What is Money, anyway!

Name:

class:

level 3
What is Money to you 1
Types of People 2
Golden Equation 3
Budgeting 5
Net Worth 11
Banking: Functions, Account Types 12
Products and Services 17
Impact of Inflation 31
Compound Interest and Power of Compounding 35
Time Value of Money 42
Loans 45
Credit Score 63
Fixed Deposits and Recurring Deposits 72
Nominee 89
Introduction to Investment 94
Asset Classes and Risk vs Return 100
Equity 106
Debt 117
Gold 121
Mutual Funds 127
Insurance 139
Tax 145
Cybersecurity 152
 10

household expenses amount

 24

Card
issuer
name #SSDhyaan
Keep in
Keep your card Mind
EVM
chip
details private.
Card Symbol of
number contactless Don’t share PIN
payment , OTP & CVV
Expiry date Check your CC
avoid any unau statements to
thorized charge
s.
Payment Report lost or
network
logo
immediately to stolen cards
the bank.
Backside same as Debit Card

Purpose
A Credit Card is a payment card that allows you to get credit - that is buy something
now and pay later. Financial institutions offer this credit facility for shopping and other
transactions. It can also be used to make cash withdrawals, which are called cash
advances.
How to Operate
It is like a loan given to you for a short period of time. The total due amount of all
transactions is received at the end of the credit cycle. No interest is charged if the due
amount is paid on or before the due date (generally 30 to 50 days period). If not, a
hefty rate of interest is charged.
However, in cases of cash advances, the interest starts accruing right away. Interest
rates are a primary driver for financial institution’s revenue, which explains why credit
card interest is notoriously high.
Like a Debit Card you have a 4-digit or 6-digit PIN for a Credit Card as well.
One gets many perks such as Airport Lounge Access, Offers on Dining, Shopping
Movies etc.
Unlike Debit Cards, which are given to every individual with a bank account, consumers
have to apply and qualify for a Credit Card. Your creditworthiness (capability to pay up)
is reviewed and if approved, you are granted a specific credit limit. The better
someone's credibility, the higher their limit. Transaction is denied upon spending
beyond that limit. Hence, the maximum amount you can spend by a Credit Card is the
amount (Credit Limit) assigned by the issuing company to you.
 25

Annual Fees Cash Advance Charges

Many credit cards charge There is a certain amount of

the customer an annual money one can withdraw from
fee. This varies from card an ATM using the credit card.
to card and is charged This is known as cash advance
every year. Some cards are and a really high fee is charged
free of this charge and on this by the card issuing
some of them waive it off if company. The cost can go up
you spend a certain amount to 3% of the amount
using them in a year. withdrawn. A steep interest is
also levied upon the amount
withdrawn.

Late Payment Penalties Interest

on EMI
In case one is unable to pay
the due amount in time, Most credit cards offer you to
companies charge interest on convert your large payments into
the unpaid amount. Oftentimes small EMIs (Equated monthly
people pay just the Minimum Installments). This is like a short-
Amount due on the due date term loan. So you get to pay a big
thinking this would be enough amount in small installments over a
but that is not correct. If you few months. You are charged an
just pay the minimum amount interest on the same. E.g, you have
then the unpaid amount will be made a big purchase, say a
charged with interest with refrigerator, using your card. You
every single passing day. This can pay this amount in installments
can be quite a huge amount over 3-12 months but with an
eventually. interest as charges for this service.
 27

You visit a bookstore and The company checks for

1 buy books. The storekeeper 4 various factors (credit limit,
swipes your card in a POS identity, validity, etc.) and if
(Point Of Sale) machine. In all of them look fine then it
most cases, the store will sends an approval back to
ask you to enter a PIN to the Network Company after
authenticate the deducting a fee on the
transaction.
CC Issuing transaction amount..
INR 1000 Company/Bank
INR 990

The machine reads the 5 INR 985

2 encrypted data on the
strip or chip (which
contains information to
identify the card) and
sends it to the CC Payment Network
Network Company. POS Company Company
The POS Company passes The Network Company
6 on the money to Book 3 transfers the information
Store’s Bank account after along with the PIN to your
deducting a fee. card issuing company for
7 INR 980 authentication of the details.
Once the transaction is
approved, the machine prints The Network Company
a pair of charge slips or 5 passes on the approval to
receipts – the retailer retains the POS Company along
one and gives you the with its share of money.
customer copy.

Bookstore’s
Bank

Note: The Credit Card issuing company, Payment Network

company (RuPay, Visa, Mastercard etc) and the POS company all
charge a fee for every transaction a customer makes. This fee is
paid by the seller or the merchant (Bookstore). The amounts
shown as fees can be different for different cases.
 29

Each individual should evaluate the credit card features against their own spending
habits, lifestyle needs, and financial goals to choose the card that offers the most
benefits relevant to them.

Travel Explorer Card

Earn multiple miles for every ₹100 spent on
airline bookings, complimentary domestic
airport lounge access, no foreign transaction
fees, and special privileges at partner hotels
and restaurants. Priya
A corporate professional who travels
Grocery Cashback Card frequently for work across India and
occasionally for leisure, enjoys dining out, and
Up to 5% cashback on groceries and bill prefers accessing airport lounges for comfort
payments, 2% on fuel, 1% on other purchases, during her travels.
no annual fee for the first year, and cashback
redeemable directly into the account.
Rohan
Lifestyle Privilege Card A recent university graduate focused on
High annual fee with premium benefits managing his expenses wisely, spends primarily
including exclusive access to sales, luxury on groceries, utilities, and fuel, and is looking
dining experiences, high reward points on for ways to maximize his savings.
shopping at partner brands, and
complimentary golf lessons at select courses.
Aditi
Student Value Card An entrepreneur who owns a small to medium-
sized enterprise (SME), incurs expenses on
No annual fee, rewards for online purchases office supplies, pays for utility services, and
and dining, special discounts on books and travels for business meetings.
entertainment, and a built-in EMIs option for
large purchases.

