- CFA Exams
- CFA Exam: Level II 2021
- Study Session 2. Quantitative Methods (1)
- Reading 5. Multiple Regression
- Subject 2. Testing the significance of a regression coefficient

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**CFA Practice Question**

You have 3 independent variables and 30 observations. The t-statistic for one
of the independent variables is 2.013. What is the critical value for Student's t distribution? Is the variable significant at the 5% confidence level?

Correct Answer: The critical value is 2.056 and the variable is not significant.

The degrees of freedom is 30 - 3 - 1 = 26. Because the Student's t distribution is for the area in the upper tail, the critical value is based on 2.5%. Therefore, the critical value for 26 degrees of freedom is 2.056. Because the t-statistic is only 2.013, it is not significant.

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**User Contributed Comments**
4

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

vi2009 |
degree of freedom = n-k-1 = 30 - 3 - 1 = 26 t-distribution: t is the symmetrical distribution with a mean of 0. always use the upper-tail area. so for 95%, use upper 0.025, 90%, use upper 0.05 etc |

JohnnyWu |
Didn't we need to know this was a 2 tail test? |

philjoe |
I agree with Johnny |

birdperson |
agree with the Wu |