- CFA Exams
- CFA Exam: Level I 2021
- Study Session 3. Quantitative Methods (2)
- Reading 11. Hypothesis Testing
- Subject 5. The Power of a Test

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**CFA Practice Question**

If the significance level of a test is the probability of incorrectly rejecting the null hypothesis, then the "power of a test" is defined as which of the following? Choose the best answer.

B. The probability of a Type I error

C. The probability of correctly rejecting the null hypothesis

A. The probability of a Type II error

B. The probability of a Type I error

C. The probability of correctly rejecting the null hypothesis

Correct Answer: C

If the significance level of a test is the probability of incorrectly rejecting the null hypothesis (a Type I error), then the power of the test is defined as the probability of correctly rejecting the null hypothesis. In other words, the power of a test is equal to (1 - the probability of a Type II error). The standard method of hypothesis testing involves stating only the significance level, which is equal to the probability of a Type I error.

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**User Contributed Comments**
1

User |
Comment |
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johntan1979 |
A is beta B is alpha |