WGU D363 PREASSESMENT QUESTIONS WITH 100% COMPLETE ANSWERS, ALREADY
GRADED A+/NEWEST UPDATE!!!
Question 1
An individual wants to build up an emergency fund in a savings account. Monthly expenses for
this individual total $4,000 per month, while monthly income is $5,000. How much can be saved
monthly toward this goal, and what is the target if the individual wants to build up two months'
worth of income savings?
A) Save $1,000/month; Target $8,000
B) Save $500/month; Target $10,000
C) Save $1,000/month; Target $10,000
D) Save $4,000/month; Target $5,000
E) Save $1,000/month; Target $2,000
Correct Answer: C) Save $1,000/month; Target $10,000
Rationale: The individual earns $5,000 and spends $4,000, leaving a surplus of $1,000 per
month for savings. The goal is to save two months' worth of income. Since monthly income
is $5,000, the target is $5,000 x 2 = $10,000. (Note: Many financial planners recommend 3-6
months of expenses, but if the specific goal is two months of income, $10k is the figure).
Question 2
An individual wants to make a large purchase that will take two years to pay off. The individual
owns a home, earns an income of $75,000, and has no other debt aside from a $900 mortgage
payment with five years left at 3%. The individual will retire within one year and will be
required to take minimum distributions from a traditional retirement account. Which financing
option is most appropriate for this individual's objective?
A) A one-time high-interest credit card purchase
B) A home equity line of credit (HELOC)
C) An early distribution from retirement accounts with penalties
D) A short-term payday loan
E) A consumer finance company loan
Correct Answer: B) A home equity line of credit (HELOC)
Rationale: A HELOC is appropriate here because the individual has significant equity in
their home (only 5 years left on the mortgage) and a low existing debt-to-income ratio.
HELOCs typically offer much lower interest rates than credit cards or consumer finance
loans, making it a prudent choice for a multi-year repayment plan, especially as the
individual enters retirement and needs to preserve cash flow.
Question 3
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, with the trip costing $3,000. How long until the
individual can fund the $30,000 goal if income and expenses stay consistent?
, 2
A) 1 year and 8 months
B) 2 years and 1 month
C) 2 years and 6 months
D) 2 years and 9 months
E) 3 years and 4 months
Correct Answer: A) 1 year and 8 months
Rationale: Annual net income is
60, 000(
5,000/month). Monthly expenses are $3,200, leaving $1,800/month in surplus. However, the
annual
3,000𝑡𝑟𝑎𝑣𝑒𝑙𝑐𝑜𝑠𝑡𝑟𝑒𝑑𝑢𝑐𝑒𝑠𝑡ℎ𝑒𝑦𝑒𝑎𝑟𝑙𝑦𝑠𝑢𝑟𝑝𝑙𝑢𝑠. 𝐴𝑛𝑛𝑢𝑎𝑙𝑠𝑢𝑟𝑝𝑙𝑢𝑠=(
1,800 x 12) - $3,000 = $18,600. To reach $30,000: $30,000 / $18,600 = 1.61 years. 0.61 of a
year is roughly 7-8 months. Thus, 1 year and 8 months is the correct timeframe.
Question 4
A cost-sensitive individual utilizes an advisory firm for financial planning and investment
management with a conservative risk profile. The client pays $1,000 per year for a financial plan
and $100 per year in investment product expenses. Which possible outcome can complicate this
individual's expectations based on the risk profile and needs?
A) The firm's allocation projecting an excessively long investment horizon
B) Recommendations failing to meet the client's aggressive risk appetite
C) The firm's management fees exceeding the overall investment returns
D) The product offering increasing in cost by 2% annually
E) The client's tax bracket decreasing unexpectedly
Correct Answer: C) The firm's management fees exceeding the overall investment returns
Rationale: For a conservative investor, returns are typically low (often 2-4%). If a client is
paying $1,100 in annual fees on a small or moderate portfolio, those fees might represent a
large percentage of—or even exceed—the total gains. Cost-sensitivity is a major factor
when gross returns are inherently limited by a low-risk profile.
Question 5
Jack is a freelance technical writer receiving 1099 forms and earns between $60,000 and $65,000
per year. Jack’s monthly expenses are $4,000. Jack previously worked a W-2 job paying $55,000.
How should Jack modify his financial planning regarding his taxes now that he is self-employed?
