Week 2 Quiz Review

💡 Discussion Points:

• • Silver typically trades between $20-40/oz in recent years
• • Compare with gold prices (~$2,000/oz) to understand relative values
• • Discuss factors affecting precious metal prices

💡 Discussion Points:

• • Beta measures volatility relative to the market
• • Beta > 1 = more volatile than market
• • Beta < 1 = less volatile than market
• • Beta = 1 = moves with the market

💡 Discussion Points:

• • AAA is the highest credit rating
• • Rating scale: AAA, AA, A, BBB (investment grade)
• • Below BBB is considered "junk" or high-yield

💡 Discussion Points:

• • 68-95-99.7 rule (empirical rule)
• • 1 SD = 68%, 2 SD = 95%, 3 SD = 99.7%
• • Critical for understanding investment volatility

💡 Discussion Points:

• • 2 standard deviations = ±20% from the mean
• • Range: 10% - 20% = -10%, 10% + 20% = 30%
• • 95% of returns should fall in this range

💡 Discussion Points:

• • Municipal bonds: GO bonds and Revenue bonds
• • Repos are short-term lending agreements, not bonds
• • Revenue bonds ARE municipal bonds (funded by specific revenue)

💡 Discussion Points:

• • ALL investments have some volatility
• • Money markets have very LOW standard deviation
• • But it's not zero - prices can fluctuate slightly

💡 Discussion Points:

• • FOMC meets 8 times per year (roughly every 6 weeks)
• • Two-day meetings ending on Wednesday
• • Policy statement released at 2:00 PM ET

💡 Index Comparison:

• • Nasdaq Composite: ~3,300 stocks
• • Russell 3000: ~3,000 stocks (Luke was close!)
• • S&P 500: 500 large-cap stocks
• • Question asks for "of the following" - Russell wasn't an option

💡 The 11 S&P Sectors:

💡 Staples vs. Discretionary:

• • Staples = Necessities (toilet paper, food, soap)
• • Discretionary = Optional (cars, entertainment, luxury)
• • Think: "Can I live without it?"

💡 Historical Context:

• • 1952: Markowitz publishes "Portfolio Selection"
• • Foundation of modern investing theory
• • Won Nobel Prize in Economics (1990)
• • Key concept: Diversification reduces risk