Hypothesis Testing in CFA Level 1 Exam

False Statement Regarding Hypothesis Testing

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Question

Which of the following statements regarding hypothesis testing is false?

Answers

A. If the population standard deviation is known, then the standard deviation of the sample is found by dividing the population standard deviation by the square root of "n."

B. The test statistic is also known as the "critical value."

C. A Type II error is defined as the act of incorrectly failing to reject the null hypothesis.

D. The level of significance is denoted by the Greek letter alpha.

E. Despite the different ways to formulate a hypothesis, the null hypothesis is always tested at the point of equality.

F. More than one of these answers is incorrect.

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Explanations

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A. B. C. D. E. F.

The test statistic is measured AGAINST the critical value. The test statistic is defined as "...a quantity, calculated on the basis of sample, whose value is the basis for deciding whether to reject or not reject the null hypothesis." The critical value is found by referencing the probability distribution for the series (z-distribution, t- distribution, Chi-squared distribution, F-distribution, etc.).

The remaining answers are correct.

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