A) Open a standard savings account for general emergencies
B) Maximize business deductions and aggregate savings for higher self-employment tax
obligations
C) Increase personal spending to reduce the amount of cash on hand
, 3
D) Rely on the standard deduction and ignore quarterly estimated payments
E) Make large cash donations to non-profits to eliminate the tax bill entirely
Correct Answer: B) Maximize business deductions and aggregate savings for higher self-
employment tax obligations
Rationale: Self-employed individuals (1099) are responsible for both the employer and
employee portions of Social Security and Medicare taxes (Self-Employment Tax), which is
roughly 15.3%. Unlike W-2 employees, no taxes are withheld from their checks, so they
must proactively save for tax season and maximize legitimate business deductions to lower
their taxable income.
Question 6
An individual earns $75,000 annually. Monthly rent is $2,200, and 20% of monthly cash income
is spent on utilities and groceries. To pay off a credit card, the client pays $1,650 per month.
What is the monthly debt-to-income (DTI) ratio?
A) 22.4%
B) 26.4%
C) 35.6%
D) 41.2%
E) 61.6%
Correct Answer: B) 26.4%
Rationale: Monthly gross income = $75, =
6,250. 𝐷𝑇𝐼𝑖𝑠𝑐𝑎𝑙𝑐𝑢𝑙𝑎𝑡𝑒𝑑𝑢𝑠𝑖𝑛𝑔"𝑑𝑒𝑏𝑡"𝑝𝑎𝑦𝑚𝑒𝑛𝑡𝑠, 𝑛𝑜𝑡𝑙𝑖𝑣𝑖𝑛𝑔𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠𝑙𝑖𝑘𝑒𝑔𝑟𝑜𝑐𝑒𝑟𝑖𝑒𝑠𝑜𝑟𝑢𝑡𝑖𝑙𝑖𝑡𝑖𝑒𝑠. 𝑇ℎ𝑒𝑑𝑒𝑏𝑡𝑠ℎ𝑒𝑟
2,200) and the credit card payment ($1,650). Total monthly debt = $2,200 + $1,650 = $3,850.
(Note: In some strict contexts, only the credit card and mortgage are "debt," but the D363
logic often groups fixed housing costs like rent). Total debt $1,650 / $6,250 = 26.4%.
Question 7
An individual has monthly expenses of $1,800 for rent and $1,000 for other necessary expenses.
Which average return should the individual expect to earn to cover 25% of their total yearly
expenses using a $100,000 investment?
A) 7.2%
B) 8.4%
C) 9.1%
D) 10.2%
E) 12.0%
Correct Answer: B) 8.4%
Rationale: Total monthly expenses = $1,800 + $1,000 = $2,800. Total yearly expenses =
$2,800 x 12 = $33,600. 25% of yearly expenses = $33,600 x 0.25 = $8,400. To earn $8,400 on
a $100,000 investment: $8,400 / $100,000 = 0.084 or 8.4%.
, 4
Question 8
A student earns $18,000 per year and saves $3,000 per year because $15,000 of their expenses
are subsidized by grants. Grant funding will run out for the student's final year. If the student
saves for three years prior to the final year, what will be their deficit for that final year?
A) $3,000
B) $6,000
C) $9,000
D) $12,000
E) $15,000
Correct Answer: B) $6,000
Rationale: The student saves $3,000/year for 3 years, totaling $9,000 in savings. In the final
year, the $15,000 grant is gone, meaning the student must cover the full $15,000 of
expenses. Deficit = $15,000 (expenses) - $9,000 (total savings) = $6,000.
Question 9
An individual has three debts: $15,000 at 12% APR, $20,000 at 8% APR, and $15,000 at 6%
APR. How should the individual distribute payments to minimize interest costs?
A) Make minimum payments to all, with extra funds towards the 12% APR debt
B) Pay off the $20,000 debt first since it is the largest balance
C) Pay off the 6% debt first to feel a sense of accomplishment
D) Distribute all extra funds equally across the three debts
E) Stop paying the 12% debt and negotiate a settlement
Correct Answer: A) Make minimum payments to all, with extra funds towards the 12%
APR debt
Rationale: This is the "Debt Avalanche" method. Mathematically, paying off the debt with
the highest interest rate first saves the most money in total interest charges over time,
regardless of the balance size.
Question 10
An individual wants to allocate $600 per month into an emergency savings account with a goal
of liquidity, price stability, and offsetting inflation, but has a low risk tolerance. Which option is
appropriate?
A) A ladder of 5-year Certificates of Deposit (CDs)
B) A high-growth technology stock portfolio
C) A money market account (MMA)
D) A variable annuity
E) Physical gold bullion stored in a safe
Correct Answer: C) A money market account (MMA)
Rationale: A money market account provides high liquidity (access to funds usually within a
GRADED A+/NEWEST UPDATE!!!
