CFA CFA Level 1 Question of the Week: Level 1 – Quantitative Methods

Question of the Week: Level 1 – Quantitative Methods

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    • MarkMeldrum
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      Which is a false statement?

      • A. The probability of a Type 1 error is given by α.
      • B. The probability of a Type 2 error is given by 1 – α.
      • C. The only way to reduce the probability of both Type 1 and Type 2 errors
        simultaneously is to increase the sample size.
    • MarkMeldrum
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      The correct answer is Option B.

      The probability of a Type I error in testing a hypothesis is denoted by the Greek letter alpha, α.

      The probability of a Type 2 error in testing a hypothesis is denoted by the Greek letter beta, β.

      Option Β is difficult to quantify and it does not = 1 – α.

      Finally, with respect to Option C, the only way to reduce the probabilities of both types of errors simultaneously is to increase the sample size, n.

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