DSST Personal Finance Practice Questions Answer Key

1. B: A long vacation is a specific future financial goal; the other three choices are not. Choice A might be a good way to keep up on what is going on in the world of finance, but is not a goal. Neither are choices C or D.
2. D: Real property has a relatively long life. It also cannot be moved. Choices A and B are incorrect because they describe personal property. Choice C is incorrect also since real property cannot be moved, while personal property can be.
3. B: A balance sheet lists assets minus debt. Choice A is incorrect; it is not a list of impending expenses. Choice C has nothing to do with net worth. Choice D is also incorrect; an income and expense statement measures financial performance over time.
4. C: It was a protective measure. Choices A and B are incorrect. There is no way to reduce the impact of inflation, and there was no mention of reducing the role of government. Choice D is incorrect. It was also known as the Gramm-Leach-Biley Act.
5. A: Time value of money allows an accurate comparison of dollar values that occur at different points of time. Choice B is the future value of money. Choice C is incorrect; time value has nothing to do with annuity rates or compound interest. A depository institution is basically a bank, so choice D is incorrect also.
6. C: Using credit to pay off other credit is dangerous. Choice D is one reason people apply for credit. Open checking and savings accounts helps establish credit. Debit cards are popular because they carry no high interest costs, so neither Choice A nor B is correct.
7. B: The lender may make an arrangement to help you avoid being labeled a late payer. Choice A is not correct because paying cash doesn’t help build a strong credit history. Choice C, exceeding an overdraft protection line, will actually harm your credit. Choice D only refers to the fact that a home equity credit line is the only type of consumer loan that qualifies for this tax treatment.
8. A: Two cards is the most a person should have. Accepting every offer you receive may result in too much credit. Choice C, an affinity card, is merely a standard bank card that has a sponsor, such as a non-profit organization. And going to a site like bankrate.com is only a way to compare rates, making Choice D incorrect as well.
9. D: Never put personal information on any sales or charge slip. Choice A is a method of lowering monthly payments if you can pay most or all of your balance off before the rate goes up. Choice B is a sure way to invite fraud. And Choice C is the maximum amount of credit that a bank will allow.
10. C: It is a fee that is incurred if a card holder goes over the credit limit. Fair Isaac & Co. is a provider of credit scores. Choice B appears on a monthly statement and includes previous balance, new charges and finance charges. Choice D is not correct, either.