CFA® Level 1 Exam: Understanding Type I and Type II Errors

Type I and Type II Errors in Hypothesis Testing

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Question

Which of the following is/are true?

I. Type I error is the event in which we reject the null when it is false.

II. Type II error occurs when we accept the null when it is false

III. Type I error occurs if we accept the alternative when it is false.

IV. Type II error is the event where we reject the alternative when it is true.

Answers

Explanations

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A. B. C. D. E. F. G. H.

A

Type I error is the event in which we reject the null when it is true. This is the same as accepting the alternative when it is false. Type II error is the event in which we fail to reject the null when it is false. This is the same as rejecting the alternative when it is true.

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