- CFA Exams
- CFA Level I Exam
- Study Session 3. Quantitative Methods (2)
- Reading 11. Hypothesis Testing
- Subject 3. Test Statistic and Significance Level

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**CFA Practice Question**

The significance level in hypothesis testing refers to the probability that we will ______.

A. reject the null when it is true

B. accept the alternative when it is true

C. fail to reject the null when it is false

**Explanation:**Note that the significance level is the same as the probability of making a Type I error. A Type I error refers to the event that we will reject the null when, in fact, it is true. Clearly, lower significance levels are better, all other factors being equal.

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