The Number of Dummy Variables Representing a Qualitative Variable Should

question 64

True/False

The number of dummy variables representing a qualitative variable should be one less than the number of categories of the variable.

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Definitions:

Par Value

The face value of a bond or stock, representing the amount that will be returned to the holder at maturity, not reflecting the market value.

Market Value

Market value refers to the current price at which an asset or service can be bought or sold in a marketplace.

Corporate Bond Yield Curve

A graph that plots the yields of corporate bonds of similar credit quality against their maturities, showing the relationship between the two.

Maturity Risk Premiums

Additional returns required by investors for holding longer-term securities, compensating for the increased risk of price fluctuations and changes in interest rates over time.