- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 8. Hypothesis Testing
- Subject 2. Null Hypothesis and Alternative Hypothesis
CFA Practice Question
A consumer group wants to prove that average hospital costs are more than $931 per day. The group randomly samples 60 accounts and finds a sample mean of $950. The hypothesis test is at an a-level of 5% and assumes a σ of $50. Which of the following is true?
A. The alternative hypothesis is Ha: μ < 931.
B. The alternative hypothesis is Ha: μ > 931.
C. The null hypothesis is H0: μ > 931.
Explanation: The alternative hypothesis, Ha, is what is to be proved; in this case we want to prove the average costs are above $931. So, we have Ha: μ > 931.
User Contributed Comments 5
| User | Comment |
|---|---|
| danlan | Ha is what to be proved |
| MattyBo | I do not thnk danlan has it correct. We are only testing the null hypothesis. We either (i) refect null or (ii) fail to reject null. We are not accepting the alternative hypothesis if we reject the null hypothesis. |
| clarelau | MattyBO: I think danlan is correct and you are not. We actually accept alternative hypothesis if null is false |
| gmorris | But why not Ho: u>931? I thought the goal was to test the theory, which in this cas seems to be that the costs are more than $931 per day. |
| Shaan23 | No gmorris. Ho is what you are testing but Ha is what you are trying to prove. |