- CFA Exams
- CFA Exam: Level I 2021
- 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**

For the hypothesis test below where the decision is fail to reject H

B. concluding that the population mean is 90 or less when in fact the population mean is less than 90.

C. going along with the population mean as 90 or less when in fact the population mean is greater than 90.

D. concluding that the population mean is 90 or more when in fact the population mean is less than 90.

_{0}, a Type II error could have been committed. A correct discussion of the error would involve ______.

A. going along with the population mean as more than 90 when in fact the population mean is 90 or less.

B. concluding that the population mean is 90 or less when in fact the population mean is less than 90.

C. going along with the population mean as 90 or less when in fact the population mean is greater than 90.

D. concluding that the population mean is 90 or more when in fact the population mean is less than 90.

Correct Answer: C

A Type II error is failing to reject H

_{0}when H_{0}is in fact false. In terms of this problem, this would mean going along with the population mean as 90 or less (failing to reject [H_{0}: μ < 90] when in fact the mean is more than 90 [H_{0}: μ < 90] is false).###
**User Contributed Comments**
7

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

Aimy |
what is the difference between answer B and C? |

Gina |
wording: you can only draw a conclusion when you reject Ho. |

xiong |
type II - going along, Type I- conclude |

fding |
I think the difference is at "in fact", which means "truth" --- B = in fact u < 90 whereas C = in fact u > 90 |

JKiro |
Aimy: "...when a null hypothesis is not rejected, no conclusion is drawn..." --- hence with the type II error, the experimenter is "...going along..." |

thekid |
I agree with Jkiro's explanation. However, for this particular question: 'B' is DEFINITELY wrong aside from term 'concluding' because it says "...in fact the population mean is LESS than 90." which is not true. If it had stated "...in fact the population mean is GREATER than 90." Then the term 'concluding' would differentiate it from the correct answer 'C'. If someone could confirm, it would be appreciated. |

johntan1979 |
Yup, nothing to do with going along or concluding at all. Keywords are at the end of the sentences. |