Personal Finance


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Personal Finance

  1. 1. Fact Sheet DANTES Subject Standardized Tests PERSONAL FINANCE TEST INFORMATION Approximate Percent This test was developed to enable schools to award II. Credit and Debt 20% credit to students for knowledge equivalent to that A. Credit cards which is learned by students taking the course. The B. Installment loans school may choose to award college credit to the C. Interest calculations student based on the achievement of a passing score. D. Federal credit laws The passing score for each examination is E. Creditworthiness, credit determined by the school based on recommendations scoring and reporting from the American Council on Education (ACE). F. Bankruptcy This minimum credit-awarding score is equal to the 1. Various chapters mean score of students in the norming sample who 2. Alternatives received a grade of C in the course. Some schools 3. Advantages and disadvantages set their own standards for awarding credit and may require a higher score than the ACE III. Major Purchases 14% recommendation. Students should obtain this A. Auto, furniture, appliances information from the institution where they expect to 1. Preshopping research/comparison receive credit. shopping 2. Lease vs. buy CONTENT 3. Warranties/service contracts 4. Lemon laws and redress The following topics, which are commonly taught in a. Effective complaining courses on this subject, are covered by this b. Small claims court examination. B. Housing Approximate 1. Rent vs. buy Percent 2. Financing I. Overview 12% a. Adjustable Rate Mortgages A. Financial goals and values (ARMs) B. Budgeting (spending plan) and financial b. Fixed-rate mortgages statements c. Closing costs C. Cash management d. PITI D. Economic terminology (recession, 3. Rules of thumb (ratios) depression, etc.) 4. Roles of professionals (real estate E. Institutional aspects of financial planning agents, inspectors, appraisers, (e.g., CFP, CHFC, FDIC, NASD, SEC) lawyers) Copyright © 2002 by The Chauncey G roup International Ltd., Princeton, New Jersey 08540. All rights reserved. The Chauncey Group International is a subsidiary of Educational Testing Service. THE CHAUNCEY GROUP INTERNATIONAL and THE CHAUNCEY GROUP are registered trademarks and The Chauncey Group design logo and the DSST logo are trademarks of The Chauncey Group International Ltd. A subsidiary of Approximate A. Payroll Percent B. Income IV. Taxes 11% C. IRS and audits
  2. 2. D. Estate and gift Approximate E. Tax planning/estimating Percent F. Progressive vs. regressive C. Equities G. Other (excise, property, 1. Stock exchanges state income) 2. Over-the-counter stocks H. Tax professionals 3. Primary vs. secondary markets 4. Common vs. preferred stocks V. Insurance 14% 5. P/E ratio A. Risk management 6. Stock analysis techniques B. Life policies 1. Term vs. cash value D. Mutual funds 2. Policy terminology 1. Dollar-cost averaging C. Property and liability policies 2. Load vs. no-load 1. Personal and family auto 3. Fee structures 2. Homeowners E. Other (e.g., commodities, 3. Umbrella coverage precious metals, real estate, 4. Terminology options) D. Health and Disability policies F. Sources of information (e.g., 1. Major medical professionals, Moody’s, S&P, Morning 2. HMOs Star, Barrons, Value 3. Medicare and Medicaid Line, prospectuses, audited 4. Terms and concepts annual financial reports) E. Specialty insurance (e.g., G. Time value of money professional, malpractice, H. Asset/Portfolio allocation antiques) F. Insurance analysis and VII. Retirement and Estate 12% sources of information Planning A. Qualified retirement accounts VI. Investments 17% (roll-overs) (e.g., IRA, SEP, A. Liquid assets Keogh, 401(k), 403(b) 1. Savings accounts B. Terminology (vesting, maturity) 2. Certificates of Deposit (CDs) C. Social Security benefits 3. Money market funds/Money market D. Wills and trusts deposit accounts E. Tax-deferred annuities 4. Emergency funds F. Estate planning (e.g., probate vs. non- B. Fixed income/Bonds (e.g., Treasury, probate) municipal, deep discount, corporate, junk, zero-coupon, Ginnie Mae) Questions on the test require candidates to demonstrate the following abilities. Some questions may require more than one of the abilities. • Knowledge of basic facts and terms (about 45 - 50% of the examination) • Understanding of concepts and principles (about 30 -35% of the examination) • Ability to apply knowledge to specific problems and situations (about 15 - 20% of the examination) -3-
