WGU D363 PERSONAL FINANCE – PRE-ASSESSMENT
TEST BANK COMPLETE QUESTIONS AND CORRECT
DETAILED ANSWERS (VERIFIED ANSWERS) WITH
RATIONALES |ALREADY GRADED A+| |BRAND NEW
VERSION!!!!
1. An individual wants to build up an emergency fund in a savings account.
Monthly expenses total $4,000 per month, while monthly income is $5,000.
How much can be saved if the individual wants to build up two months' worth
of income savings?
A) $1,000
B) $2,000
C) $4,000
D) $5,000
Correct Answer: B – With monthly income of $5,000, two months of income
savings would be $10,000. The current surplus is $1,000/month ($5,000 −
$4,000), so the amount being saved each month is $1,000.
2. Which statement best describes a personal budget?
A) A list of only monthly expenses
B) A plan that compares income and expenses to achieve financial goals
C) A record of past tax payments
D) A report showing credit history
Correct Answer: B – A budget is a financial plan that tracks income,
expenses, savings, and spending decisions to help achieve financial goals.
,3. What is the primary purpose of an emergency fund?
A) Increase investment returns
B) Pay luxury expenses
C) Cover unexpected financial needs
D) Reduce income taxes
Correct Answer: C – Emergency funds provide cash for unexpected events
such as medical bills, car repairs, or job loss.
4. Net worth is calculated as:
A) Income − Expenses
B) Assets − Liabilities
C) Assets + Liabilities
D) Expenses − Income
Correct Answer: B – Net worth measures financial position by subtracting
what you owe from what you own. Formula: Net Worth = Total Assets − Total
Liabilities.
5. Which of the following is considered a liability?
A) Savings account
B) Retirement account
C) Mortgage balance
D) Stock investment
Correct Answer: C – Liabilities are debts owed to others, such as mortgages,
loans, and credit card balances.
6. An individual wants to make a large purchase that will take two years to
pay off. The individual owns a home, earns $75,000 annually, has no other
,debt aside from a $900 mortgage payment with five years left at 3%, and will
retire within one year while beginning required minimum distributions from
a traditional retirement account. Which financing option is appropriate?
A) A onetime credit card purchase
B) A home equity line of credit
C) An early distribution from retirement accounts
D) A consumer finance company loan
Correct Answer: B – A HELOC allows homeowners to borrow against home
equity with lower interest rates than unsecured options, and the individual
has minimal existing debt with a short repayment period.
7. An individual's net earnings are $60,000 per year, with living expenses for
housing, food, and transportation amounting to $3,200 per month. The
individual wants to save $30,000 for a home down payment and plans to
travel once a year costing $3,000. How long until the individual can fund both
goals for the same year if income and expenses stay consistent?
A) 1 year and 8 months
B) 2 years and 9 months
C) 3 years and 2 months
D) 3 years and 4 months
Correct Answer: A – Annual surplus = $60,000 − ($3,200 × 12) = $60,000 −
$38,400 = $21,600. Total goal = $30,000 + $3,000 = $33,000. Time = $33,000 /
$21,600 ≈ 1.53 years ≈ 1 year and 8 months.
8. A cost sensitive individual utilizes an advisory firm for financial planning
with a conservative risk profile, paying $1,000 per year for a financial plan
and $100 per year in investment product expenses. Which possible outcome
can complicate expectations based on the risk profile and needs?
A) Firm's allocation projecting a short investment time horizon
, B) Firm recommendations not meeting investment risk appetite
C) Firm's fees exceeding overall investment returns
D) Firm's product offering increasing in cost annually
Correct Answer: C – For a conservative investor with low fees, high advisory
costs can erode returns, making fees exceeding returns a primary
complication.
9. Jack is a freelance technical writer receiving a 1099 form from clients,
earning $60,000–$65,000 per year, with increased monthly expenses to
$4,000 after quitting a W2 job that paid $55,000. How should Jack modify
financial planning around this employment change?
A) Fund an investment account to increase money available for future tax
payments
B) Maximize business deductions and aggregate savings for higher tax
obligations
C) Maintain deductible expense spending to have the highest possible tax
writeoffs
D) Make large cash donations to charitable causes to deduct against taxable
income
Correct Answer: B – As a selfemployed individual, Jack faces higher
selfemployment taxes and should maximize legitimate business deductions
while saving for tax obligations.
10. An individual earns $75,000 annually. Monthly rent is $2,200, and 20% of
monthly cash income is spent on utilities, groceries, and transportation. To
pay off a credit card in six months, the client agrees to monthly payments of
$1,650. What is the monthly debttoincome ratio?
