CFA Level 1 Exam: Significance Level of a Test

Significance Level of a Test

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Question

The significance level of a test is usually equal to which of the following:

Answers

A. The power of a test.

B. The probability of a Type I error.

C. None of these answers is correct.

D. The probability of a Type II error.

E. More than one of these answers is correct.

F. (1 - the probability of a Type I error). B

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Explanations

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

Explanation

The standard method of hypothesis testing involves stating the significance level as equal to the probability of incorrectly rejecting the null hypothesis. This action is defined as a Type I error. The converse of a Type I error, in which the null hypothesis is incorrectly rejected, is a Type II error, in which a false null hypothesis is mistakenly accepted.

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