- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 8. Hypothesis Testing
- Subject 5. The Power of a Test
CFA Practice Question
If the significance level of a test is the probability of incorrectly rejecting the null hypothesis, then the "power of a test" is defined as which of the following? Choose the best answer.
B. The probability of a Type I error
C. The probability of correctly rejecting the null hypothesis
A. The probability of a Type II error
B. The probability of a Type I error
C. The probability of correctly rejecting the null hypothesis
Correct Answer: C
If the significance level of a test is the probability of incorrectly rejecting the null hypothesis (a Type I error), then the power of the test is defined as the probability of correctly rejecting the null hypothesis. In other words, the power of a test is equal to (1 - the probability of a Type II error). The standard method of hypothesis testing involves stating only the significance level, which is equal to the probability of a Type I error.
User Contributed Comments 1
User | Comment |
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johntan1979 | A is beta B is alpha |