inflation increases purchasing power. _______
- Compound interest is also called "interest on interest." _______
- Mutual funds provide diversification. _______
- Bonds are generally less risky than stocks. _______
- Budgeting helps reduce financial stress. _______
- Life insurance provides financial security to dependents. _______
- Fixed deposits offer predictable returns. _______
- Savings accounts are suitable for emergency funds. _______
- Income tax helps fund public services. _______
D. Match the Following
Column A Column B
1. Savings Account a. Ownership in a company
2. Stock b. Medical expense protection
3. Health Insurance c. Safe place to keep money
4. Bond d. Tax on income
5. Income Tax e. Debt instrument
E. Very Short Answer Questions
- What is Personal Financial Management?
- Define purchasing power.
- What is a budget?
- What is risk in investment?
- Name any two saving options.
- What is a Fixed Deposit?
- What is a bond?
- What is insurance?
- What is income tax?
- State one benefit of regular saving.
F. Short Answer Questions
- Differentiate between needs and wants.
- Explain any three benefits of budgeting.
- What are short-term, medium-term, and long-term financial goals?
- Explain the impact of inflation on purchasing power.
- Describe any three features of a Savings Account.
- What are the two major advantages of mutual funds?
- Explain market risk in shares and equity funds.
- Why is insurance important?
G. Long Answer Questions
- Explain the importance of Personal Financial Management in daily life.
- Describe the steps involved in preparing a personal or family budget.
- Compare Simple Interest and Compound Interest.
- Discuss different saving and investment options available to individuals.
- Explain various types of risks associated with investments.
H. Case Study
Case Study 1
Rohan receives ₹5,000 as a monthly allowance. He spends ₹2,500 on school-related expenses, ₹1,000 on entertainment, and saves ₹1,000 every month. He invests the remaining amount in a Recurring Deposit. After a few months, prices of goods increase significantly due to inflation.
Answer the Following Questions:
- How much money does Rohan invest in the Recurring Deposit every month?
- Which type of financial goal is Rohan achieving through regular saving?
- What is inflation?
- How does inflation affect Rohan's purchasing power?
- Suggest one way Rohan can protect his money from inflation.
Case Study – 2
Case Study: Planning a Family Budget
Mr. Sharma earns ₹40,000 per month. His family spends ₹12,000 on food, ₹8,000 on house rent, ₹5,000 on education, and ₹3,000 on transportation. He saves ₹7,000 every month and keeps track of all expenses. Recently, the family decided to reduce unnecessary spending on entertainment and dining out. This helped them increase their monthly savings. Mr. Sharma also maintains an emergency fund for unexpected expenses. Due to proper budgeting, the family is able to meet its needs and work towards future goals such as higher education and buying a vehicle.
Questions
- What is Mr. Sharma's monthly income?
- Name any two fixed expenses mentioned in the case.
- Why did the family reduce entertainment expenses?
- What is the purpose of an emergency fund?
- How does budgeting help the Sharma family?
Case Study – 3
Case Study: Investing for Future Goals
Priya, a Class 9 student, received ₹15,000 as a gift from her grandparents. With the help of her parents, she deposited ₹5,000 in a Savings Account, ₹5,000 in a Fixed Deposit, and invested ₹5,000 in a Mutual Fund. Her parents explained that savings accounts provide safety and easy access to money, while fixed deposits offer higher interest. The mutual fund investment may provide better returns over time but also involves some risk. Priya wants to save for her future education and learn the importance of financial planning. She regularly tracks the growth of her money and compares different investment options.
Questions
- How much money did Priya receive as a gift?
- How much did she invest in the Mutual Fund?
- Which investment option provides easy access to money?
- Which investment option carries higher risk among the three?
- What financial habit is Priya developing by tracking her investments regularly?
I. HOTS (Higher Order Thinking Skills)
- Why should a student start saving money at an early age?
- If inflation is higher than the interest earned on savings, what could happen to purchasing power?
- Why is diversification important while investing?
- A person invests all their money in shares. What risks might they face?
- How can budgeting help a family during a financial emergency?
