- CFA Exams
- CFA Exam: Level I 2021
- Study Session 3. Quantitative Methods (2)
- Reading 11. Hypothesis Testing
- Subject 3. Test Statistic and Significance Level

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**CFA Practice Question**

True or False? If False, explain why.

Testing at a 5% level of significance means that you only have a 5% chance of rejecting the null hypothesis.

Correct Answer: False

This statement is accurate only if the null hypothesis is true.

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**User Contributed Comments**
4

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

bobert |
Would an also acceptable answer be: False, Testing at a 5% level of significance means that you only have a 5% chance of failing to reject the null hypothesis. I think that is right, just want to make sure the wording is correct. Any disagreements? |

mordja |
Bobert its a 5% chance of type one error, ie failing to accept the null hypotheses if the hypothesis is true. failing to reject the null when it is false is type two error. |

johntan1979 |
Only if the null is true... otherwise, statement is incomplete and unacceptable. |

robbiecow |
Shouldn't it be: the sign level is the probability of WRONGLY rejecting the null hypothesis if it is in fact true... Comments? |