37 Questions
What is the purpose of the Rule of 72?
To determine the time it takes to double an investment
If you invest ₹200/- in an account that earns 8% interest annually, how long will it take to grow to ₹400/-?
9 years
What is the benefit of Rupee Cost Averaging?
It reduces the impact of short-term market fluctuations
What happens when you use Rupee Cost Averaging?
You invest a fixed amount of money at regular intervals
What is the result of dividing 72 by the interest rate?
The time it takes to double your money
What happens to the unit prices when using Rupee Cost Averaging?
You buy more units when unit prices are low
What percentage of equity is allocated in the first portfolio example?
50%
What is the primary goal of diversification in investing?
To minimize loss on returns by investing in different asset classes
What is the recommended approach for a longer-term investment goal?
Focus on maximizing returns with diversified asset allocation
What is the main risk of investing in a single asset class?
Loss of diversification benefits
What is the purpose of asset allocation in investing?
To maximize returns with a diversified asset allocation
What is the recommended percentage of gold allocation in a portfolio?
15%
Why is diversification important in investing?
It minimizes risk and helps achieve long-term financial goals
What is the main benefit of diversifying a portfolio across different asset classes?
Minimizing loss on returns by investing in different asset classes
What is the primary purpose of changing the PIN immediately after receiving the card from the bank?
To ensure the security of the card
What is the primary difference between a credit card and a debit card?
The source of funds
What is a common feature of both credit and debit cards?
Withdrawal of cash from ATMs
Why is it recommended to use an ATM within bank premises or premises with a security guard?
To ensure the security of the transaction
What is the consequence of not paying the outstanding amount on a credit card on time?
Interest is levied
What is the primary advantage of using a debit card?
It is linked to the account holder's savings or current account
What should not be done with the PIN number?
It should be disclosed to a third person
What is the primary benefit of a credit card?
It provides a credit facility
What is the primary purpose of using a virtual keyboard during online transactions?
To reduce the risk of keystroke logging
Why do banks charge customers for providing SMS or e-mail alerts related to their bank accounts?
To compensate for the cost of sending alerts
What is the customer's liability in cases where an unauthorized transaction occurs due to the negligence of the bank?
The customer bears no liability
What is the primary function of the Reserve Bank of India?
To create financial stability in India through monetary policy
What should a customer do immediately if they lose their card?
Inform the bank and request a replacement card
Why are banks instructed to send SMS and e-mail alerts to customers immediately after a transaction is carried out in their account?
To enable customers to report any unauthorized transactions immediately
What is the time period within which a customer must notify the bank of an unauthorized transaction to avoid liability?
Three days
What is the main objective of introducing Basic Services Demat Account (BSDA) by SEBI?
To achieve wider financial inclusion and encourage holding of demat accounts
What is the maximum Annual Maintenance Charges (AMC) for a BSDA with debt holdings worth ₹1,50,000/-?
₹100/-
How many physical statements are provided free of charge during the billing cycle for a BSDA?
2
What is the minimum number of Delivery Instruction Slips (DIS) issued at the time of opening a BSDA?
2
What is the purpose of Annual Maintenance Charges (AMC) in demat accounts?
To collect charges towards maintenance of demat accounts
What is the main characteristic of a mutual fund?
It pools in money from many investors and invests in various securities
What is the requirement for a mutual fund to launch a scheme?
It must be registered with SEBI
What is the benefit of having a BSDA with debt holdings worth ₹50,000/-?
No Annual Maintenance Charges (AMC)
Study Notes
Financial Education
- The Rule of 72: to find out how long it will take to double your money, divide 72 by the interest rate.
- Example: if you invest ₹200 at a 6% interest rate, it will take 12 years to double your money to ₹400.
Rupee Cost Averaging
- It's a process where you invest a fixed amount of money at regular intervals, regardless of market fluctuations.
- This helps to avoid trying to figure out the best time to invest and reduces the impact of short-term market fluctuations.
Portfolio Diversification
- Diversification reduces risk by making investments in various financial instruments, industries, and categories.
- It aims to minimize loss on return by investing in different asset classes that react differently to the same event.
- Examples of asset classes: debt, equity, gold, real assets.
Choosing the Right Investments
- For a longer-term goal, focus on maximizing returns with diversified asset allocation.
- Tip: don't put all your money in one asset class.
Credit and Debit Cards
- Credit card: gives the card holder a credit facility for a certain period, allowing them to make payments without immediate money.
- Debit card: issued to a bank account holder, allowing them to withdraw money from their account and make payments at point of sale.
- Comparison between credit and debit cards:
- Source of funds: credit card (lending bank), debit card (linked to one's own savings/current account)
- Interest: credit card (if outstanding amount is not paid on time), debit card (not applicable)
- Credit history: credit card (relevant for issuing a credit card), debit card (not relevant)
ATM Card Safety
- Change the PIN immediately when the card is received.
- Don't write down your PIN number, memorize it.
- Don't disclose your PIN number to anyone.
- Preferably use an ATM within bank premises or manned by a security guard.
- Use the virtual keyboard while using online transactions.
- Register for SMS alerts on transactions.
Customer Liability
- RBI specifies that a customer has no liability for unauthorized transactions due to fraud, negligence, or deficiency on the bank's part.
- If the customer reports the unauthorized transaction within three days, they will not bear any liability.
Reserve Bank of India (RBI)
- Established on April 1, 1935, under the Reserve Bank of India Act.
- Uses monetary policy to create financial stability in India.
- Regulates the country's currency and credit systems.
Basic Services Demat Account (BSDA)
- Introduced by SEBI to achieve wider financial inclusion.
- Benefits:
- Nil/Low Annual Maintenance Charges (AMC)
- Free periodic transaction and holding statements
- 2 physical statements free of charge during the billing cycle
- At least 2 Delivery Instruction Slips (DIS) issued at time of account opening
- Annual Maintenance Charges (AMC) vary based on the value of holdings in the BSDA.
Mutual Fund
- Pools in money from many investors and invests in stocks, bonds, short-term money-market instruments, or other securities.
- All mutual funds must be registered with SEBI before launching any scheme.
Learn how to calculate the time it takes to double your money using the Rule of 72. Apply this mathematical concept to real-life scenarios, such as investing birthday money.
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