CFA Practice Question

There are 434 practice questions for this study session.

CFA Practice Question

A mechanic is concerned that his very expensive pressure gauge is giving faulty readings. He measured 18 pressures with his gauge and then compared them with the actual pressure given. His gauge showed a mean of 120 psi with a standard deviation of 0.75 psi. The actual pressure was 122 psi. The t test statistic is less than the critical value of t for a 90% confidence level. What should the mechanic infer from this?
A. The calibrated gauge understates the real pressure at a 95% confidence interval.
B. The mechanic's gauge understates the real pressure at a 90% confidence interval.
C. The mechanic's gauge readings do not differ from the actual pressure at a 90% confidence interval.

User Contributed Comments 7

User Comment
Nguyen why, t-value<critical value --> cannot reject the Null.
Pooh Given that the t-statistic < critical value, the p-value < the significance level of 10%, the effect is statistically significant. Therefore, the null hypothesis is rejected. This means that the Ha is accepted: U1 < U2.
hizmo If you actually calculate the t-statistic, it is actually higher than than the critical value :)
george2006 Don't be fool by the words "less than".

It is actually less than the negative critical value of -1.645 ( use z stat value to approximated t value).

Do actual calc anyhow to get better understanding of the problem. the words are sometime too ambiguous.
Shelton TS=(120-122)/(0.75/sqrt(18))=-11.31<-1.740=t(17;p=0.05)
teje two-sided test, therefore use +/- 1.645 as your critical values
endurance T test are more appropriate since we don't know the population variance. We have to be more conservative with small samples

Critical value t(0,05, 17)=1,74, not 1,645
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