SME Business Card

Enhanced credit limit, rewards on business-
related expenses such as office supplies and
utility payments, travel insurance, and no cost
EMI options on business purchases.
 31

Inflation is the rise in prices of goods and services but how does it impact money we
earn and save? Let us delve into how it impacts us in our daily lives and more
importantly how it impacts our finances.

1) Purchasing Power of Money:

When inflation occurs, the value of money diminishes because you
need more money to buy the same goods and services.
P PP
As prices rise, the purchasing power of your money decreases.
For example, if the CPI is increasing 5% annually, it means that you
would need 5% more money each year to maintain the same
standard of living. Therefore, keeping money sitting idle at home
will make one worse-off as you will not be able to maintain your
standard of living with the same amount of money in the future.

2) Return on Investment:
The return or earnings we generate from our savings or
investments is known as Nominal Rate of Return. However, that
does not show the true picture.

Imagine you have an FD where you get 5% p.a return on your

deposits. This means if you invested INR 100 then one year later
you will get around INR 105 (assuming simple interest). Now, if the
inflation during the same period would have been 6% p.a then
something that cost INR 100 rupees at the time of investment in 6

the FD now costs INR 106. Thus, you could afford to buy that thing
5

earlier but now you are not able to. This is the impact of Inflation
4

on your return on investment. Thus, we calculate the real rate of

3

return.
2

Real Rate of Return = Nominal Rate of Return – Inflation Rate

0

6% 5%
(r) (i) INFLATION RETURN
In our case, the real rate of return is -1% (5-6) hence, this
investment has made us worse-off due to high inflation. Increased
inflation implies reduced real return. Some assets however, may
r
generate higher returns as inflation increases like Equity, Gold etc.
 36

In the real world, compound interest is the way interest is determined

The formula to calculate the Compound Interest:
where, A = Amount

A = P x (1+nr )
P = Principal
^nt r = Rate of Interest
t = Time in years
n = Number of times
compounding happens in a year
Example:
P = INR 1,00,000 | r = 12% | t = 5 years

A = P x (1+nr ) = ₹1,76,234.17
^nt

Interest on Accumulated Interest on Amount at the end

Time Principal the Original Interest of the Accumulated
Principal Previous Years Interest of year

1 ₹ 100000 ₹ 12000 ₹0 ₹0 ₹ 112000.00

2 ₹ 100000 ₹ 12000 ₹ 12000.00 ₹ 1440.00 ₹ 125440.00
3 ₹ 100000 ₹ 12000 ₹ 25440.00 ₹ 3052.80 ₹ 140492.80
4 ₹ 100000 ₹ 12000 ₹ 40492.80 ₹ 4859.14 ₹ 157351.94
5 ₹ 100000 ₹ 12000 ₹ 57351.94 ₹ 6882.23 ₹ 176234.17
Principal Interest on Principal
Accumulated Interest Interest on Interest Till now the examples we have seen
200000 are of annual compounding. In other
words, interest is paid once a year.
150000
Compounding can be done at more
frequent intervals such as monthly,
quarterly and semi-annually. Thus, in
100000 monthly compounding interest is paid
every month.
50000
Note: The interest is definitely adjusted from
being per annum to per month before the
0
Year 1 Year 2 Year 3 Year 4 Year 5 calculations are made.
 37

But does it really make a difference to compound once or multiple

times a year?
If yes, then what is better compounding yearly or monthly.
Example:
P = INR 1,00,000 | r = 15% | t = 3 years
n = 12 (monthly), 4 (quarterly), 2 (semi-annually) and 1 (annually)
Monthly Quarterly Semi-annually Annually
Principal ₹ 100,000
Interest 15% ₹ 156,394.38 ₹ 155,545.43 ₹ 154,330.15 ₹ 152,087.50
Term 3

Frequency of compounding Amount

This is because interest is being paid on interest more number of times in a given year
hence, increasing the effect of compounding
Thus, if you have to pay off a loan a higher compounding frequency will make you pay more. Similarly, if an
investment gives you returns then it would be the best to get a high frequency of compounding.

POWER OF COMPOUNDING
You must have heard of the 7 wonders of the world but have you heard of the 8th wonder?

Compound But why is that?

Interest is the
8th wonder of The phenomena of Power of
the world
Compounding is what makes it a wonder.
Example:
Investment Amount = INR 1,00,000 | Rate of Return = 12%
Year 1 2 5 10 15 20 25 30
Interest 12,000.00 13,440.00 50,794.17 134,350.65 236,771.76 417,272.73 735,377.13 1,295,985.77

Amount 112,000.00 125,440.00 176,234.17 310,584.82 547,356.58 964,629.31 1,700,006.44 2,995,992.21

Ratio 1.12 1.25 1.76 3.11 5.47 9.65 17.00 29.96

 39

To maximise the impact of power of compounding you have to:

Start early Invest regularly and Reinvest your

stay invested for a returns
long period of time

While Power of Compounding looks really awesome when it adds to your investments
one must also realise that this can work against you if you delay your investments and
are not disciplined when it comes to investing regularly and early.

Example:
Age 25 30 35 40 45 50
Invested 1,00,000.00 1,00,000.00 1,00,000.00 1,00,000.00 1,00,000.00 1,00,000.00
Amount
Return 15% 15% 15% 15% 15% 15%

Amount 1,33,17,552.34 66,21,177.20 32,91,895.26 16,36,653.74 8,12,706.16 4,04,555.77

at 60
Proportion
decline every - 0.50 0.50 0.50 0.50 0.50
5 years

You halve your wealth for every 5 years

of procrastination!

