National Finance Olympiad Grade 8 Financial Literacy Guidebook – Comprehensive Review Flashcards

These 200 question-and-answer flashcards comprehensively review key concepts from the National Finance Olympiad Grade 8 Guidebook, covering money, banking, personal finance, insurance, inflation, investing, risk, portfolio management, compounding, stock markets, taxation, fintech, and financial fraud. Use them to test knowledge, reinforce learning, and prepare for exams or competitions.

What are the four primary functions of money?

Medium of exchange, store of value, unit of account, and standard of deferred payment.

Why is money considered a social convention?

Because its value is based on collective trust and mutual agreement among people to accept it for transactions.

Name any three key properties of effective money.

Durability, portability, divisibility, uniformity, acceptability, and fungibility.

What property of money allows 1 rupee to be exchanged for any other 1-rupee coin?

Fungibility.

Which ancient system directly exchanged goods without using money?

The barter system.

Give one major limitation of the barter system.

It required a double coincidence of wants between trading parties.

What form of money first introduced stamped metal pieces to certify value?

Metal coins.

Which country first widely used government-backed paper money?

China during the Song Dynasty.

Define ‘fiat money’.

Currency that has no intrinsic value and is accepted because a government declares it legal tender.

What 1971 event ended direct convertibility of the US dollar to gold?

The Nixon Shock.

Name two advantages of cryptocurrencies.

Lower transaction costs and global reach without currency conversion.

What is the daily trading volume of the global Foreign Exchange market (approx.)?

Over US $6 trillion per day.

In a currency pair EUR/USD, which is the base currency?

EUR (the euro).

Differentiate between fixed and floating exchange rates in one sentence.

Fixed rates are pegged to another currency by the government, while floating rates are determined by market supply and demand.

Give one factor that can strengthen a country’s currency value.

Strong economic performance or high political stability.

What does ‘spot rate’ mean in forex trading?

The current exchange rate used to settle a currency transaction immediately.

Which motive for holding money is related to unexpected emergencies?

The precautionary motive.

Who is the lender of last resort in a country’s banking system?

The central bank.

Define ‘repo rate’.

The rate at which a central bank lends short-term funds to commercial banks.

What happens to consumer borrowing when the reverse repo rate rises?

Commercial banks park more funds with the central bank, lending less to consumers, reducing borrowing.

State one purpose of quantitative easing.

To increase the money supply and stimulate economic growth.

Name any two modern electronic money transfer methods in India.

UPI and IMPS.

What is the minimum amount for an RTGS transaction?

₹2 lakh.

How quickly are IMPS transfers settled?

Immediately, 24×7.

Give one common charge applied when you break a bank FD before maturity.

A premature withdrawal penalty or reduced interest rate.

What is a credit score?

A numerical representation of an individual’s creditworthiness, usually ranging from 300-900.

Which component has the highest weight in credit-score calculation?

Payment history.

Name two unsecured loan types.

Personal loans and education loans.

What does the term ‘collateral’ mean in lending?

An asset pledged to secure a loan, which the lender can seize if the borrower defaults.

Define simple interest in one formula.

Simple Interest = (Principal × Rate × Time) ÷ 100.

Which banking innovation lets third-party apps access bank data via APIs?

Open banking.

Give one example of AI use in banks for customer service.

Chatbots or virtual assistants handling customer queries 24×7.

List any two common banking frauds mentioned in the guidebook.

Phishing scams and card skimming.

What security feature requires both a password and an OTP?

Multi-factor authentication (MFA).

Explain ‘personal finance’ in one sentence.

The management of an individual’s income, expenses, savings, investing, and debt.

What budgeting ratio does the 50/30/20 rule represent?

50 % needs, 30 % wants, 20 % savings/debt repayment.

State one key purpose of building an emergency fund.

To cover unexpected expenses such as medical bills or job loss.

Name the document that lists a person’s borrowing and repayment history.

A credit report.

What is the primary goal of retirement planning?

Ensuring enough funds to maintain one’s lifestyle after stopping work.

Identify two tax-advantaged retirement instruments in India.

PPF (Public Provident Fund) and NPS (National Pension System).

Define inflation in one line.

The general rise in prices of goods and services over time, reducing purchasing power.

Which price index tracks retail inflation for consumers?

Consumer Price Index (CPI).

Write the formula to compute an inflation rate using CPI.

Inflation Rate = (Current CPI − Previous CPI) ÷ Previous CPI × 100.

Name the risk that your fixed-rate return loses value when prices rise faster than returns.

Inflation (purchasing-power) risk.

Give one advantage of life insurance for beneficiaries.

Provides financial security by paying a lump sum if the insured dies.

What is the usual lock-in period for ELSS mutual funds?

Three years.

Who manages a mutual fund’s investments?

A professional fund manager.

What does NAV stand for in mutual funds?

Net Asset Value.

Write the Rule of 72 formula.

