CFA Practice Question

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CFA Practice Question

For the hypothesis test shown below, the decision should be to ______.

A. conclude Ha
B. fail to reject H0
C. reject H0
Correct Answer: C

Because the sample data, x-bar 16.1, has a z-score of -3.71 (the test value) and this z-score is in the critical region (critical value is -2.33, the cutoff for the bottom 1% of the normal distribution), the decision is to reject H0. That is, we do not believe this sample data came from a population whose mean is 17 or more. Note that the p-value for an x-bar of 16.1 is 0+.

User Contributed Comments 10

User Comment
Yurik74 How -2.33 is calculated??? I understand that -3.71 = (16.1-17)/(2.3/sqrt(90))
surjoy Z 0.01 is 2.33
JKiro Yurik74: critical values (rejection points) are determined by the experimenters
VGVG Isn't this a one-tailed test? And for a one-tailed test, the decision rule is:

Reject H0 if z > z-alpha.

In this case, z-score of -3.71 can't be > -2.33
VGVG Never mind, this is a one-tailed test with:
H0: u >= u0, and for this the rejection clause is: z < -z-alpha
thekid PLeAse ExplAin the following:

"Note- the p-value for an x-bar of 16.1 is 0+."

How did they get this? What does that mean?
bhaynes thekid:
the smaller the p-value, the higher the chance that we are going to reject the null and accept the alternate. For the values above, we can check the z-table for our z-stat of -3.71 and see the p-value of .0001. That's pretty low. That means that we can say with a 99.99% chance, that we should reject the null.

Remember......As the p-value shrinks, so does our confidence in the null.
johntan1979 alpha of .01 for two-tailed is 2.58, one-tailed is 2.33
farhan92 hes on the derivatives section...
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