This is the impact of compounding on your wealth and your

delay in investing.
 40

Question 1: Understanding Compound Interest

Riya invests
INR 10,000 in a savings account 5% annual compound interest rate
untouched for 2 years
Without calculating the exact amount, how much money will Riya have at the end of 2 years?
1 Exactly INR 10,500 3 Exactly INR 11,000
2 More than INR 10,500 but less than INR 11,000 4 More than INR 11,000

Question 2: The Growth Power of Compound Interest

Karan and Aarav both invest
INR 5,000 each annual interest rate of 10%
Karan's investment is Aarav's investment is
compounded annually, while compounded quarterly
After 3 years, who will have more money, and why?
1 Karan, because his interest is calculated annually.
2 It depends on the stock market.
3 Both will have the same amount because the principal and the rate are the same.
4 Aarav, because his interest is compounded more frequently.

Question 3: Frequency of Compounding in Action

You have the option to take a loan
INR 20,000 for 5 years interest rate of 8%
You're given two choices for how the interest on the loan is compounded: semi-annually or annually.
Which option will you choose, and what does this teach us about the frequency of compounding?

1 Semi-annually, teaching us that more frequent compounding leads to a higher interest amount.
2 Annually, since the interest amount will be lower as the frequency of compounding is low.
3 Since the rate is 8% it does not matter which option we choose.
4 The option that yields more money depends on the current economic conditions.
 48

Fixed Rate

These types of loans will have an interest

rate that will be fixed during the term of the #SSDhyaan
loan.
Keep in Mind
Generally, the rate of interest is 1% to 2% Generally fixed rate loans
higher than the rate charged on floating rate are more expensive than
loans at the time of commencement. These floating rate loans.
types of loans are unaffected by the
economic events and fluctuation in the Read the fine print of the
market in general. loan terms carefully.

The borrower can plan and budget for these Watch the rate of interest
repayments meticulously since everything and your base rate
remains fixed. However, the borrower will not regularly to avoid any
be able to take advantage of any reduction in discrepancies.
interest rates by the RBI.

Floating Interest Rate Loan

Total Payment

Fixed Interest Rate Loan

1 2 3 4 5 6 7 8 9 10 11
Month
In some cases, fixed rates loans are only applicable for a few years of the loan and
are then switched to floating rate loans. This is also called Reset. In case of fixed
rate loans there are penalty charges on prepayment of loans.
 49

Floating Rate
These types of loans will have an interest rate that will vary as per the market conditions.
Generally these rates are revised quarterly. The rates are based on some base rates set by
the RBI, hence if the base rate is changed by the RBI the rate of interest charged on these
loans also change. It is beneficial if the borrower feels the rate of interest will be lowered
by the RBI in the future. Planning budgeting for repayment of these loans is sometimes
challenging when the rate of interest increases.

When the rate of interest increases or decreases:

You can either pay a higher You can increase (rate
(rate increases) or lower
EMI OR T increases) or decrease (rate
(rate decreases) installment decreases) the term of the loan.

Original Scenario 1 Scenario 2

Scenario Increase Tenure Increase EMI
Principal INR 50 lakhs INR 50 lakhs INR 50 lakhs

Rate of Interest 8% p.a 9% p.a 9% p.a

Tenure 20 years 30 years 20 years

EMI INR 41,822 INR 40,231 INR 44,986

Total Interest Paid INR 50,37,281 INR 94,83,207 INR 57,96,711

Total Amount Paid INR 1,00,37,281 INR 1,44,83,207 INR 1,07,96,711

If you choose You pay more interest to the tune of:
Scenario 1 INR 94,83,207 – INR 57,96,711 = INR 36,86,496
If you choose Your EMI will be more to the tune of:
Scenario 2 INR 44,986 – INR 40,231 = INR 4,755

NOTE: Thus, this must be a carefully chosen decision. If your budget allows
one must ideally pay a higher EMI and get done with the loan soon.
 60

1. Avoid taking loans for 4. For longer term loans try

Travel, Electronics getting loans with
(Phones, TVs etc), collateral such as FDs,
Weddings as much as Insurance Policies, Gold
possible. These can be etc instead of
bracketed as bad debts Unsecured Personal
more often than not. Loan as the interest may
be very high.
2. Use a credit card for
emergencies that can 5. If a loan is going to add
be paid for within 30 value to your net worth in
days instead of the future it can be
taking out a personal labelled as Good Debt
loan. such as Education Loan.

3. Auto loans can be

both good and bad. 6. Pay off high interest
Understand how loans as soon as
much of it is a need possible.
and how much of it is
a want.

7. Some of the rules of thumb one can follow are:

5 | 20 | 30 rule 20 | 4 | 10 rule
TOTAL LOAN HOME LOAN AUTO LOAN

EMI
= VALUE OF EMI
tenure of tenure of EMI
< HOME
< 5 times
loan
< 20
< 30% 20% loan < 10%
monthly income of
down <4 of
of ANNUAL YEARS MONTHLY
INCOME payment YEARS MONTHLY
SALARY INCOME

NOTE: These thumb rules are just indicators, one must closely evaluate
their circumstances and figure out what suits them the best.
 63

Have you ever wondered how banks decide whether to give someone a loan or a credit
card? Well, one of the key factors they consider is something called a "Credit Score."

A credit score is like a report card for your financial

behavior. It's a three-digit number that tells lenders (like
banks or credit card companies) how trustworthy you
are when it comes to borrowing money.
This number is calculated based on your financial history. In
other words, it shows the creditworthiness of the person.
We also sometimes use the term CIBIL Score. CIBIL stands for
Credit Information Bureau India Limited and is the most popular
amongst the 4 major credit rating agencies in India. The other 3
RBI-registered ones are Experian, Equifax and Highmark.

