- 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**

What type of decision is reached when the calculated value of any test statistic falls in the critical region when a false null hypothesis is being tested?

B. a Type I error

C. a Type II error

A. a correct decision

B. a Type I error

C. a Type II error

Correct Answer: A

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**User Contributed Comments**
6

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

virginia |
When the calculated value falls in the critical region, you do not reject H0. Not rejecting H0 while it's false, shouldn't it be a Type II error? |

tony1973 |
if the test statistic falls in the critical region, you will reject the null hypothesis! As it is a false one, the decision is correct. |

mtcfa |
O think the wording here is tricky. A false null is always being tested. If it falls within the critical region (i.e. not outside, not significant), than the null cannot be rejected. |

tssverma |
yes..the question is testing whether the candidate understands the trick |

mordja |
Is not a trick. If you are testing a false null hypothesis (Ie you have previously found it to be false), and you now test it to find a statistically significant result then your previous decision is validated. I see no trick here, just need to be careful reading the question. |

dybacis |
Critical region is the set of all outcomes which cause the null hypothesis to be rejected. |