- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 6. Hypothesis Testing
- Subject 4. Type I and Type II Errors in Hypothesis Testing

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**CFA Practice Question**

Of the following statements:

II. Type II error is failing to reject the null hypothesis when it is actually false.

I. The level of significance of a hypothesis test is the probability of rejecting the null hypothesis when it is actually true.

II. Type II error is failing to reject the null hypothesis when it is actually false.

A. Only I is true.

B. Only II is true.

C. I and II are true.

**Explanation:**The level of significance is defined as the probability of rejecting the hypothesis when it is actually true. A Type II error is failing to reject the hypothesis when it is actually false.

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