- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 8. Hypothesis Testing
- Subject 4. Type I and Type II Errors in Hypothesis Testing
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).
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. |