- CFA Exams
- CFA Level I Exam
- Study Session 2. Quantitative Methods (1)
- Reading 4. Introduction to Linear Regression
- Subject 6. The predicted value of the dependent variable

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**CFA Practice Question**

True or False? If False, correct the statement.

Suppose a 95% confidence interval for the slope (β) of the straight line regression of Y on X is given by -3.5 < β < -0.5. Then a two-sided test of the hypothesis H(0): β = -1 would result in rejection of H(0) at the 1% level of significance.

Correct Answer: False

Since H(0): β = -1 would not be rejected at α = 0.05, it would not be rejected at α = 0.01.

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**User Contributed Comments**
7

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

webII |
maybe I'm missing something...how does a=.05 stronger than a=.01? |

danlan2 |
5% level is weaker than 1% level, since it can not be rejected at 5% level, it can not be rejected at 1% level |

Adkins08 |
Confidence interval for a 99% confidence interval (alpha is 1%) must be wider than a 95% confidence interval (alpha is 5%). Therefore, if the H(0) value is accepted at an alpha of 5%, it must be accepted at an alpha of 1% |

MattNYC |
If the calculated value (-1) falls within the acceptance range (-3.5, -0.5) then we FAIL to reject the Null |

Tukker |
If it is within the 95% range, it also fits within the wider 99% range. Don´t get tricked by the 1% expression! |

mazen1967 |
we cant reject the nul at 5% segnificancy level consiquantly we cant reject at lesser level |

quanttrader |
99% CI is wider (ie more conservative) than 95% CI. Therefore since beta = -1 falls within the 95% CI, it must also fall within the 99% CI (ie alpha = 1%) |