Answer Key
A. Multiple Choice Questions (MCQs)
- b) Managing money and financial resources
- c) Food
- c) Short-term goal
- b) Increase in average prices
- a) Principal only
- c) Stock
- b) Savings Account
- c) Health Insurance
- a) Public Provident Fund
- b) Income earned by individuals
B. Fill in the Blanks
- Inflation
- Saving
- Simple
- Recurring
- Return
- Shares
- Motor
- Income
- National
- Civic
C. True or False
- False
- False
- True
- True
- True
- True
- True
- True
- True
- True
D. Match the Following
Savings Account — c. Safe place to keep money
Stock — a. Ownership in a company
Health Insurance — b. Medical expense protection
Bond — e. Debt instrument
Income Tax — d. Tax on income
E. Very Short Answer Questions
- Personal Financial Management is the process of managing income, expenses, savings, investments, and financial goals.
- Purchasing power is the amount of goods and services that can be bought with a given amount of money.
- A budget is a plan for managing income and expenses over a specific period.
- Risk is the possibility of losing money or earning lower-than-expected returns.
- Savings Account and Fixed Deposit (FD).
- A Fixed Deposit is a scheme where money is deposited for a fixed period at a fixed interest rate.
- A bond is a debt instrument through which investors lend money to a government or company.
- Insurance is financial protection against potential losses in exchange for a premium.
- Income tax is a tax imposed on the income earned by individuals.
- Regular saving helps achieve future financial goals.
F. Short Answer Questions
1. Differentiate between Needs and Wants.
Needs are essential for survival and daily living, such as food, clothing, and shelter.
Wants are non-essential items that provide comfort and enjoyment, such as gadgets and branded clothes.
2. Explain any three benefits of budgeting.
- Helps control spending.
- Encourages regular saving.
- Reduces financial stress.
3. What are short-term, medium-term, and long-term financial goals?
Short-term goals: Achieved within 1 year.
Medium-term goals: Achieved within 1–5 years.
Long-term goals: Require more than 5 years.
4. Explain the impact of inflation on purchasing power.
- Inflation increases prices.
- The value of money decreases.
- People can buy fewer goods and services with the same amount of money.
5. Describe any three features of a Savings Account.
- Safe and secure.
- Easy deposits and withdrawals.
- Earns interest on deposits.
6. What are the two major advantages of mutual funds?
- Diversification.
- Professional management.
7. Explain market risk in shares and equity funds.
Market risk is the possibility of investment values falling due to changes in market conditions, economic factors, or investor sentiment.
8. Why is insurance important?
Insurance provides financial protection against unexpected losses and helps maintain financial security.
G. Long Answer Questions
1. Explain the importance of Personal Financial Management in daily life.
- Helps control income and expenses.
- Encourages saving and investing.
- Supports achievement of financial goals.
- Reduces financial stress.
- Improves financial security and stability.
2. Describe the steps involved in preparing a personal or family budget.
- Choose the budget period.
- List all sources of income.
- List fixed expenses.
- List variable expenses.
- Decide the saving amount.
- Check if the budget balances.
- Track and adjust regularly.
3. Compare Simple Interest and Compound Interest.
Basis Simple Interest Compound Interest
Calculation On principal only On principal and accumulated interest
Growth Constant Faster
Interest Earned Same every year Increases every year
Returns Lower Higher
4. Discuss different saving and investment options available to individuals.
- Saving Options: Savings Account, FD, RD, PPF, NSC, SCSS, SSY.
- Investment Options: Stocks, Bonds, Mutual Funds, ETFs.
5. Explain various types of risks associated with investments.
- Market Risk
- Credit Risk
- Interest Rate Risk
- Inflation Risk
- Low-risk investments offer stable but lower returns.
H. Case Study - 1
- ₹500
- Short-term or future financial goal
- Inflation is the general increase in prices of goods and services over time.
- Inflation reduces purchasing power because the same amount of money buys fewer goods and services.
- He can invest in options that provide returns higher than inflation, such as mutual funds or diversified investments.
- Case Study – 2
- ₹40,000 per month
- House rent and education expenses
- To increase their monthly savings
- To meet unexpected expenses and emergencies
- Budgeting helps the family control expenses, increase savings, and achieve future financial goals.
Case Study – 3
- ₹15,000
- ₹5,000
- Savings Account
- Mutual Fund
- Financial planning and regular monitoring of investments.
I. HOTS (Higher Order Thinking Skills)
- Saving at an early age develops financial discipline and helps achieve future goals.
- Purchasing power decreases because money grows more slowly than prices.
- Diversification reduces risk by spreading investments across different assets.
- They may face significant market risk and potential financial losses if share prices fall.
- Budgeting helps control expenses, prioritize needs, maintain savings, and manage emergencies effectively.
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