NAF Exam Study Guide Exam Questions and
Answers
Financial Literacy - -Being Financial Literate is when your able to manage your money
well, plan for the future and make reasonable decisions.
-Needs - -Things you can't live without
-Wants - -Things you would like to have
-Time value of Money - -It 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 - -It is a payment made in exchange for using money over time.
-Interest part 2 - -If you borrow money from the bank, you pay the bank interest. If you
lend the bank money, it pays you interest.
-Future Value - -It refers to the value an investment at some point in the future.
-Simple interest - -Simple 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 - -Refers to the interest that you earn on your money. The processor
compounding refers to earning interest on your interest. (exponential)
-Financial Service - -The 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 - -Hold 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, - -Banks, credit unions, saving and loans
associations, insurance companies
-Savings account - -It is a place to keep your money.
-Checking account - -Allows you to write checks against the money in the account.
-Insurance - -It is a form of risk manage; it protects your finance depending on what of
insurance it is (health, car, etc.)
, -Financial Intermediary - -Is 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 - -Are typically savings institutions and include savings and loan associations and
saving banks. Specialize in savings accounts and real estate financing
-Credit Unions - -Financial 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 - -Designed to protect individuals and businesses from risks
-Mutual Fund - -A professionally managed investment company that pools money from
investors and invests the money into stocks, bonds, or other securities
-Pension Funds - -Workplace plans designed to provide income for employees when they
retire.
-Capital - -A business's cash or property
-Importance of Capital - -Capital 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 - -How your money comes and goes
-Income - -The 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 - -Money that goes out
-Assets - -Anything you own that has monetary value, (car, house, phone)
-Liabilities - -Any debts or payments you owe to an individual or business
-Wealth - -What assets are left after you've paid your liabilities
-What is a SMART goal? - -Popular method used by individuals and even companies to
help provide a framework for how a goal should be created.
-S.M.A.R.T. - -Specific
Answers
Financial Literacy - -Being Financial Literate is when your able to manage your money
well, plan for the future and make reasonable decisions.
-Needs - -Things you can't live without
-Wants - -Things you would like to have
-Time value of Money - -It 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 - -It is a payment made in exchange for using money over time.
-Interest part 2 - -If you borrow money from the bank, you pay the bank interest. If you
lend the bank money, it pays you interest.
-Future Value - -It refers to the value an investment at some point in the future.
-Simple interest - -Simple 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 - -Refers to the interest that you earn on your money. The processor
compounding refers to earning interest on your interest. (exponential)
-Financial Service - -The 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 - -Hold 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, - -Banks, credit unions, saving and loans
associations, insurance companies
-Savings account - -It is a place to keep your money.
-Checking account - -Allows you to write checks against the money in the account.
-Insurance - -It is a form of risk manage; it protects your finance depending on what of
insurance it is (health, car, etc.)
, -Financial Intermediary - -Is 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 - -Are typically savings institutions and include savings and loan associations and
saving banks. Specialize in savings accounts and real estate financing
-Credit Unions - -Financial 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 - -Designed to protect individuals and businesses from risks
-Mutual Fund - -A professionally managed investment company that pools money from
investors and invests the money into stocks, bonds, or other securities
-Pension Funds - -Workplace plans designed to provide income for employees when they
retire.
-Capital - -A business's cash or property
-Importance of Capital - -Capital 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 - -How your money comes and goes
-Income - -The 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 - -Money that goes out
-Assets - -Anything you own that has monetary value, (car, house, phone)
-Liabilities - -Any debts or payments you owe to an individual or business
-Wealth - -What assets are left after you've paid your liabilities
-What is a SMART goal? - -Popular method used by individuals and even companies to
help provide a framework for how a goal should be created.
-S.M.A.R.T. - -Specific