  3. 3. SAMPLE QUESTIONS 5. A lender is offering a fixed-rate loan with two 1. Which of the following resources could be used points. If a family plans to purchase an $80,000 to evaluate the financial strength of an insurance house by putting 20% down and borrowing company? $64,000, how much will the two points cost? (A) Morningstar (A) $1,600 (B) Best’s (B) $1,280 (C) Dun & Bradstreet (C) $2,000 (D) Standard and Poor’s (D) $1,400 2. Joe and Betty are both recent college graduates 6. Which of the following types of insurance in their mid-twenties and are working at junior provides an individual with a percentage of lost executive positions in medium-size firms. They income due to physical or mental incapacity? plan to get married in two months and hope to (A) Health have a baby within the next three years. Which (B) Major medical of the following short-term goals should they be (C) Disability considering now? (D) Umbrella (A) Accumulating a savings fund for their honeymoon 7. A 65-year-old retiree with a 50-year-old spouse (B) Establishing a retirement plan for is considering various annuity payout options. themselves Which of the following payout options would (C) Establishing a college tuition fund for their provide the retiree with the largest annual child payment? (D) Accumulating a down payment for a house (A) Straight life (B) Joint life 3. The federal income tax is considered a (C) 20-year-certain progressive tax because as a person’s income (D) Refund rises the person’s tax rate (A) remains the same 8. A blue chip company is generally defined as a (B) increases (A) new company whose stock trades over- (C) decreases the-counter (D) fluctuates (B) well-established company whose stock trades on the NYSE 4. Which of the following types of bankruptcy is (C) 20-year-old limited partnership that is sold designed for debtors with regular incomes who by stockbrokers must attempt to repay as much of the debt as (D) 3-year-old mutual fund whose stock trades possible within a certain time period? on the NYSE (A) Chapter 5 (B) Chapter 7 9. An increase in the consumer price index (CPI) (C) Chapter 11 is generally an indication of (D) Chapter 13 (A) increased unemployment (B) increased inflation (C) continued recession (D) reduced trade deficit -4-
  4. 4. STUDYING FOR THE EXAMINATION Winger, Bernard J. and Ralph R. Frasca. Personal Finance: An Integrated Planning Approach. New The following is a list of reference publications that York: Macmillan Publishing Company, current were being used as textbooks in college courses of edition. the same or similar title at the time the test was developed. Appropriate textbooks for study are not Current textbook used by a local college or university limited to those listed below. If you wish to obtain for a course on the subject. study resources to prepare for the examination, you may reference either the current edition of the CREDIT RECOMMENDATIONS following titles or textbooks currently used at a local college or university for the same class title. It is The Center for Adult Learning and Educational recommended that you reference more than one Credentials of the American Council on Education textbook on the topics outlined in this fact sheet. (ACE) has reviewed and evaluated the DSST You should begin by checking textbook content examination development process. The American against the content outline included on the front Council on Education has made the following page of this Fact Sheet before selecting textbooks recommendations: that cover the test content from which to study. Area or Course Textbooks may be found at the campus bookstore of Equivalent: Personal Finance a local college or university offering a course on the Level: Lower-level baccalaureate subject. Amount of Credit: Three (3) semester hours Source: ACE Commission on Sources for study material suggested but not limited Educational Credit to the following: and Credentials Garman, E. Thomas and Raymond E. Forgue. INFORMATION Personal Finance. Boston: Houghton Mifflin Company, current edition. Colleges and universities that would like additional information about the national norming, or assistance Gitman, Lawrence J. and Michael D. Joehnk. in local norming or score validation studies should Personal Financial Planning. Chicago: The write to: DSST Program, Mail Stop 11-P, The Dryden Press, current edition. Chauncey Group International, 664 Rosedale Road, Princeton, New Jersey 08540. Hallman, G. Victor and Jerry S. Rosenbloom. Personal Financial Planning. New York: It is advisable that schools develop a consistent McGraw-Hill, Inc. current edition. policy about awarding credit based on scores from this test and that the policy be reviewed periodically. Kapoor, Jack R., Les R. Dlabay, and Robert J. The Chauncey Group will be happy to help schools in Hughes. Personal Finance. Homewood, IL: this effort. Richard D. Irwin, Inc., current edition. Lang, Larry R. Strategy for Personal Finance. New York: McGraw-Hill, Inc., current edition. Quinn, Jane Bryant. Making the Most of Your Money: Smart Ways to Create Wealth and Plan Your Finances in the '90s. New York: Simon & Schuster, current edition. I.N. 390550 Rosefsky, Robert S. Personal Finance. New York: John Wiley & Sons, Inc. current edition. -5-