Tammy Is Creating a Composite Measure to Examine Life Satisfaction

question 32

Multiple Choice

Tammy is creating a composite measure to examine life satisfaction and she is trying to decide whether to include the categories of very very dissatisfied and very very satisfied or to simply leave the extreme categories as very dissatisfied and very satisfied.She turns to you for help.Which of the following statements would not help her because it is FALSE?

• A)This is a variance issue.
• B)Typically as the possible extremes of an index are extended,fewer cases are to be found in each extreme.
• C)The range of measurement in an index is an advantage of an index and therefore she should include the most extreme categories to take advantage of the full range.
• D)She needs to think about both the range of her index as well as whether there will be an adequate number of cases at each point in the index.
• E)All of these statements are CORRECT.

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Definitions:

Initial Yield

The initial yield is a financial measure indicating the first year's return on an investment in real estate or bonds, often expressed as a percentage of the investment's cost.

Yield Sensitivity

The degree to which the price of a bond or other debt security responds to changes in interest rates, affecting investors' returns.

Price Volatility

Price Volatility describes the extent to which the price of an asset or security fluctuates over time, indicating the level of risk involved.

Maturity

Refers to the final payment date of a loan or other financial instrument, at which point the principal (and all remaining interest) is due to be paid.