- CFA Exams
- CFA Level I Exam
- Study Session 3. Quantitative Methods (2)
- Reading 9. Common Probability Distributions
- Subject 1. Basic Definitions

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**CFA Practice Question**

An investor wants to study movements of the interest rate. He will collect data every quarter and register whether the interest rate decreased, increased, or remained the same in each quarter. Should this investor opt to treat movements of the interest rate as a continuous or a discrete random variable?

A. discrete

B. continuous

C. either one

**Explanation:**Although the interest rate is a continuous random variable, its movement is discrete because there are only 3 possible outcomes: increasing, decreasing, or staying the same.

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**User Contributed Comments**
5

User |
Comment |
---|---|

Quan |
key word is "movement" not the "rate" |

micheleus |
I think key words is "every quarter" |

maria15 |
I agree with Quan |

ascruggs92 |
micheleus - read the explanation and you will understand why Quan is correct. Whether he records the movements daily, monthly, quarterly, etc. isn't what matters |

sumeetb |
it is about study of movement = up, down or same, which are discrete values. It doesn't matter what is underlying source of input such as Int rate, gold etc and doesn't depend on frequency as well, could be every millisecond. |