Free DSST Personal Finance Practice Questions

Sample Practice Questions

Try these 10 sample questions from the DSST Personal Finance practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1A person has no existing savings for a $2,400 goal due in 12 months. Ignoring interest, how much must the person save each month to reach the goal?

   1. A.$100 per month
   2. B.$150 per month
   3. C.$200 per monthCorrect answer: C
   4. D.$300 per month

   Explanation: "GOAL AMOUNT ÷ MONTHS" Dividing $2,400 by 12 months gives $200 per month.

   Reference: My New Money Goal Worksheet — Page 1, Describe your new money goal

2. 2When a consumer uses a standard credit card for a purchase, what happens at the time of the transaction?

   1. A.The consumer borrows money that must be repaid.Correct answer: A
   2. B.The consumer spends only the balance in a checking account.
   3. C.The card automatically withdraws money loaded in advance.
   4. D.The consumer borrows with repayment due only when the account closes.

   Explanation: "When you use a credit card, you’re borrowing money, and you must repay it on the payment due date." A credit-card purchase creates borrowing, unlike spending funds already held in an account.

   Reference: How Are Prepaid Cards, Debit Cards, and Credit Cards Different? — How do prepaid cards and debit cards compare to credit cards?

3. 3Why might a used-car shopper obtain an independent mechanical inspection even after reviewing a vehicle history report?

   1. A.A history report typically does not list mechanical problems.Correct answer: A
   2. B.A history report guarantees that no mechanical problems exist.
   3. C.A history report provides the same mechanical diagnosis as an inspection.
   4. D.A history report makes an inspection unnecessary whenever a car is certified.

   Explanation: "A vehicle history report may list accidents and flood damage, but typically it will not list mechanical problems." A history report and mechanical inspection answer different questions.

   Reference: Buying a Used Car From a Dealer — Get an Independent Inspection Before You Buy

4. 4Which two taxes make up the federal payroll taxes commonly called FICA?

   1. A.Social Security and Medicare taxesCorrect answer: A
   2. B.Federal income and estate taxes
   3. C.Unemployment and federal income taxes
   4. D.Federal gift and estate taxes

   Explanation: "Taxes under the Federal Insurance Contributions Act (FICA) are composed of the old-age, survivors, and disability insurance taxes, also known as Social Security taxes, and the hospital insurance taxes, also known as Medicare taxes." FICA consists of Social Security and Medicare taxes.

   Reference: Social Security and Medicare Withholding Rates — Topic No. 751, introduction

5. 5In an insurance policy, what is a deductible?

   1. A.The part of a claim the insured pays before the insurer pays its shareCorrect answer: A
   2. B.The regular payment required to keep coverage active
   3. C.The maximum amount the insurer will pay for a covered loss
   4. D.The percentage of a covered claim paid after the deductible.

   Explanation: "The dollar amount or percent of a claim that you pay yourself before the insurance company pays its share." A deductible is the insured's initial share of a covered claim, subject to policy terms.

   Reference: How Does Insurance Work? — Insurance terms, Deductible

6. 6What kinds of investments do money market mutual funds typically hold?

   1. A.Liquid short-term debt, cash, and cash equivalentsCorrect answer: A
   2. B.Long-term corporate bonds and preferred stock
   3. C.Common stocks concentrated in one industry
   4. D.Direct holdings of commercial real estate

   Explanation: "Money market funds are a type of mutual fund that invest in liquid, short-term debt securities, cash and cash equivalents." Money market funds invest in the stated short-term instruments, though investment loss is possible.

   Reference: Money Market Funds: Investor Bulletin — What are money market funds?

7. 7What does vesting in a retirement plan refer to?

   1. A.Ownership of the account or entitlement to benefitsCorrect answer: A
   2. B.The rate at which the plan's investments must grow
   3. C.The first date an employee is allowed to contribute
   4. D.The period over which a plan pays retirement benefits

   Explanation: "Vesting means ownership of your account or your entitlement to benefits." Vesting concerns the participant's ownership rights in benefits or account contributions.

   Reference: Understanding Your Employer’s Retirement Plan — Vesting

8. 8A household averages $4,000 in monthly income, $3,100 in expenses, and $400 in existing savings contributions. How much is available each month for an additional goal under the CFPB worksheet approach?

   1. A.$500Correct answer: A
   2. B.$900
   3. C.$1,300
   4. D.$3,500

   Explanation: "Start with your average monthly income. Then subtract your average monthly expenses, and then subtract your average monthly savings." The available amount is $4,000 minus $3,100 minus $400, or $500.

   Reference: My New Money Goal Worksheet — Page 3, See what’s available for your new goal

9. 9How is a prepaid card generally funded before the cardholder uses it?

   1. A.A lender advances a revolving credit line.
   2. B.Money is loaded into the prepaid card account.Correct answer: B
   3. C.The card draws directly from a linked checking account.
   4. D.A lender adds each purchase to an installment loan.

   Explanation: "A prepaid card is not linked to a bank or credit union account. Instead, you put money into the card account, sometimes called loading money onto the card, before you can spend it." A prepaid card is loaded in advance and is not a linked debit account or a credit loan.

   Reference: How Are Prepaid Cards, Debit Cards, and Credit Cards Different? — How do prepaid cards compare to debit cards?

10. 10A used car is offered with the disclosure “As Is - No Dealer Warranty.” What does that disclosure mean about the dealer's repair obligation?

    1. A.The dealer agrees to repair all post-sale defects.
    2. B.The dealer does not promise to pay for needed repairs.Correct answer: B
    3. C.The dealer must replace the vehicle after any breakdown.
    4. D.The dealer promises to cover half of all repair bills.

    Explanation: "As Is - No Dealer Warranty means the dealer won’t pay for any problems or needed repairs." The disclosure describes the absence of a dealer warranty, subject to applicable law.

    Reference: Buying a Used Car From a Dealer — Types of Warranties