- CFA Exams
- CFA Level I Exam
- Study Session 3. Quantitative Methods (2)
- Reading 11. Hypothesis Testing
- Subject 4. Type I and Type II Errors in Hypothesis Testing

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**CFA Practice Question**

As the alternative mean approaches the hypothesized mean, what can we say about the risk?

A. There will be smaller risk of a Type II error.

B. There will be greater risk of a Type II error.

C. There will be smaller risk of a Type I error.

**Explanation:**When the alternative mean approaches the hypothesized mean, there is a greater possibility of accepting the null hypothesis when it is actually false (since the numbers are close together).

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**User Contributed Comments**
5

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

turtle |
not accepting but failing to reject null |

labsbamb |
accepting the null hypothesis, when it`s actually false. Greater type II error. |

lazio |
good question! |

ElenaStep |
I thought that the smaller probability of Type I error implies a higher probability of Type II eror, meanining that B and C are both correct. I am confused, could somebody please tell me whe I am wrong? Thanks!!! |

Marinov |
Why is it not A? If the hypothesized mean approaches the alternative mean, aren't we not tempted to reject the null in favour of the alternative? Thus the risk of a Type II error (failing to reject a false null) is diminished. |