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**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.

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**User Contributed Comments**
1

User |
Comment |
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levani307 |
Level of significance = Confidence level? |