- CFA Exams
- CFA Level I Exam
- Study Session 3. Quantitative Methods (2)
- Reading 11. Hypothesis Testing
- Subject 3. Test Statistic and Significance Level

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**CFA Practice Question**

Which of the following statements regarding hypothesis testing is false?

A. If the population standard deviation is known, then the standard error of the sample mean is found by dividing the population standard deviation by the square root of "n."

B. The test statistic is also known as the "critical value."

C. Despite the different ways to formulate a hypothesis, the null hypothesis is always tested at the point of equality.

**Explanation:**The test statistic is measured AGAINST the critical value. The test statistic is defined as "...a quantity, calculated on the basis of sample, whose value is the basis for deciding whether to reject or not reject the null hypothesis." The critical value is found by referencing the probability distribution for the series (z-distribution, t-distribution, chi-square distribution, F-distribution, etc.).

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