If 8 Out of 10 Students in the Upper Group

question 19

Multiple Choice

If 8 out of 10 students in the upper group and 2 out of 10 students in the lower group answer an item correctly, then the difficulty and discriminating power of the item would be

• A)50%, .60.
• B)50%, .80.
• C)60%, .60.
• D)60%, .80.

---

Definitions:

Yield to Maturity

The total return anticipated on a bond if the bond is held until it matures, reflecting interest payments and price changes.

Price Yield Curve

A graph that shows the relationship between the yield of bonds and their maturities, illustrating how interest rates affect bond prices.

Convexity

A measure of the curvature in the relationship between bond prices and bond yields that demonstrates how the duration of a bond changes as the interest rate changes.

Modified Duration

A measure that estimates the price sensitivity of a bond to a one percent change in interest rates, adjusting for the changing yield to maturity.