CFA Practice Question

CFA Practice Question

A hypothesis test is conducted at the .05 level of significance to test whether or not the population correlation is zero. If the sample consists of 25 observations and the correlation coefficient is 0.60, then what is the computed value of the test statistic?
A. 3.60
B. 2.07
C. 1.96
Explanation: Using the t statistics, t = r* [sq. root of ((n-2)/(1-r_squared))].

t = r*[n-2/(1-r2)]0.5. So t = 0.6*[23/0.64]0.5 = 3.60.

User Contributed Comments 8

User Comment
chamad Can some one explain? is this the p-value formula? why??? thanks
MrsP It's a test for correlation of 2 normally distributed populations. Had to look this one up.

Degrees of Freedom = n-2

Suppose in future I'll guess that if we're given r and n then this applies.
Kathkun this is the Spearman rank correlation function
Kathkun I believe there's a typo with the answer or the value of the correlation coefficient.

r squared should be .36, hence the result will be 4.8
chandsingh they get 0.64 by 1 - 0.36 = 0.64, so no type-o
acemaj do we have to memorize this formula?
madelinee Apparently yes. Omg.
nickcoulby no thanks
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