ICE Final REVIEW SPRING 2024

Which of these costs would be the MOST difficult to adjust if you were looking to reduce your expenses?

• Dining out at local restaurants
• Loan payment on a new car
• Expenses for new clothes
• Postponing a purchase for a big-screen TV

How does investing in the stock market differ from putting money in a savings account at a bank?

• Investing is always a less risky option than saving
• Investing is best for short-term situations like emergency funds; saving is best for the long-term
• Investing typically earns between 1-2% while saving generally earns between 5-7%
• Investing allows you to accumulate wealth for retirement while saving is best for short-term purchases or emergencies

Why is diversification a recommended investment strategy?

• Investing in a diversified portfolio guarantees that you won’t lose money with your investments
• If you tell your fund manager to use diversification, they’ll charge you lower fees
• Diversifying your portfolio helps reduce risk
• If you diversify your portfolio, you will definitely earn a high return

How is a bond different from a stock?

• A bond is a loan you give to an organization while a stock is partial ownership in a company
• Bonds are typically riskier than stocks but have the potential to earn higher returns
• Bonds are usually issued by smaller startup companies while stocks are issued by well established organizations
• Bonds are best for earning high returns while stocks are best for providing a stable source of income

How can someone make money from investing in a stock?

• They sell the stock for a lower price than what they bought it for
• They receive dividends or they sell the stock at a higher price than what they bought it for
• The stock loses value but the overall market experiences a positive return
• They sell the stock for the same price they bought it for

What is a brokerage account used for?

• It’s an online portal that allows you to set up appointments with a fund manager
• It’s the account you use to pay any taxes you owe on money you earned on your investments
• It’s a type of account used to buy and sell stocks, bonds, and funds
• It’s a special type of 401(k) plan that only some employers offer

Sam is 22, just started his first full-time job, and is selecting his investments through his company's 401(k) plan. Why might a target date fund (TDF) be a good option for Sam?

• A TDF is actively managed by a fund manager but comes with low fees
• A TDF buys a single stock and bond so that beginner investors can practice day trading
• A TDF is insured by the federal government, so Sam's money is protected even if the fund performs poorly
• A TDF will automatically adjust his asset allocation based on the retirement year he has chosen

Nancy is new to investing and is eager to get started. All of the following are things she should do EXCEPT...

• Invest in a low cost index fund
• Estimate how much she will need for retirement to determine how much she needs to invest each month
• Pick individual stocks to see if she can beat the market
• Invest in a diversified portfolio

If you are trying to substantially reduce the amount you spend on food, you should try...

• Cooking your own food at home for as many meals as possible
• Dining at restaurants more often so you don't waste water doing dishes
• Eating more snacks on the go and way fewer meals at home
• Drinking more coffee and soda so you are not as hungry for food

Greg is trying to decide whether he needs a car when he moves to the city. Which of the following would be a reason for Greg to get a car rather than use public transportation?

• There are several public transportation routes between Greg's apartment and work
• The cost of public transportation is less than Greg’s monthly car payment
• Greg’s company covers half the cost of his monthly public transportation pass
• Using public transportation, Greg’s commute to work one-way is two hours