A high credit score implies you have

borrowed and repaid money responsibly
and on time in the past. This implies you High Credit Low Credit
may get lenders lending you larger sums Score Score
of money at lower rates of interest
contrary to someone who has a lower
credit score.
Creditworthy Not a
But what is a good credit score? Individual Creditworthy
Credit score ranges from 300 to 900. Individual
Let us see a detailed elucidation to
understand the importance and relevance
of credit score.
Low Risk for High Risk for
Lenders Lenders

Favourable Unfavourable
terms of credit terms of credit,
for the may be denied
individual any credit
 67

One good thing about Credit Score is that it is revised every 30-45 days. Thus, in case
our score is low today we can always take measures to ensure it gets fixed over a
period of time. Some of the things one can do are given below:

Check your Dispute inaccuracies Maintain a decent

Credit Score credit utilisation
In case you spot any ratio
This will tell you why your inaccurate entries or
score is low in the first place defaults in your report Keep an eye on the
so that you can focus on immediately raise it with the amount of the credit card
making that area better. It rating agency and get it limit you are using. You
also shows the defaults or sorted. One must not apply must try to keep the
delayed payments you made for new credit before utilisation ratio low
which impacted your score. getting this fixed. around 30%.

Show debt Avoid over- Applying for

leveraging multiple loans or
Unlike popular belief, you cards
must have good debt to
showcase your Do not take loans
creditworthiness and build unnecessarily just because Do not apply for too many
on your credit score. A long they are available to you. credit cards or loans with
history of good debt This may make your multiple institutions. This
management will always financial position risky and shows desperation to
augur well for you. discourage lenders from obtain credit and reflects
lending you money. poorly on your score.

Credit mix Pay off your loans and

credit card dues on time
Have a good balance of
secured as well as Ensure one is completely aware of the due dates for all
unsecured credit. the loans and credit card bills to be paid and make all the
due payments in time. Paying the minimum amount due
on credit cards is not sufficient.
In conclusion, a credit score is like your financial reputation. It shows how responsible
you've been with money and helps lenders decide whether they can trust you to repay
loans. Building and maintaining a good credit score is an important part of managing
your finances and achieving your financial goals in the future. So, it's like having a good
report card for your money management skills!
 70

Objective: To cultivate critical financial analysis skills in students by evaluating

diverse loan applications based on real-world scenarios, teaching them to
assess financial stability, risk factors, and make informed lending decisions.

Instructions:
For each case, students should:
1. Identify Pros: Highlight the positive aspects that support the loan application.
2. Identify Cons:Discuss any red flags or concerns regarding the loan application.
3. Decide: Decide whether to approve or reject the loan application,
providing reasons based on the financial information given.

Case Study 1: Rahul's Home Loan Application

Discussion Points
Assess the impact of
Rahul's existing car
loan on his home loan
application.
Evaluate the
significance of
Rahul's credit score
and savings for the
home loan.
Consider the pros and
cons of approving
Rahul's loan
application based on
his financial stability
and obligations.
 72

What is a
Fixed Deposit FD of longer duration:
(FD)? Higher rate of
Interest
Compound
In a Fixed Deposit (also known as Interest
How is interest
Term Deposit) you can put away a calculated on FDs:
chunk of money a for a specific
period, known as the maturity
period and receive a fixed rate of
interest. It has higher interest rate
than savings account. The period
can vary from a few days to years, FD of shorter duration:
depending on the choice of the Lower rate of Interest
depositor. It generally ranges from Generally Simple
7 days to 10 years. Interest

Banks pay both Simple and Compound Interest on FDs. The calculation of interest can be
complex. Generally all banks have FD Calculators which show how much interest is going
to be paid for different amounts invested for different periods of investment.

FD Made Maturity

0 1 2 3 4 5 6 7 8 9 10 11 12

Principal
Principal + Principal + Principal +
Capitalised Capitalised Capitalised Maturity
Interest Interest Interest Amount

Mostly, banks pay interest which is quarterly compounded. This means you receive
simple interest for the first 3 months (1st quarter) on the Principal and then the
interest received is added to the Principal at the end of the third month and we get
interest on that from the 4th to the 6th month. Again, at the end of the 6th month (2nd
quarter) the interest earned over months 4 to 6 is added to the ‘Principal + interest
from the 1st quarter’ and the loop continues till the end of the term.
 78

Choose the right FD based on your goals

While choosing the FD, look for interest rate, Interest rate: Compare the
type of interest and lock-in period. interest rate received for that
duration across different
institutions.
Visit the nearest branch of the bank Lock-in period: Decide the
or download and access their mobile app lock-in period or duration.
Penalty: Choose the
institution which offers lower
penalty rate.
Fill out the application form,
Compounding: Opt for the
also Mention the nominee for your FD banks which offer compound
interest to avail the Power of
Compounding.
Power of Compounding
Provide the required documents FDs offer the benefit
ID Proof- PAN Card, Passport size photo, of compounding,
Address Proof- Aadhaar Card or Voter ID Card, where interest is
Passport, Ration Card, Driving License. earned on both the
initial amount and the
interest earned
previously.
Deposit the amount This only works if you
The amount can be in cash, through cheque, or keep the money
directly transferred from account in case of app invested without
withdrawing it before
maturity.

Collect the Fixed Deposit Certificate

 87

Objective: This activity is designed to deepen understanding of Fixed

Deposits by comparing different products, highlighting the importance of
interest rates, compounding frequency, and terms of investment in making
informed financial decisions.

