- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 6. Hypothesis Testing
- Subject 6. The Decision Rule
CFA Practice Question
A consumer group wants to prove that average hospital costs are equal to or more than $931 per day. The group randomly samples 60 accounts and finds a sample mean of $950. The hypothesis test is at an a-level of 5% and assumes a σ of $50. If the decision is to reject H0: μ < 931, the conclusion should be that ______.
B. there is no evidence that the average daily cost of the hospital is more than $931.
C. the average daily cost of the hospital is equal to or more than $931.
A. the average daily cost of the hospital is more than $950.
B. there is no evidence that the average daily cost of the hospital is more than $931.
C. the average daily cost of the hospital is equal to or more than $931.
Correct Answer: C
Rejecting H0: μ < 931 means that the statement μ < 931 is false. So, the statement μ >= 931 is true. In terms of this problem, this means that the average daily cost of the hospital is equal to or more than $931.
User Contributed Comments 8
| User | Comment |
|---|---|
| Yurik74 | Why not A? Ha would be MU more than 931, not equl or more??? Ot not? |
| bhuman | Look at the null hypothesis, its simply states that M < 931. In that case, the alternative hypothesis, which we accept, covers both = and > |
| jpducros | I thought Ho always included the = sign, being either >= or <= Can someone confirm? |
| SKIA | jpducros -- that is not correct, in a two tailed test Ho does not need to have an equal sign. For example John thinks Jenny is a 5 on a scale of 1 to 10. Therefore the H1 = Jenny is a 5 and the Ho is Jenny is <5 or >5. |
| sgossett86 | I think JPDUCROS is saying that he thinks (and so did I) that H0 includes the equal sign in any hypothesis "de facto". so H0=, or H0>=, or H0<0.................... And yes, i'm still wondering about this after this problem... It raises questions... |
| EMMADADA | I agreed with JPDUCROS. H0 should be included the one with an equal sign. The given answer contradicts what I have learned in any STAT course. |
| EMMADADA | I mean, the answer should be correct. But the explanation is weird. |
| wpaxtonn21 | ^^ yes the null should always include the equal sign. |