- CFA Exams
- CFA Exam: Level I 2021
- Study Session 3. Quantitative Methods (2)
- Reading 11. Hypothesis Testing
- Subject 2. Null Hypothesis and Alternative Hypothesis

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**CFA Practice Question**

If alpha equals 0.05 for a two-tailed hypothesis test, how large is the area of rejection in the upper or right tail?

B. 0.025

C. 0.975

A. 0.95

B. 0.025

C. 0.975

Correct Answer: B

Since this is a two-tailed test, there is a similar size region in each tail. So, 0.05/2 = 0.025.

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**User Contributed Comments**
3

User |
Comment |
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sharky7 |
I'm getting sick with this topic... If alpha equals 0.05 for a two-tailed test, that means there are 0.025 in each side, wich means the rest of the area is 0.975. I thought this 0.975 area was supposed to be the area of rejection because the null hypothesis is falling within it, so it means to reject it!! Thank you for your help! |

Shaan23 |
The two tails are the area of rejection when Ho is actually true. So that is the rejection area |

35712850 |
That means that in one tailed test it will be 0.05( +1.96) to be the area of rejection and in two tailed it be 0.05÷2 = 0.025(-1.96 to +1.96) in both sides to be the area of rejection |