1.

Define the term ‘Investment’. Name any two long term scheme which will help a person to invest his/her savings for further use. Write two advantages and two disadvantages of each.

Answer»

The term ‘Investment’ means that part of income which may be used to purchase a financial product or other item of value to generate some additional income. Two long term schemes, with their advantages and disadvantages, which will help a person to invest his/ her savings for further use, are given in the table below.

Name of SchemeAdvantagesDisadvantages
Public Provident Fund(PPF)Very low minimum amount of money needs to be invested every year (Rs 500 minimum) Very high rate of interest (7.6%) compared investment schemesThe investment must be kept locked in for a long period (minimum 15 years), although partial withdrawal is allowed. Maximum limit of investment in a year is limited to Rs 1.5 lakhs only.
National Savings Certificate (NSC)It is one of the safest investment tools available at all Indian post-offices because it is guaranteed by the Government of India. The amount invested is eligible for deduction under section 80°C of Income tax Act, 1961The investor cannot redeem the National Savings Certificate before its maturity period except in some cases like death etc. The certificate has to be physically kept till maturity


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