Hypothesis Testing and the Region of Rejection | CFA® Level 1 Exam Preparation

Calculating the Region of Rejection for Hypothesis Testing

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Question

A statistician has framed his hypothesis testing problem as:

Ho: mean >= 1 H1: mean < 1 -

For the given sample, he calculates the z-statistic. Then, the region of rejection at the 95% level is given by:

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Explanations

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A. B. C. D.

B

Since the alternative hypothesis is directional and to the left, the rejection region for the null is also to the left. Hence, you should use a one-tailed test. 5% of the probability mass in a Normal distribution lies in the left tail with values which are less than -1.645. Therefore, the rejection region comprises of z-values less than -

1.645.