Amount to be Invested: INR 100,000

Period: 5 Year

FD Option 1: FD Option 2: FD Option 3:

Interest Rate: 7.50% Interest Rate: 8.00% Interest Rate: 7.25%
per annum per annum per annum
Interest to be Paid: Interest to be Paid: Interest to be Paid:
Compound Interest Simple Interest Compound Interest
Compounding Compounding Compounding
Frequency: Annually Frequency: Not Frequency: Quarterly
Premature Applicable Premature
Withdrawal Premature Withdrawal
Possibility: Yes, with Withdrawal Possibility: Yes, with a
a penalty of 0.75% Possibility: No penalty penalty of 1% less
less than the agreed on premature than the agreed
interest rate. withdrawal. interest rate.

Activity Instructions
1. Analyze Each Option: Evaluate and look closely at the investment amount,
period, interest rate, method of interest calculation, and conditions regarding
premature withdrawal for each FD.
2. Rank the Options: Determine which FD option is most attractive to you and
rank them from 1 (most preferred) to 3 (least preferred). Consider factors such as
the potential return on investment, the flexibility offered by the deposit, and the
penalty clause on premature withdrawal.
3. Justify Your Choice: Reflect on why you ranked the options as you did. Which
features of the FDs were most influential in your decision? How do the interest
rates and penalties for premature withdrawal affect your preference?
 97

Emergencies and unprecedented events such as a job loss, Covid lockdown, car repair
etc can put off anyone’s budget. Such unexpected happenings can have an immensely
detrimental impact on one’s financial health and can push you in a debt trap quite
quickly. It is thus, absolutely imperative that you set aside a sum of money which can
be used for such emergencies without disturbing your day to day budget.
The primary purpose of an emergency fund is to
provide financial stability and peace of mind
during challenging times, ensuring that individuals
and families can weather unexpected financial Emergency Fund = 6 months’
worth of living expenses
storms without relying on loans or credit cards.
TO START BUILDING AN EMERGENCY FUND
1
Create a budget to monitor
your income and expenses. 2
Identify your needs
and wants.
3
Gauge the value of
the insurance cover 4
Allocate a portion of your monthly
income towards your emergency fund
5
Use it only when a genuine
emergency arises
It's advisable to keep your emergency fund in a separate savings account or a liquid
investment with easy access. This ensures that the funds are readily available when
needed but also earn some interest to help them grow over time.

GOOD PRACTICES
1 2

Emergency Fund Savings account

This helps ensure consistent contributions Aim to gradually increase the size of your
without requiring constant manual effort. emergency fund as your financial situation
improves or as your expenses grow.
 103

To understand how risky it may get when YEAR 1981-2023

investing in equity let us see the
illustration here. We can see that from Minimum Returns -52.45% (2008)
1981 to 2023 the annual returns for
SENSEX have been negative 23% of the Maximum Returns 93.98% (1985)
times. Just imagine, if an investor faces an
emergency at a time when the market is Number of years with
low he or she may lose money at the time Negative Returns 10 23%
of sale of their investments. Thus, even
though expected returns on Equity is much Number of years with
higher than FD or Gold one must know that Positive Returns 33 77%
the actual returns may or may not be close
to the expected returns.
When we say 15% p.a expected returns it implies that over a certain number of years
the average return on investment in equity will be 15% and not that every year it will
grow by 15%. Some years the returns may be higher than 15% while some years will also
see negative returns.

2022 2023

2018 2020 2021

2016 2019 2017

2013 2010 2014 2007

2002 2004 2012 2006

2011 2001 2015 1984 1997 1993 2005 2009

2000 1998 1996 1983 1994 1992 1988 2003 1991

2008 1995 1987 1986 1982 1989 1990 1981 1999 1985

-60% -30% -20% -10% 0% 10% 20% 40% 60% 80%

to -30% to -20% to -10% to 0% to 10% to 20% to 40% to 60% to 80% to 100%
 106

BUSINESS
Two friends, Radhika and Samarth, want to OWNERS
start a business. The business requires at least
Rs 5,00,000 to start. Samarth has only Rs
100,000, Radhika however has the rest. So
ideally how much share of the profits Samarth
should get for his investment?? SAMARTH RADHIKA
INR 1,00,000 INR 4,00,000
1 lakh of 5 lakhs is 20%. So Samarth becomes a 20% 80%
20% owner in the business. He gets 20% of the
total profits or losses earned by the company.
When you invest in a company’s shares, you are SHAREHOLDERS RIGHTS
essentially buying a small piece of that company.
This piece, or share, represents a fraction of the
company's value. As a shareholder, you own a Right to
inspect the
part of the company's assets (like its buildings, financial
equipment, and brand) and, in some cases, you Right to statements
even get a say in the company's decisions of the
through voting rights at shareholder meetings. in the meetings. company.

A share is a certificate (electronic form) of ownership that is issued by the

company. In addition to a share in the growth of the company, a
shareholder also gets some rights.

Why would companies want to sell their shares?

The main reason is to raise money. When
companies have plans to grow bigger— like
opening new stores, developing new products, or
improving their services— they often need more
money than they have on hand. So in order to get
more money, they can either: (a) take a loan (b) give equity

Debt/ loan has interest cost, plus you have to repay it within the stipulated time.
Hence, it can be burdensome on a growing company. By selling shares of the company
to the public, you are giving away, part ownership, hence there is no burden to repay
the funds, that is why companies also consider this option.
 111

Historically, returns from investments in Equity have given a 15%p.a return to the
investors over a period of more than 20 years.
Look at the values of these 5 stocks from 2000 to 2024.
Share 2000 March 1, 2024 Returns
Reliance Industries INR 64 INR 2,984 18.18% p.a
HDFC Bank INR 45 INR 1,430 16.23% p.a
ICICI Bank INR 23 INR 1,087 18.25% p.a
Infosys INR 178 INR 1,655 10.18% p.a
MRF Tyres INR 1217 INR 1,45,186 23.11% p.a

The annual rate of return also known as Compounded Annual Growth Rate (CAGR) is
calculated as:

CAGR = (Current Price/Purchase Price)^ (1/n) - 1

where n is the number of years

Note: For ease of calculation we took n=23 for the above table

risk hai to ishq hai !!