Question 1
An individual wants to build up an emergency fund in a savings account. Monthly expenses for
this individual total $4,000 per month, while monthly income is $5,000. How much can be saved
monthly toward this goal, and what is the target if the individual wants to build up two months'
worth of income savings?
A) Save $1,000/month; Target $8,000
B) Save $500/month; Target $10,000
C) Save $1,000/month; Target $10,000
D) Save $4,000/month; Target $5,000
E) Save $1,000/month; Target $2,000
Correct Answer: C) Save $1,000/month; Target $10,000
Rationale: The individual earns $5,000 and spends $4,000, leaving a surplus of $1,000 per
month for savings. The goal is to save two months' worth of income. Since monthly income
is $5,000, the target is $5,000 x 2 = $10,000. (Note: Many financial planners recommend 3-6
months of expenses, but if the specific goal is two months of income, $10k is the figure).
Question 2
An individual wants to make a large purchase that will take two years to pay off. The individual
owns a home, earns an income of $75,000, and has no other debt aside from a $900 mortgage
payment with five years left at 3%. The individual will retire within one year and will be
required to take minimum distributions from a traditional retirement account. Which financing
option is most appropriate for this individual's objective?
A) A one-time high-interest credit card purchase
B) A home equity line of credit (HELOC)
C) An early distribution from retirement accounts with penalties
D) A short-term payday loan
E) A consumer finance company loan
Correct Answer: B) A home equity line of credit (HELOC)
Rationale: A HELOC is appropriate here because the individual has significant equity in
their home (only 5 years left on the mortgage) and a low existing debt-to-income ratio.
HELOCs typically offer much lower interest rates than credit cards or consumer finance
loans, making it a prudent choice for a multi-year repayment plan, especially as the
individual enters retirement and needs to preserve cash flow.
Question 3
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, with the trip costing $3,000. How long until the
individual can fund the $30,000 goal if income and expenses stay consistent?
, 2
A) 1 year and 8 months
B) 2 years and 1 month
C) 2 years and 6 months
D) 2 years and 9 months
E) 3 years and 4 months
Correct Answer: A) 1 year and 8 months
Rationale: Annual net income is
60, 000(
5,000/month). Monthly expenses are $3,200, leaving $1,800/month in surplus. However, the
annual
3,000𝑡𝑟𝑎𝑣𝑒𝑙𝑐𝑜𝑠𝑡𝑟𝑒𝑑𝑢𝑐𝑒𝑠𝑡ℎ𝑒𝑦𝑒𝑎𝑟𝑙𝑦𝑠𝑢𝑟𝑝𝑙𝑢𝑠. 𝐴𝑛𝑛𝑢𝑎𝑙𝑠𝑢𝑟𝑝𝑙𝑢𝑠=(
1,800 x 12) - $3,000 = $18,600. To reach $30,000: $30,000 / $18,600 = 1.61 years. 0.61 of a
year is roughly 7-8 months. Thus, 1 year and 8 months is the correct timeframe.
Question 4
A cost-sensitive individual utilizes an advisory firm for financial planning and investment
management with a conservative risk profile. The client pays $1,000 per year for a financial plan
and $100 per year in investment product expenses. Which possible outcome can complicate this
individual's expectations based on the risk profile and needs?
A) The firm's allocation projecting an excessively long investment horizon
B) Recommendations failing to meet the client's aggressive risk appetite
C) The firm's management fees exceeding the overall investment returns
D) The product offering increasing in cost by 2% annually
E) The client's tax bracket decreasing unexpectedly
Correct Answer: C) The firm's management fees exceeding the overall investment returns
Rationale: For a conservative investor, returns are typically low (often 2-4%). If a client is
paying $1,100 in annual fees on a small or moderate portfolio, those fees might represent a
large percentage of—or even exceed—the total gains. Cost-sensitivity is a major factor
when gross returns are inherently limited by a low-risk profile.
Question 5
Jack is a freelance technical writer receiving 1099 forms and earns between $60,000 and $65,000
per year. Jack’s monthly expenses are $4,000. Jack previously worked a W-2 job paying $55,000.
How should Jack modify his financial planning regarding his taxes now that he is self-employed?