A) 25.6
B) 26.4
TEST BANK COMPLETE QUESTIONS AND CORRECT
DETAILED ANSWERS (VERIFIED ANSWERS) WITH
RATIONALES |ALREADY GRADED A+| |BRAND NEW
VERSION!!!!
1. An individual wants to build up an emergency fund in a savings account.
Monthly expenses total $4,000 per month, while monthly income is $5,000.
How much can be saved if the individual wants to build up two months' worth
of income savings?
A) $1,000
B) $2,000
C) $4,000
D) $5,000
Correct Answer: B – With monthly income of $5,000, two months of income
savings would be $10,000. The current surplus is $1,000/month ($5,000 −
$4,000), so the amount being saved each month is $1,000.
2. Which statement best describes a personal budget?
A) A list of only monthly expenses
B) A plan that compares income and expenses to achieve financial goals
C) A record of past tax payments
D) A report showing credit history
Correct Answer: B – A budget is a financial plan that tracks income,
expenses, savings, and spending decisions to help achieve financial goals.
,3. What is the primary purpose of an emergency fund?
A) Increase investment returns
B) Pay luxury expenses
C) Cover unexpected financial needs
D) Reduce income taxes
Correct Answer: C – Emergency funds provide cash for unexpected events
such as medical bills, car repairs, or job loss.
4. Net worth is calculated as:
A) Income − Expenses
B) Assets − Liabilities
C) Assets + Liabilities
D) Expenses − Income
Correct Answer: B – Net worth measures financial position by subtracting
what you owe from what you own. Formula: Net Worth = Total Assets − Total
Liabilities.
5. Which of the following is considered a liability?
A) Savings account
B) Retirement account
C) Mortgage balance
D) Stock investment
Correct Answer: C – Liabilities are debts owed to others, such as mortgages,
loans, and credit card balances.
6. An individual wants to make a large purchase that will take two years to
pay off. The individual owns a home, earns $75,000 annually, has no other
,debt aside from a $900 mortgage payment with five years left at 3%, and will
retire within one year while beginning required minimum distributions from
a traditional retirement account. Which financing option is appropriate?
A) A onetime credit card purchase
B) A home equity line of credit
C) An early distribution from retirement accounts
D) A consumer finance company loan
Correct Answer: B – A HELOC allows homeowners to borrow against home
equity with lower interest rates than unsecured options, and the individual
has minimal existing debt with a short repayment period.
7. An individual's net earnings are $60,000 per year, with living expenses for
housing, food, and transportation amounting to $3,200 per month. The
individual wants to save $30,000 for a home down payment and plans to
travel once a year costing $3,000. How long until the individual can fund both
goals for the same year if income and expenses stay consistent?
A) 1 year and 8 months
B) 2 years and 9 months
C) 3 years and 2 months
D) 3 years and 4 months
Correct Answer: A – Annual surplus = $60,000 − ($3,200 × 12) = $60,000 −
$38,400 = $21,600. Total goal = $30,000 + $3,000 = $33,000. Time = $33,000 /
$21,600 ≈ 1.53 years ≈ 1 year and 8 months.
8. A cost sensitive individual utilizes an advisory firm for financial planning
with a conservative risk profile, paying $1,000 per year for a financial plan
and $100 per year in investment product expenses. Which possible outcome
can complicate expectations based on the risk profile and needs?
A) Firm's allocation projecting a short investment time horizon
, B) Firm recommendations not meeting investment risk appetite
C) Firm's fees exceeding overall investment returns
D) Firm's product offering increasing in cost annually
Correct Answer: C – For a conservative investor with low fees, high advisory
costs can erode returns, making fees exceeding returns a primary
complication.
9. Jack is a freelance technical writer receiving a 1099 form from clients,
earning $60,000–$65,000 per year, with increased monthly expenses to
$4,000 after quitting a W2 job that paid $55,000. How should Jack modify
financial planning around this employment change?
A) Fund an investment account to increase money available for future tax
payments
B) Maximize business deductions and aggregate savings for higher tax
obligations
C) Maintain deductible expense spending to have the highest possible tax
writeoffs
D) Make large cash donations to charitable causes to deduct against taxable
income
Correct Answer: B – As a selfemployed individual, Jack faces higher
selfemployment taxes and should maximize legitimate business deductions
while saving for tax obligations.
10. An individual earns $75,000 annually. Monthly rent is $2,200, and 20% of
monthly cash income is spent on utilities, groceries, and transportation. To
pay off a credit card in six months, the client agrees to monthly payments of
$1,650. What is the monthly debttoincome ratio?
A) 25.6
B) 26.4
