Free DSST Personal Finance Practice Test (2026)

Question 1

A taxpayer in the 22% bracket can claim either a $1,000 tax credit or a $1,000 tax deduction. How much more does the credit save?

Accepted Answer

$780

Answer

$0

Answer

$220

Answer

$1,000

Question 2

Jordan borrows $1,200 for one year on an add-on installment loan with a stated rate of 12% and repays it in 12 equal monthly payments. What is each monthly payment?

Accepted Answer

$112.00

Answer

$100.00

Answer

$106.62

Answer

$144.00

Question 3

A mutual fund holds assets worth $52 million and has $2 million in liabilities, with 2.5 million shares outstanding. What is its net asset value (NAV) per share?

Accepted Answer

$20.00

Answer

$19.20

Answer

$20.80

Answer

$21.60

Question 4

In a disability income insurance policy, the elimination period is

Accepted Answer

the waiting time after the disability begins before benefits start

Answer

the length of time that benefits will continue to be paid

Answer

the period during which the insurer may cancel the policy

Answer

the grace period allowed for paying an overdue premium

Question 5

Under the Fair Credit Reporting Act, what can a consumer do if her credit report lists an account that is not hers?

Accepted Answer

Dispute the error with the credit bureau, which must generally investigate

Answer

Have every negative item removed, even accurate ones, after one year

Answer

Sue the bureau for any late payment that appears on the report

Answer

Order the creditor to raise her credit limit as compensation

Question 6

A new toaster from a store fails to heat on the first use, and the seller made no promises about it and gave no written warranty. Which protection still applies under the law of sales in most states?

Accepted Answer

The implied warranty of merchantability

Answer

An express warranty from the seller

Answer

An extended service contract

Answer

The Truth in Lending Act

Question 7

What is the main tax difference between a Roth IRA and a traditional deductible IRA?

Accepted Answer

Roth contributions are made with after-tax money, and qualified withdrawals are tax free

Answer

Roth contributions are tax deductible, and all withdrawals are fully taxed

Answer

Roth accounts are taxed every year on their investment gains

Answer

Roth accounts are open only to workers whose employers offer a pension

Question 8

A 30-year-old parent with a tight budget needs a large amount of life insurance until the children are grown. Which type usually gives the most coverage per premium dollar?

Accepted Answer

Term life insurance

Answer

Whole life insurance

Answer

Universal life insurance

Answer

Variable life insurance

Question 9

In a simplified tax system, income is taxed at 10% up to $10,000, at 15% from $10,000 to $40,000, and at 25% above $40,000. How much tax is owed on $60,000 of taxable income?

Accepted Answer

$10,500

Answer

$9,000

Answer

$12,000

Answer

$15,000

Question 10

Which factor carries the most weight in a typical FICO credit score?

Accepted Answer

Payment history

Answer

Length of credit history

Answer

Types of credit in use

Answer

Number of recent credit inquiries

Question 11

Which asset generally passes to heirs outside of probate?

Accepted Answer

A life insurance policy with a named beneficiary

Answer

A house owned in the deceased person's name alone

Answer

A car titled only in the deceased person's name

Answer

Personal belongings left to a relative in a will

Question 12

A 25-year-old saving for retirement 40 years away wants long-term growth and can accept short-term ups and downs. Which allocation best fits this investor?

Accepted Answer

Mostly diversified stock funds, with a smaller share in bonds

Answer

Mostly money market funds and certificates of deposit

Answer

All savings in a single company's stock

Answer

Mostly short-term Treasury bills

Question 13

A worker whose full retirement age is 67 starts Social Security retirement benefits at 62. What is the effect?

Accepted Answer

The monthly benefit is permanently reduced

Answer

The monthly benefit is reduced only until age 67

Answer

The monthly benefit is the same as waiting until 67

Answer

The monthly benefit is permanently increased

Question 14

Compared with buying a car with a loan, leasing the same car usually means

Accepted Answer

lower monthly payments, but no ownership at the end and charges for extra mileage or wear

Answer

higher monthly payments, but full ownership of the car at the end of the term

Answer

no down payment or fees of any kind, and no limit on the miles driven

Answer

the lessee may sell the car at any time during the lease without penalty

Question 15

A health plan has a $1,000 annual deductible and then 20% coinsurance. A member who has paid nothing yet this year has a covered bill of $6,000. Assuming the out-of-pocket maximum is not reached, how much does the member pay?

Accepted Answer

$2,000

Answer

$1,000

Answer

$1,200

Answer

$2,200

Question 16

Using the common 28% guideline, what is the most a household with a gross monthly income of $6,000 should spend on monthly housing costs (mortgage principal and interest, property taxes and insurance)?

Accepted Answer

$1,680

Answer

$1,500

Answer

$1,800

Answer

$2,160

Question 17

Which feature most clearly separates an exchange-traded fund (ETF) from a traditional mutual fund?

Accepted Answer

ETF shares trade on an exchange throughout the day at market prices

Answer

ETFs cannot hold more than ten different stocks

Answer

ETFs are priced only once a day, after the market closes

Answer

ETFs are insured by the FDIC against market losses

Question 18

A worker with a steady income wants to keep her house while repaying her debts over three to five years under a court-approved plan. Which form of personal bankruptcy fits this goal?

Accepted Answer

Chapter 13

Answer

Chapter 7

Answer

Chapter 11

Answer

Chapter 9

Question 19

Which tax is generally considered regressive?

Accepted Answer

A flat sales tax on everyday purchases

Answer

The federal income tax

Answer

An estate tax on very large estates

Answer

A graduated state income tax

Question 20

Using the Rule of 72, about how many years will it take an investment earning 8% a year, compounded, to double?

Accepted Answer

9 years

Answer

6 years

Answer

8 years

Answer

12 years

Question 21

Most financial planners recommend that an emergency fund hold about how much?

Accepted Answer

Three to six months of essential living expenses

Answer

One to two weeks of take-home pay

Answer

One full year of gross income

Answer

Enough to cover the next credit card statement

Question 22

A buyer makes a 10% down payment on a home with a conventional mortgage. Which added cost will the lender most likely require?

Accepted Answer

Private mortgage insurance (PMI)

Answer

Title insurance paid each month

Answer

A balloon payment after five years

Answer

Flood insurance for every home

Question 23

A bond pays a 4% coupon, and market interest rates on similar bonds rise to 6%. The bond will most likely trade

Accepted Answer

at a discount to its face value

Answer

at a premium to its face value

Answer

at exactly its face value

Answer

only after its coupon is raised to 6%

Question 24

The Social Security and Medicare taxes withheld from an employee's paycheck are known as

Accepted Answer

FICA taxes

Answer

FUTA taxes

Answer

Estimated taxes

Answer

Excise taxes

Question 25

A homeowner installs smoke detectors and deadbolt locks to lower the chance of fire and theft. Which risk management method is this?

Accepted Answer

Risk reduction

Answer

Risk avoidance

Answer

Risk retention

Answer

Risk transfer

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