- CFA Exams
- CFA Exam: Level I 2021
- Study Session 3. Quantitative Methods (2)
- Reading 11. Hypothesis Testing
- Subject 6. The Decision Rule

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**CFA Practice Question**

A consumer group wants to prove that average hospital costs are equal to or more than $931 per day. The group randomly samples 60 accounts and finds a sample mean of $950. The hypothesis test is at an a-level of 5% and assumes a σ of $50. If the decision is to reject H

B. there is no evidence that the average daily cost of the hospital is more than $931.

C. the average daily cost of the hospital is equal to or more than $931.

_{0}: μ < 931, the conclusion should be that ______.A. the average daily cost of the hospital is more than $950.

B. there is no evidence that the average daily cost of the hospital is more than $931.

C. the average daily cost of the hospital is equal to or more than $931.

Correct Answer: C

Rejecting H

_{0}: μ < 931 means that the statement μ < 931 is false. So, the statement μ >= 931 is true. In terms of this problem, this means that the average daily cost of the hospital is equal to or more than $931.###
**User Contributed Comments**
8

User |
Comment |
---|---|

Yurik74 |
Why not A? Ha would be MU more than 931, not equl or more??? Ot not? |

bhuman |
Look at the null hypothesis, its simply states that M < 931. In that case, the alternative hypothesis, which we accept, covers both = and > |

jpducros |
I thought Ho always included the = sign, being either >= or <= Can someone confirm? |

SKIA |
jpducros -- that is not correct, in a two tailed test Ho does not need to have an equal sign. For example John thinks Jenny is a 5 on a scale of 1 to 10. Therefore the H1 = Jenny is a 5 and the Ho is Jenny is <5 or >5. |

sgossett86 |
I think JPDUCROS is saying that he thinks (and so did I) that H0 includes the equal sign in any hypothesis "de facto". so H0=, or H0>=, or H0<0.................... And yes, i'm still wondering about this after this problem... It raises questions... |

EMMADADA |
I agreed with JPDUCROS. H0 should be included the one with an equal sign. The given answer contradicts what I have learned in any STAT course. |

EMMADADA |
I mean, the answer should be correct. But the explanation is weird. |

wpaxtonn21 |
^^ yes the null should always include the equal sign. |