A) Open a standard savings account for general emergencies
B) Maximize business deductions and aggregate savings for higher self-employment tax
obligations
C) Increase personal spending to reduce the amount of cash on hand
, 3
D) Rely on the standard deduction and ignore quarterly estimated payments
E) Make large cash donations to non-profits to eliminate the tax bill entirely
Correct Answer: B) Maximize business deductions and aggregate savings for higher self-
employment tax obligations
Rationale: Self-employed individuals (1099) are responsible for both the employer and
employee portions of Social Security and Medicare taxes (Self-Employment Tax), which is
roughly 15.3%. Unlike W-2 employees, no taxes are withheld from their checks, so they
must proactively save for tax season and maximize legitimate business deductions to lower
their taxable income.
Question 6
An individual earns $75,000 annually. Monthly rent is $2,200, and 20% of monthly cash income
is spent on utilities and groceries. To pay off a credit card, the client pays $1,650 per month.
What is the monthly debt-to-income (DTI) ratio?
A) 22.4%
B) 26.4%
C) 35.6%
D) 41.2%
E) 61.6%
Correct Answer: B) 26.4%
Rationale: Monthly gross income = $75, =
6,250. 𝐷𝑇𝐼𝑖𝑠𝑐𝑎𝑙𝑐𝑢𝑙𝑎𝑡𝑒𝑑𝑢𝑠𝑖𝑛𝑔"𝑑𝑒𝑏𝑡"𝑝𝑎𝑦𝑚𝑒𝑛𝑡𝑠, 𝑛𝑜𝑡𝑙𝑖𝑣𝑖𝑛𝑔𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠𝑙𝑖𝑘𝑒𝑔𝑟𝑜𝑐𝑒𝑟𝑖𝑒𝑠𝑜𝑟𝑢𝑡𝑖𝑙𝑖𝑡𝑖𝑒𝑠. 𝑇ℎ𝑒𝑑𝑒𝑏𝑡𝑠ℎ𝑒𝑟
2,200) and the credit card payment ($1,650). Total monthly debt = $2,200 + $1,650 = $3,850.
(Note: In some strict contexts, only the credit card and mortgage are "debt," but the D363
logic often groups fixed housing costs like rent). Total debt $1,650 / $6,250 = 26.4%.
Question 7
An individual has monthly expenses of $1,800 for rent and $1,000 for other necessary expenses.
Which average return should the individual expect to earn to cover 25% of their total yearly
expenses using a $100,000 investment?
A) 7.2%
B) 8.4%
C) 9.1%
D) 10.2%
E) 12.0%
Correct Answer: B) 8.4%
Rationale: Total monthly expenses = $1,800 + $1,000 = $2,800. Total yearly expenses =
$2,800 x 12 = $33,600. 25% of yearly expenses = $33,600 x 0.25 = $8,400. To earn $8,400 on
a $100,000 investment: $8,400 / $100,000 = 0.084 or 8.4%.
, 4
Question 8
A student earns $18,000 per year and saves $3,000 per year because $15,000 of their expenses
are subsidized by grants. Grant funding will run out for the student's final year. If the student
saves for three years prior to the final year, what will be their deficit for that final year?
A) $3,000
B) $6,000
C) $9,000
D) $12,000
E) $15,000
Correct Answer: B) $6,000
Rationale: The student saves $3,000/year for 3 years, totaling $9,000 in savings. In the final
year, the $15,000 grant is gone, meaning the student must cover the full $15,000 of
expenses. Deficit = $15,000 (expenses) - $9,000 (total savings) = $6,000.
Question 9
An individual has three debts: $15,000 at 12% APR, $20,000 at 8% APR, and $15,000 at 6%
APR. How should the individual distribute payments to minimize interest costs?
A) Make minimum payments to all, with extra funds towards the 12% APR debt
B) Pay off the $20,000 debt first since it is the largest balance
C) Pay off the 6% debt first to feel a sense of accomplishment
D) Distribute all extra funds equally across the three debts
E) Stop paying the 12% debt and negotiate a settlement
Correct Answer: A) Make minimum payments to all, with extra funds towards the 12%
APR debt
Rationale: This is the "Debt Avalanche" method. Mathematically, paying off the debt with
the highest interest rate first saves the most money in total interest charges over time,
regardless of the balance size.
Question 10
An individual wants to allocate $600 per month into an emergency savings account with a goal
of liquidity, price stability, and offsetting inflation, but has a low risk tolerance. Which option is
appropriate?
A) A ladder of 5-year Certificates of Deposit (CDs)
B) A high-growth technology stock portfolio
C) A money market account (MMA)
D) A variable annuity
E) Physical gold bullion stored in a safe
Correct Answer: C) A money market account (MMA)
Rationale: A money market account provides high liquidity (access to funds usually within a
