Class 10 Money and Credit Mock Test (CBSE)

Topics in Money and Credit

• Money as a medium of exchange
• Modern forms of money
• Loan activities of banks
• Credit situations
• Terms of credit
• Formal and informal sources of credit
• Self-help groups

Money and Credit practice questions with answers

1. Q1Multiple choice·1 mark
   At a science exhibition stall, Meera buys a solar-powered toy for Rs 300 and tells the stall owner that she will pay the amount next Sunday. Which statement best describes this transaction?

   1. (a)A cash transaction, because the toy changes hands today
   2. (b)A barter exchange, because no money is paid at the time of purchase
   3. (c)A credit situation, because payment is deferred and Meera owes the stall owner
   4. (d)A gift, because the stall owner trusts Meera
   Show answer and step marks

   1. Correct option: (c) A credit situation, because payment is deferred and Meera owes the stall owner+1

   Answer: (c)
2. Q2Multiple choice·1 mark
   Why does a credit situation depend on trust between the lender and the borrower?

   1. (a)Because the lender always keeps the goods in storage until the borrower pays in full
   2. (b)Because the lender gives value before receiving payment, so repayment depends on the borrower's willingness and ability to pay
   3. (c)Because the borrower is allowed to pay only in cash
   4. (d)Because the price of the goods falls steadily over the period of credit
   Show answer and step marks

   1. Correct option: (b) Because the lender gives value before receiving payment, so repayment depends on the borrower's willingness and ability to pay+1

   Answer: (b)
3. Q3Assertion and reason·1 mark
   Assertion (A): Banks lend money to borrowers and earn interest on the loans. Reason (R): Banks never lend money to businesses, only to individuals.

   1. (a)Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
   2. (b)Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A).
   3. (c)Assertion (A) is true but Reason (R) is false.
   4. (d)Assertion (A) is false but Reason (R) is true.
   Show answer and step marks

   1. Correct option: (c) Assertion (A) is true but Reason (R) is false.+1

   Answer: (c)
4. Q4Assertion and reason·1 mark
   Assertion (A): The use of money makes it much easier to exchange commodities without depending on the double coincidence of wants. Reason (R): Money acts as an intermediate step in any exchange, eliminating the need for a person to simultaneously want what the other person has.

   1. (a)Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
   2. (b)Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A).
   3. (c)Assertion (A) is true but Reason (R) is false.
   4. (d)Assertion (A) is false but Reason (R) is true.
   Show answer and step marks

   1. Correct option: (a). Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A) as money resolves the difficulty of double coincidence of wants.+1

   Answer: (a)
5. Q5Short answer·2 marks
   (a) Define a bank loan in one sentence. [1] (b) Name one purpose for which a bank may give a loan to a household. [1]
   Show answer and step marks

   1. (a) A bank loan is an amount of money lent by a bank to a borrower, who agrees to repay it with interest by an agreed date.+1
   2. (b) Any one purpose such as buying a house, paying for education, or starting a small business.+1

   Answer: (a) A bank loan is money lent by a bank to a borrower who agrees to repay it with interest by an agreed date. (b) For example, to buy a house, pay school or college fees, or start a small business.
6. Q6Long answer·5 marks
   A sports club in a city park plans to fence a children's badminton court and buy equipment worth ₹1,50,000. The club has ₹42,000 in savings and applies to a bank for the balance as a loan at 10% per annum simple interest for 3 years. The bank asks the club to deposit the title papers of a plot it owns as security. The club's monthly membership fees are ₹15,000, and it proposes to repay the total amount due in 36 equal monthly instalments. (a) Calculate the simple interest payable on the loan for 3 years. [1] (b) Calculate the monthly instalment the club must pay to repay the total amount due over 36 months. [1] (c) Calculate the amount left from the monthly membership fees after paying one instalment. [1] (d) State whether the bank is likely to treat the club as a safe borrower. Give a reason. [2]
   Show answer and step marks

   1. Loan = ₹1,50,000 − ₹42,000 = ₹1,08,000; $SI = \frac{P \times R \times T}{100} = \frac{1{,}08{,}000 \times 10 \times 3}{100}$+0.5
   2. Interest payable = ₹32,400+0.5
   3. Total amount due = ₹1,08,000 + ₹32,400 = ₹1,40,400+0.5
   4. Monthly instalment = $\frac{1{,}40{,}400}{36}$ = ₹3,900+0.5
   5. Amount left from fees = ₹15,000 − ₹3,900 = ₹11,100+1
   6. The bank is likely to treat the club as a safe borrower+1
   7. Reason: the fees of ₹15,000 cover the instalment of ₹3,900 with ₹11,100 spare every month+1

   Answer: (a) Interest = ₹32,400. (b) Monthly instalment = ₹3,900. (c) Amount left = ₹11,100. (d) Yes, the bank is likely to treat the club as a safe borrower, because the monthly fees of ₹15,000 comfortably cover the instalment of ₹3,900.

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