### CFA Practice Question

There are 434 practice questions for this study session.

### CFA Practice Question

Consider the following information about a fund. The fund has been in existence for 3 years. Over this period it has achieved a mean monthly return of 3% with a sample standard deviation of monthly returns of 5%. It was expected to earn a 2.5% mean monthly return over the 3-year period.

The rejection point(s) at the 0.10 level of significance is (are) ______.
A. reject when t < 1.690 or t < -1.690
B. reject when t < 1.690 or t > -1.690
C. reject when t > 1.690 or t < -1.690
Explanation: In this case, we look at p = 0.05 because the significance level given is 0.1 and 35 degrees of freedom (36-1). The value read from the table is 1.690; this determines the rejection point(s).

User Comment
danlan Reject when it is far from 0, so it's the only choice.
Xocrevilo Danlan, that's not quite right.

No calculation needed on this one. From the LOS:
"Reject the null if the t-statistic is greater than the upper rejection point or less than the lower rejection point."
mishis Why wasn't the z-value used instead since standard deviation is known, and n=36?

I am guessing it could be used as well but t statistic is more conservative...?
StanleyMo the SD for sample only? we need population SD
homersimpson Tricky!
prtwf this question is messed up... not z because the sample is not large or the population variance normal/known
not t test because pop not normal or approx normal nor sample size large...
prtwf so if a population is normal is the variance of that population also normal??? the LOS is also messed up
alles Isn't this a one-tailed test? The alternative hypothesis is Ha: Mu > 2.5%.
So at the 0.1 level of significance the we look at p=0.1 and 35 degrees of freedom. The critical t-value is 1.31.
CJHughes Look at Signs "<>". C is only correct answe