CFA Practice Question

There are 434 practice questions for this study session.

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?

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.

User Contributed Comments 3

User Comment
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
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