- CFA Exams
- CFA Exam: Level I 2021
- Study Session 3. Quantitative Methods (2)
- Reading 11. Hypothesis Testing
- Subject 6. The Decision Rule

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**CFA Practice Question**

Does taking garlic tablets twice a day provide significant health benefits? To investigate this issue, a researcher conducted a study with 50 adult subjects who took garlic tablets twice a day for a period of 6 months. At the end of the study, 100 variables related to the health of the subjects were measured on each subject and the means compared to known means for these variables in the population of all adults. Four of these variables were significantly better (in the sense of statistical significance) at the 5% level for the group taking the garlic tablets as compared to the population as a whole, and one variable was significantly better at the 1% level for the group taking the garlic tablets as compared to the population as a whole. It would be correct to conclude that ______

B. there is good statistical evidence that taking garlic tablets twice a day provides benefits for the variable that was significant at the 1% level. We should be somewhat cautious about making claims for the variables that were significant at the 5% level.

C. Neither of these statements.

A. there is good statistical evidence that taking garlic tablets twice a day provides some health benefits.

B. there is good statistical evidence that taking garlic tablets twice a day provides benefits for the variable that was significant at the 1% level. We should be somewhat cautious about making claims for the variables that were significant at the 5% level.

C. Neither of these statements.

Correct Answer: C

Even if garlic has no effect on any of the 100 variables measured, by chance, we would expect to see about 5 of them appearing to be statistically significant at the 0.05 level and about 1 of them appearing to be statistically significant at the 0.01 level. This expectation is consistent with what was actually observed, indicating that the results may just be due to chance, not to any effect of the garlic tablets.

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**User Contributed Comments**
5

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

gth763s |
It reminds me of GMAT reasoning. |

Rotigga |
The GMAT is a piece of cake compared with CFA review. |

dcfa |
i don't completely understand why we think it is by chance - what if 90 variables were better instead of 5 ? would it still be by chance? |

poomie83 |
No 90 variables indicates good statistical evidence |

johntan1979 |
If you examine carefully A and B, they are inaccurate, statistically speaking. Only C makes the most sense, especially to vampires. |