NAF Exam Study Guide Questions
with Correct Answers
Financial Literacy - ANSWERSBeing Financial Literate is when your able to manage
your money well, plan for the future and make reasonable decisions.
Needs - ANSWERSThings you can't live without
Wants - ANSWERSThings you would like to have
Time value of Money - ANSWERSIt refers to the idea that a dollar in hand today is
worth more than a dollar in the future. In other words, money avaliable now is worth
more than the same amount in the future.
Interest - ANSWERSIt is a payment made in exchange for using money over time.
Interest part 2 - ANSWERSIf you borrow money from the bank, you pay the bank
interest. If you lend the bank money, it pays you interest.
Future Value - ANSWERSIt refers to the value an investment at some point in the
future.
Simple interest - ANSWERSSimple interest refer to the interest that you earn on your
money. Simple interest is paid when the interest is not reinvested each interest period.
(linear)
Compound interest - ANSWERSRefers to the interest that you earn on your money. The
processor compounding refers to earning interest on your interest. (exponential)
Financial Service - ANSWERSThe financial services industry helps people, businesses,
and governments manage their money. They are heavily regulated by the government
and they keep money flowing through the economy.
Financial service institutions may - ANSWERSHold an protect people's money, lend
money people, help people make more money, protect people from being financially
hurt by unfortunate event.
Examples of financial service institutions are, - ANSWERSBanks, credit unions, saving
and loans associations, insurance companies
Savings account - ANSWERSIt is a place to keep your money.
, Checking account - ANSWERSAllows you to write checks against the money in the
account.
Insurance - ANSWERSIt is a form of risk manage; it protects your finance depending on
what of insurance it is (health, car, etc.)
Financial Intermediary - ANSWERSIs an institution or even an individual who acts as
the middleman between those who want to lend money and those who want to borrow
it; (etc: commercial banks).
Thrifts - ANSWERSAre typically savings institutions and include savings and loan
associations and saving banks. Specialize in savings accounts and real estate financing
Credit Unions - ANSWERSFinancial institutions formed by an organized group of
people with a common bond, such as the one that exist between teachers, government
or industry employees
Insurance companies - ANSWERSDesigned to protect individuals and businesses from
risks
Mutual Fund - ANSWERSA professionally managed investment company that pools
money from investors and invests the money into stocks, bonds, or other securities
Pension Funds - ANSWERSWorkplace plans designed to provide income for
employees when they retire.
Capital - ANSWERSA business's cash or property
Importance of Capital - ANSWERSCapital is something that touches everyone, financial
intermediaries facilitate the transfer of capital.
If a financial institution is struggling, the money it needs to support itself and the
economy becomes unavailable, (economy slows down).
Cash flow - ANSWERSHow your money comes and goes
Income - ANSWERSThe money that comes in
Earned income- Income from working
Portfolio income- Income from managing investments (bonds, stocks)
Passive income- Money from items you have purchased or created
Expenses - ANSWERSMoney that goes out
Assets - ANSWERSAnything you own that has monetary value, (car, house, phone)
Liabilities - ANSWERSAny debts or payments you owe to an individual or business
with Correct Answers
Financial Literacy - ANSWERSBeing Financial Literate is when your able to manage
your money well, plan for the future and make reasonable decisions.
Needs - ANSWERSThings you can't live without
Wants - ANSWERSThings you would like to have
Time value of Money - ANSWERSIt refers to the idea that a dollar in hand today is
worth more than a dollar in the future. In other words, money avaliable now is worth
more than the same amount in the future.
Interest - ANSWERSIt is a payment made in exchange for using money over time.
Interest part 2 - ANSWERSIf you borrow money from the bank, you pay the bank
interest. If you lend the bank money, it pays you interest.
Future Value - ANSWERSIt refers to the value an investment at some point in the
future.
Simple interest - ANSWERSSimple interest refer to the interest that you earn on your
money. Simple interest is paid when the interest is not reinvested each interest period.
(linear)
Compound interest - ANSWERSRefers to the interest that you earn on your money. The
processor compounding refers to earning interest on your interest. (exponential)
Financial Service - ANSWERSThe financial services industry helps people, businesses,
and governments manage their money. They are heavily regulated by the government
and they keep money flowing through the economy.
Financial service institutions may - ANSWERSHold an protect people's money, lend
money people, help people make more money, protect people from being financially
hurt by unfortunate event.
Examples of financial service institutions are, - ANSWERSBanks, credit unions, saving
and loans associations, insurance companies
Savings account - ANSWERSIt is a place to keep your money.
, Checking account - ANSWERSAllows you to write checks against the money in the
account.
Insurance - ANSWERSIt is a form of risk manage; it protects your finance depending on
what of insurance it is (health, car, etc.)
Financial Intermediary - ANSWERSIs an institution or even an individual who acts as
the middleman between those who want to lend money and those who want to borrow
it; (etc: commercial banks).
Thrifts - ANSWERSAre typically savings institutions and include savings and loan
associations and saving banks. Specialize in savings accounts and real estate financing
Credit Unions - ANSWERSFinancial institutions formed by an organized group of
people with a common bond, such as the one that exist between teachers, government
or industry employees
Insurance companies - ANSWERSDesigned to protect individuals and businesses from
risks
Mutual Fund - ANSWERSA professionally managed investment company that pools
money from investors and invests the money into stocks, bonds, or other securities
Pension Funds - ANSWERSWorkplace plans designed to provide income for
employees when they retire.
Capital - ANSWERSA business's cash or property
Importance of Capital - ANSWERSCapital is something that touches everyone, financial
intermediaries facilitate the transfer of capital.
If a financial institution is struggling, the money it needs to support itself and the
economy becomes unavailable, (economy slows down).
Cash flow - ANSWERSHow your money comes and goes
Income - ANSWERSThe money that comes in
Earned income- Income from working
Portfolio income- Income from managing investments (bonds, stocks)
Passive income- Money from items you have purchased or created
Expenses - ANSWERSMoney that goes out
Assets - ANSWERSAnything you own that has monetary value, (car, house, phone)
Liabilities - ANSWERSAny debts or payments you owe to an individual or business
