CFA Level I · CFA Level I Exam · Introduction to Financial Data Science
An analyst collects a dataset containing each firm's credit rating (AAA, AA, A, BBB), where the ratings have a clear ranking but the gaps between ratings are not equal. This data is best described as:
Credit ratings are best described as ordinal data. They are categories with a meaningful ranking from highest to lowest quality, but the differences between adjacent ratings are not equal or measurable. Nominal data lacks any order, and continuous data takes any value in a range.
- Anominal data
- Bordinal dataCorrect
- Ccontinuous data
Explanation
Credit ratings are categories that can be ranked, but the distance between ranks is not defined, which is the definition of ordinal data. Nominal data has no ranking. Continuous data can take any value within a range, which ratings cannot.
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