- CFA Exams
- CFA Level I Exam
- Study Session 3. Quantitative Methods (2)
- Reading 11. Hypothesis Testing
- Subject 8. Hypothesis Tests Concerning the Mean: T-Test vs. Z-Test

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**CFA Practice Question**

The Santa Rosa Homeowners are trying to prove that the homes in their area are less than 5 miles from the nearest fire station. The data and hypothesis test is shown. The conclusion should be ______.

A. There is no evidence that the homes in the Santa Rosa area are, on average, 5 miles or more from the nearest fire station.

B. The homes in the Santa Rosa area are, on average, less than 5 miles from the nearest fire station.

C. There is no evidence that the homes in the Santa Rosa area are, on average, less than 5 miles from the nearest fire station.

**Explanation:**Failing to reject H

_{0}(μ ≥ 5) means that there is no evidence that μ < 5 is true. So, in terms of this example, our conclusion is that there is no evidence that the homes in the Santa Rosa area are, on average, less than 5 miles from the nearest fire station.

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**User Contributed Comments**
6

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

miso |
Why B is wrong In similar qestion conclusion was stricty related to H0 such populattion is less than 0.32 |

NufaNka |
Because we fail to reject Ho, we dont reject or accept it. |

achu |
Remember, Ha is what you WANT to prove. So conclusions are about Ha not H0. |

discoarzt |
@achu: but Ha says smaller than 5 and the result is 4,9 on average. So I don´t really understand the answer, can you please explain it in more detail? thx |

Marinov |
The test value -0.71 is not beyond the rejection point -1.65. So we cannot reject the null hypothesis. |

GBolt93 |
sample average is 4.9, but that doesn't mean it's a statistically significant difference. Based on 95% confidence you can't conclude that the population mean is less than 5. |