- CFA Exams
- CFA Level I Exam
- Study Session 2. Quantitative Methods (1)
- Reading 5. Multiple Regression
- Subject 2. Testing the Significance of a Regression Coefficient

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**CFA Practice Question**

Beth has two independent variables and 25 observations in her regression analysis. The t-statistic for one of the independent variables X

_{1}is 1.98. What is the critical value for Student's t distribution? Is the variable significant at the 5% confidence level? Assume 2-tailed test.

Correct Answer: The critical value is 2.074, and the variable is not significant.

t

As 1.98 < 2.074, the variable is not significant at the 5% confidence level.

The degrees of freedom: 25 - 2 - 1 = 22.

t

_{0.025, 22}: 2.074.As 1.98 < 2.074, the variable is not significant at the 5% confidence level.

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**User Contributed Comments**
2

User |
Comment |
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wink26 |
Why not 1.717? I thought the CI was 5%? |

jhmorris |
Since the t-test seeks to determine whether or not the null hypothesis that X1 is equal to zero should be rejected, this is a two-tailed test. As such, at the 5.00% significance level, you use column 2 to determine the critical value. |