Investing in equities, while offering the potential for substantial returns, comes with its
set of risks. Before studying the major risks associated with investing in equities let us
have a look at prominent companies going from peaks to valleys!

Company Then Now Returns

Reliance INR 84 (in 2012) INR 2 (in 2024) -26.76% p.a
Communications

Nokia $55 (in 2000) $3.61 (in 2024) -10.73% p.a

Source: Yahoo Finance
 116

Objective: This activity aims to enhance research skills, familiarize students

with global financial markets, and introduce them to the process of
accessing and interpreting real-time financial data.
Instructions:
1. Below is a list of 11 companies from across the world. Your task is to find specific
details for each company.
2. Ensure to note the date on which you access the market price for accuracy.
3. You may use financial websites or the official stock exchange websites for your
research.
NOTE: Ticker symbols are used to identify specific publicly traded
companies and the securities they issue on a financial platform. They are
typically unique symbols made up of letters and numbers.

Market
Ticker Stock Source
Company Country Industry Price as
Symbol Exchange Website
on_____
 121

Gold is one of the most preferred investments in India. India is the second largest
consumer of gold as a commodity and first as a jewellery. The average return on
gold is 11% over the last 20 years. Gold has been a symbol of wealth in India since
time immemorial.
So the question arises, why?
Why is gold the favourite investment of India?
[Link] on Gold beat inflation
Historically, returns on Gold have been more than the inflation
rate thus, Gold provides a great hedge against inflation. Average
return on Gold over the past 20 years in India has been around
11%-12% p.a.
[Link]
Gold is a liquid asset that means you can sell gold at the market
price and convert it into cash immediately.
[Link] World Wide
Gold has been around as commodity money for over 3000 years
across the world. Almost all countries recognise gold as a
valuable commodity. Thus, the trust in Gold as a safe investment
option is paramount. It can be observed that during an economic
crisis or war like situations, gold prices increase because people
consider it a safe investment tool.
[Link] Asset
Gold is a physical asset (bullions, coins etc) which gives a sense
of belongingness and security to the investors.
[Link] risk
Due to acceptance of Gold as a trusted asset class across the
world, the risk associated with this asset class is considered to
be low. It has dual benefits of risk-reduction and wealth creation.
.
[Link] specialized knowledge
Buying or investing in gold doesn’t require any research so it is a
go to option for someone who doesn’t have much expertise/
knowledge of other investments.
 122

[Link] And Cultural Significance

Gold is regarded very highly in India as people consider buying it
on auspicious occasions of festivals, weddings etc. This
invariably keeps the demand ahead of its supply thus, increasing
the price.
[Link]ateral for loans
Probably the best thing to be used as collateral for loans to get
low rates of interest.

[Link] against Equity

It has been seen that returns on Gold generally shares an inverse
relation with the equity market. This means, when the Equity
market is down, Gold gives higher returns. Therefore, it makes
complete sense to invest in Gold to diversify your portfolio if you
have exposure to Equity.

Don’t believe it? Let the figures say it all.

GOLD VS NIFTY & SENSEX

YEAR NIFTY GOLD SENSEX
2010 17.25% 22.70% 17.40%
2011 -24.90% 31.10% -25.10%
2012 27.35% 12.15% 25.10%
2013 5.95% -5.10% 8.50%
2014 31.45% -8.60% 29.60%
2015 -4.20% -6.05% -5.10%
2016 2.80% 11.15% 2.25%
2017 28.75% 5.20% 27.50%
2018 4.10% 7.50% 5.90%
2019 11.65% 23.65% 14.10%
 127

Do you recall those times when you went out

with friends, enjoyed movies, delicious food, and
various activities, and then divided the
expenses evenly among yourselves? It was a
fantastic way to collectively experience
something enjoyable while each person
contributed their fair share of money. Well, this
cooperative approach is precisely what Mutual
Funds are all about.

To illustrate, consider the story of Radhika, who

had a keen interest in investing in a company
called ABC Ltd. However, the share price of this
company was INR 100,000, and Radhika had
only INR 10,000 to invest. This means she could
have bought just 0.10 shares which obviously is
ABC Ltd. not allowed in India.

To get around this issue she decided

to discuss her investment idea with You are allowed to buy shares
three of her friends, and together, in decimals in the United
they decided to pool their money to States of America though!
purchase one share of ABC Ltd.
Profit
amount
Name sharing
invested
ratio

Radhika ₹ 10,000 1:10

₹ 10,000 ₹ 20,000 ₹ 30,000 ₹ 40,000

Riya ₹ 20,000 2:10

ABC Ltd.

Priya ₹ 30,000 3:10

Khushi ₹ 40,000 4:10

total ₹ 1,00,000 4:3:2:1

 134

Objective: To help students understand the nuances of saving and

investing for a goal, specifically for purchasing a home. They will analyze
different parameters to decide the course of action for individuals.

Instructions:
After reading each scenario, advise on the best saving or investment strategy for
Priya, Arjun, and Simran.
Asset classes available are Bank Account, Fixed Deposits, Bonds, Equity, and
Mutual Funds.
Consider their time until goal, current savings, and income level to provide a
reasoned recommendation for each.
Also, discuss any potential rebalancing strategies they might consider during their
journey towards home ownership.

Case Study 1: Priya's Plan

Priya writes, "I am a middle-income earner with a stable job. I've been saving for a
down payment to buy a house, and my goal is just about 10-12 months away. I have
managed to save up almost all the down payment amount needed, which is INR
5,00,000. My savings currently stand at INR 4,80,000. Given the timeframe and my
income level, where should I invest or save my money to best meet my goal? Also,
should I consider rebalancing my investments during this period?"

