CFA Practice Question

CFA Practice Question

The (true) population mean is 12. You test the Null Hypothesis that the mean equals 12 at the 95% level of significance. The probability of making a Type 1 error is:
A. 47.5%
B. 5%
C. 0%
Explanation: A 95% level of significance means that if the Null is true, the probability of an extreme value of the estimator that causes the Null to be rejected is 100% - 95% = 5%. If this happens, we have a Type 1 error.

User Contributed Comments 1

User Comment
levani307 Level of significance = Confidence level?
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