- CFA Exams
- CFA Exam: Level I 2021
- Study Session 3. Quantitative Methods (2)
- Reading 11. Hypothesis Testing
- Subject 2. Null Hypothesis and Alternative Hypothesis

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**CFA Practice Question**

In 2007, the DEA found that 12% of teenagers (13-19 years) used illegal drugs. In 2011, to prove that there was a decrease in usage, the DEA's study of 1000 randomly selected teens produced 100 teens who used illegal drugs. For this study, the null hypothesis, H

B. H

C. H

_{0}, is ______.A. H

_{0}: p <= 0.12B. H

_{0}: p >= 0.12C. H

_{0}: p = 0.12Correct Answer: B

The DEA wants to prove a decrease in usage, so H

_{a}is H_{a}: p < 0.12. Thus, H_{0}is H_{0}: p >= 0.12.###
**User Contributed Comments**
8

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

thekid |
Notation clarification needed. what is 'p'? Why not Ho: u >= 0.12 (u = Mu) THanks! |

Jurrens |
p = probability, and in the question the mean is 12% which is the probability saying that 12% of teenagers used illegal drugs. |

smit0745 |
Reject the null if the p-value is less than alpha. In this case 0.12 <= 0.10 is not true so you do not reject the null hypothesis. There is insufficient evidence to claim that there was a decrease in drug usage in teens as of 2011. |

endurance |
Since we want to reject the probability of an increase in use of drugs, the null must equal or greater than the 12 percent - |

ashish100 |
i got it!! thanks to bobert from the previous page!!!! lets get this $$,$$$,$$$,$$$. |

dbedford |
I thought Ho was the statement to be tested so why isnt the statement wanting to be tested "usage in 2011 is <12%" Ho? |

dbedford |
I guess Ho is better stated in terms of what we want to reject? So we want to prove that drug use went down so how can we state that in its opposite to reject? Ho = We want to reject the idea that drug use increased and thus we need p >= .12 Thats the only thing I can think of to make sense of this |

jgoff508 |
Please correct me if I'm wrong but, whatever we're trying to PROVE becomes the ALTERNATIVE HYPOTHESIS. The opposite statement of our alternative hypothesis is our null hypothesis. |