Your Advice:

Reason for the Strategy:

Rebalancing Strategy:
 135

Case Study 2: Arjun's Aspiration

Arjun shares, "I'm a businessman with a volatile income, planning to buy a house in
about 7 years. The down payment I need is approximately INR 20,00,000, and I've
saved about 20% of that amount so far. I can invest regularly towards this goal,
but given the nature of my income, where should I place my savings? Also, how
should I approach rebalancing my investment portfolio over time?"

Your Advice:

Reason for the Strategy

Rebalancing Strategy

Case Study 3: Simran's Strategy

Simran explains, "I have a high-paying job and aim to buy a house in about 3 years.
The down payment required is INR 15,00,000, and I've already saved about 70-80%
of this amount, which is around INR 12,00,000. With my high risk appetite and
considerable savings, what would be the best investment strategy for me? And
considering my goal's timeframe, how might I need to rebalance my investments?"

Your Advice:

Reason for the Strategy

Rebalancing Strategy
 139

Mr Kamath works in an IT company and earns a Salary + Rent + Portfolio

salary of INR 75,000 per month. He lives with his 75,000 15,000 700000
father, wife and a son. In addition to his salary he
also receives rent of INR 15,000 per month and
invests in Gold and Mutual Funds regularly. He
already has a portfolio INR 7 lakhs.
Everything was working fine unless 2020 rolled
in. He lost his job, the tenant vacated and the
stock market was down as a result the portfolio
was down to INR 5 lakhs. To add to the woes his Lost his job Tenant 500000
father was hospitalised due to Covid.
Now, they have to take care of the family along with daily expenses and to top it all, cope
with the medical expenses of their father resulting in huge hospital bills. The bills have
already gone above INR 6 lakhs. How would Mr. Kamath now resolve this financial
predicament?
There were many such families which found themselves in similar difficult situations due
to Covid where their income and savings were not enough to help them with dire
situations. Investments, emergency funds etc are all important but in some situations
such as loss of job, medical emergencies, loss of life etc they might not be able to help
you cover all your expenses.

This is where Insurance comes to rescue! Imagine someone paying off all the medical
bills for Mr. Kamath so that he had to just worry about the daily expenses at home!

What is Insurance?
We are surrounded by various types of risks in our day to day life such as risk of
accidents, illness, loss of valuables, loss of life etc. All these risks can cause severe
financial burden and/or loss. Insurance is a prudent way of transferring these risks to
an insurance company.

Insurance is a contract between two parties where the insurer (Insurance

Company) agrees to compensate the insured (Individual) to the tune of monetary
loss suffered due to the contingency listed in the contract. Contingency is the event
whose occurrence causes monetary loss to the individual. In lieu of this promise, the
insured pays a price called the premium to the insurer.
In short, “ Insurance is making good the monetary loss”.
 140

The premium you pay to cover yourself from the risks is relatively much smaller
compared to the amount you receive from the insurance company upon that
unfortunate event happening. Then why do Insurance companies agree to cover your
risks? This is because of the concept of Pooling of Risks. Insurance companies sell such
policies to many individuals and collect premiums whereas only a few of them claim
insurance due to the event happening.

Think of a situation where you sell 1 lakh policies to people promising to pay money
upon someone falling ill and getting hospitalised. How many people do you think will
get hospitalised from this pool of 1 lakh people? Not many, right! This is how the
insurance business works.

Note : Insurance is not an investment or saving which is done to earn returns.

It is a type of protection that is taken to cope up with any kind of losses in
future.

Saarthi Scoops
In ancient India, people had early versions of insurance based
on helping each other within communities, not like today's
formal insurance. They shared resources to support anyone in
trouble, such as during illness or natural disasters. For
example, "Yogakshema" from the Vedas focused on welfare
by pooling resources for those in need. "Dharmashastras"
talked about early social security, suggesting community
health and safety support. Also, trade and craft guilds,
known as "Shrenis," collected money to help members during
hard times, similar to how insurance works by sharing risks.
These early practices were all about communities sticking
together and helping each other out, which helped pave the
way for the insurance systems we have now.
 143

Objective: These scenarios highlight common risks that can lead to financial
losses in real life, demonstrating the importance of insurance in mitigating
these risks. Students should understand that while not all losses can be
prevented, insurance provides a safety net that can help recover financially
from such events.

1. Car Accident

2. House Fire

3. Health Emergency or
Serious Illness

4. Theft or Burglary at Home

5. Loss of Life (of the
breadwinner)

6. Natural Disasters (Flood,

Earthquake, Storm)

7. Travel-Related Losses
(Lost luggage, trip
cancellation, medical
emergencies abroad)

8. Market Investment Losses

9. Wear and Tear of Property

10. Losses from Betting

and/or Illegal Activities
 147

Progressive Tax: Proportional Tax:

Progressive taxation is where the tax In this method, tax rate at which one
rate increases with increase in the has to pay tax that remains the same
taxpayer’s income. It imposes a lower tax for everyone, irrespective of an
rate on low-income earners and a higher individual’s income. The proportional
tax rate on those with a higher income. tax system is also known as the flat tax
rate system.

