- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 8. Hypothesis Testing
- Subject 3. Test Statistic and Significance Level
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.
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? |