Time to double ≈ 72 ÷ annual rate of return (in %).

At 9 % annual return, approximately how many years to triple using Rule of 114?

About 12.7 years (114 ÷ 9).

Which investment risk arises if a bond issuer cannot pay interest?

Credit (default) risk.

Explain diversification in one sentence.

Spreading investments across different asset classes or sectors to reduce overall risk.

What is a balanced mutual fund’s typical equity allocation?

At least 65 % in equities, the rest in debt.

Give one key difference between savings and investing.

Savings protect capital with low returns, while investing seeks higher returns with some risk.

Define a bond’s coupon rate.

The fixed annual interest percentage paid on a bond’s face value.

What is the face value of a bond?

The principal amount repaid to bondholders at maturity.

Mention one reason investors choose fixed deposits.

Guaranteed returns with minimal risk.

What does the 100-age rule help investors decide?

The percentage of a portfolio to allocate to equities based on age.

Identify one limitation of compounding.

It requires time; short horizons show minimal effect.

Which two major Indian stock exchanges list most large-cap companies?

NSE (National Stock Exchange) and BSE (Bombay Stock Exchange).

What do you call the first sale of company shares to the public?

An Initial Public Offering (IPO).

Give one factor that typically causes stock prices to fall.

Negative company earnings reports or poor outlook.

Name the person or entity that executes buy/sell orders for investors on an exchange.

A stockbroker.

How is dividend yield calculated?

Dividend per share ÷ price per share × 100.

Define ‘liquidity’ in investing.

The ease with which an asset can be quickly sold for cash without significant loss in value.

What is an expense ratio in mutual funds?

The annual fee charged by a fund to cover management and administrative costs, expressed as a percentage of AUM.

How long is the typical tenure range for bank recurring deposits?

From 6 months up to 10 years.

What does DICGC insure and up to what limit per depositor per bank?

Bank deposits (principal + interest) up to ₹5 lakh.

Name one key advantage of investing through a SIP.

Rupee-cost averaging reduces the impact of market volatility.

Which loan type uses property as collateral and usually has long tenure?

A mortgage (home loan).

State one purpose of an asset allocation strategy.

To balance risk and return according to an investor’s goals and risk tolerance.

Give one example of a fintech service powered by blockchain.

Faster and cheaper cross-border payments.

What is meant by ‘market capitalisation’?

The total market value of a company’s outstanding shares.

Which mutual fund invests only in companies within one industry like banking?

A sector fund.

What risk results from not finding a buyer quickly for your shares?

Liquidity risk.

Describe ‘compound interest’ in one line.

Interest calculated on the initial principal plus previously earned interest.

Why are government bonds considered lower risk than corporate bonds?

Because governments are less likely to default on repayments.

What tax-saving deduction section applies to life-insurance premiums in India?

Section 80C of the Income Tax Act.

Which budget component tracks and plans spending and saving?

A budget.

Define ‘hyperinflation’.

Extremely rapid and uncontrolled price increases causing currency value to collapse.

What does KYC stand for in banking?

Know Your Customer.

What is a man-in-the-middle attack?

A cyberattack where a hacker intercepts communication between two parties to steal data or manipulate transactions.

List any two common digital wallet apps in India.

Paytm and PhonePe.

What are ‘hedging mechanisms’ used for in finance?

Reducing or offsetting potential losses from price fluctuations.

Which interest calculation gives higher maturity value: simple or compound?

Compound interest.

Give one example of a quantitative easing measure.

A central bank buying government securities to inject liquidity.

What is the minimum balance requirement concept in savings accounts?

The lowest amount that must be maintained to avoid fees or account penalties.

Name one potential disadvantage of life insurance.

High premium costs for comprehensive coverage.

Why are high-cap stocks generally less volatile than small-cap stocks?

They belong to well-established companies with stable earnings and large market capitalisation.

Which type of risk cannot be diversified away?

Systematic (market) risk.

State one benefit of a forward currency contract for an importer.

Locks in an exchange rate to hedge against future currency fluctuations.

What are capital gains taxes levied on?

Profits from selling capital assets such as stocks or property.

Which personal finance element involves protecting oneself against unforeseen losses?

Risk management and insurance.

What is a tax slab?

A range of income levels taxed at a specific rate in a progressive tax system.

Define ‘asset under management’ (AUM).

The total market value of all assets a mutual fund or financial institution manages on behalf of clients.

Which instrument’s interest income is completely tax-free under Section 10(11)?

PPF (Public Provident Fund) interest.

Why is gold often considered an inflation hedge?

Because its price tends to rise when currency purchasing power falls.

Explain ‘systematic withdrawal plan’ (SWP) in mutual funds.

A facility allowing investors to withdraw a fixed amount at regular intervals from their fund.

What does IPO stand for?

Initial Public Offering.

Name the two main financial statements used to analyse a company’s performance.

The income statement and the balance sheet.