INCOME SLAB TAX RATE INCOME TAX RATE

0 - Rs 2.5 lakh NIL 0 - Rs 2.5 lakh 20%
Rs 2.5 lakh to Rs 5 lakh 10% Rs 2.5 lakh to Rs 5 lakh 20%
Rs 5 lakh to Rs 10 lakh 20% Rs 5 lakh to Rs 10 lakh 20%
Above Rs 10 lakh 30% Above Rs 10 lakh 20%

For example, Mr. A earns Rs 5,00,000 per annum, and Mr.B earns Rs.20,00,000 per
annum. The flat tax rate is 20% of the income. The tax calculation will be done as follows:

Income Tax calculation for Mr A and Mr B

Progressive Method Proportional Method
Mr A Mr B Mr A Mr B

NIL + (5-2.5)10% NIL+ (5-2.5)10% + 20% of 5,00,000 20% of

(10-5)20% + (20-10)30% 20,00,000
=25,000 =4,25,000 =1,00,000 =4,00,000

Note: 500000
Mr B Mr B
India follows both progressive system of 400000
taxation and a proportional system of taxation. 300000
While direct taxes, like the income tax, follow a 200000
progressive taxation system, indirect taxes, like 100000
Mr A
GST, follow a proportional system. Mr A
0
Progressive Proportional
 149

Individual taxpayers must pay income tax based on the slab

system into which they fall. Individuals may fall into a
different tax bracket depending on their Income. As a result,
persons with higher incomes will have to pay more taxes.
Assessee:
The term assessee refers to any individual or entity that holds the legal liability of tax
payment or any other financial commitments as specified by the Income Tax Act, 1961.
Rebate:
Tax rebate is a refund on taxes when the tax liability is less than the taxes the
individual has paid.

Income tax slab rates for FY 2023-24 AY 2024-25

OLD REGIME
Slab Individuals Resident Resident Super
(Age<60 Senior Citizen Senior Citizen
years) (80 years and above)
Upto Rs 2,50,000 Nil Nil Nil
Rs 2,50,001 to
5% Nil Nil
Rs 3,00,000
Rs 3,00,001 to
5% 5% Nil
Rs 5,00,000
Rs 5,00,001 to
20% 20% 20%
Rs 10,00,000
Above Rs 10,00,000 30% 30% 30%
 152

Cybersecurity is an essential discipline in the digital age, focusing

on protecting computer systems, networks, and data from theft,
damage, or unauthorized access. As we increasingly rely on digital
technologies for every aspect of our lives - from banking and
shopping to communication and entertainment - the importance
of cybersecurity has never been more paramount. It serves as
the backbone of modern digital safety, ensuring the
confidentiality, integrity, and availability of information.
The necessity for cybersecurity emerges from the growing sophistication of cyber
threats and attacks, which can lead to significant financial losses, compromise
personal and sensitive information, and even disrupt the operations of critical
national infrastructure.
The digital transformation of society, accelerated by the
COVID-19 pandemic, has further emphasized the importance of
cybersecurity. With more people working remotely, an increase
in online transactions, and the proliferation of digital
communication channels, there is a broader attack surface for
cybercriminals to exploit. This shift has made cybersecurity not
just a concern for IT professionals but a critical issue for
everyone.
 153

Phishing Attacks: These involve tricking

individuals into revealing personal information, Unexpected SMS Suspicious
or social media emails with
such as passwords and credit card numbers, by messages with urgent
masquerading as a trustworthy entity in an links,
misspellings in
requests,
misspelled
electronic communication. app names URLs

Malware:This includes various malicious software

types like viruses, worms, Trojan horses, and Apps requesting Slow
excessive computer
ransomware. Malware can damage or disable permissions, performance
computers, steal information, or allow attackers unexpected
battery drain
unexpected
pop-ups
to take control of systems.

Denial-of-Service (DoS) and Distributed Denial- Inability to Websites not

of-Service (DDoS) Attacks: These attacks aim to access online loading,
make a website or network resource unavailable services, slow network
network connectivity
to users, typically by overwhelming it with a flood Attack Common
on Network performance issues
of internet traffic

Man-in-the-Middle (MitM) Attacks: The attacker Unsecured Wi- Certificate

Fi connections, warnings on
secretly intercepts and possibly alters the sudden drop in websites,
communication between two parties who believe connection unsecured
they are directly communicating with each other. security. Wi-Fi
connections.

Social Engineering: Attackers also use Impersonating Emails or

psychological manipulation to trick users into known contacts or messages
authorities, asking for
making security mistakes or giving away sensitive soliciting personal immediate
information. information. action,
suspicious
attachments.
Password Attacks: This encompasses a variety of Failed login
Account lockout
techniques used to gain unauthorized access to attempts
notifications, after multiple
systems or services by cracking users' passwords, unexpected failed attempts,
unusual activity
such as brute force attacks, dictionary attacks, password reset
prompts. alerts.
and keylogging.
Unauthorized Bills for
Identity Theft: This involves stealing personal accounts in your services you
didn't use,
information to impersonate someone else, often name, unexpected
credit inquiries. denied credit
to carry out fraudulent activities. applications.
 157

Objective: To enhance students' cybersecurity awareness by identifying

subtle signs of cyber threats in everyday digital scenarios, fostering a
cautious approach to digital interactions and personal information
protection.

Are the below mentioned situations a case of a Cyber Attack? If yes, identify what type
of attack it might be and what are the red flags that indicate likewise.
Case 1 The Suspicious Friend Request
Rahul receives a friend request on a social media platform from someone claiming to be a distant

2
relative. The profile has a few photos and some mutual friends. Shortly after accepting the
request, he receives a message from the new "relative" asking for Rahul's email and password to
share a family photo album through a link.

3
Case 2 The Free Wi-Fi Network
While waiting at a café, Aisha notices a free Wi-Fi network named “Free_Cafe_WiFi”. She connects

4
without hesitation to check her emails. Soon after, a pop-up appears, asking her to enter credit
card information to continue using the service.

Case 3 The Urgent Email from the Boss

Varun receives an email from his boss late at night, marked as urgent. The email instructs him to
immediately transfer funds to a new vendor for an upcoming project. The email address is slightly
different from his boss's usual email.