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Why Save? — NBSE Class 9 Financial Literacy
Get summary, textual answers, solutions, notes, extras, MCQs, PDF of NBSE Class 9 Financial Literacy Unit 7 Why Save? However, the educational materials should only be used for reference, and students are encouraged to make necessary changes.
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Summary
The chapter titled “Why Save?” explains the concept of saving and its importance in managing money for the future. It begins by introducing the idea of disposable income, which is the money left after paying taxes. People can either spend or save this income. Saving means setting aside a part of the income to use in the future, helping people afford things they desire, like vacations or large purchases.
The chapter explains that saving early allows the money to grow, as saved money earns interest. Interest is the extra money that banks or companies give for keeping the money with them. There are two main types of interest: simple interest and compound interest.
Simple interest is calculated only on the initial amount saved, known as the principal. The formula for simple interest is straightforward, involving the principal amount, the rate of interest, and the time period for which the money is saved. For example, if ₹100 is saved at a 10% interest rate for one year, the interest earned will be ₹10.
Compound interest, on the other hand, is more powerful because it is calculated not only on the principal amount but also on the interest that has already been earned. This means that each year, interest is calculated on a growing amount. For example, if ₹100 is saved at a 10% interest rate, in the second year, interest is calculated on ₹110, not just ₹100. This process of earning interest on interest helps savings grow much faster over time.
The chapter concludes by stressing that saving is essential for financial growth. Starting early and understanding the difference between simple and compound interest can make a big difference in achieving financial goals.
Textual MCQs
1. Mr. Raja has invested ₹7,000 in a bank that offers him 7% compound (yearly) rate of interest. What would be his expected return after 3 years?
A. ₹8,470
B. ₹8,575
C. ₹7,490
Answer: A. ₹8,470
2. The amount of money that an investor will need to reach his investment goal is based on which of the following?
A. principal amount only
B. interest only
C. principal amount and interest
Answer: C. principal amount and interest
3. Compounding is
A. interest on principal and interest earned already
B. principal amount and interest on principal
C. principal amount only
Answer: A. interest on principal and interest earned already
Extra/additional MCQs
1. What is saving defined as?
A. Income after taxes
B. Disposable income minus spending
C. Total income minus taxes
D. Interest minus spending
Answer: B. Disposable income minus spending
Q. What does ‘paying yourself first’ refer to?
A. Earning more income
B. Paying taxes
C. Saving before spending
D. Spending all disposable income
Answer: C. Saving before spending
Q. How does interest help your money?
A. Reduces expenses
B. Keeps the same value
C. Allows it to grow
D. Spends it for you
Answer: C. Allows it to grow
Q. What is the principal in financial terms?
A. The total amount earned
B. The amount borrowed or saved
C. The interest on a loan
D. The total debt
Answer: B. The amount borrowed or saved
Q. What type of interest is only paid on the principal amount?
A. Compound interest
B. Fixed interest
C. Simple interest
D. Adjustable interest
Answer: C. Simple interest
Q. What does the formula for simple interest calculate?
A. Total amount due
B. Interest earned
C. Savings after interest
D. Time required for savings
Answer: B. Interest earned
Q. What is the interest earned in a year on ₹100 at a 10% simple interest rate?
A. ₹5
B. ₹15
C. ₹10
D. ₹20
Answer: C. ₹10
Q. Compound interest is calculated on which amounts?
A. Only the original principal
B. Principal and accumulated interest
C. Interest alone
D. Principal minus taxes
Answer: B. Principal and accumulated interest
Q. How much total money is earned after 2 years with ₹100 principal at 10% compound interest?
A. ₹20
B. ₹110
C. ₹21
D. ₹200
Answer: C. ₹21
10. What does compounding refer to in finance?
A. Spending less than you earn
B. Earning interest on both principal and accumulated interest
C. Interest paid once
D. Increasing the interest rate
Answer: B. Earning interest on both principal and accumulated interest
Nice i really understand it
Nice i really understand it