If you choose a 5% significance level you should

CFA Level I Quant
#1

In order to test if the mean IQ of employees in an organization is greater than 100, a sample of 30 employees is taken and the sample value of the computed test statistic, tn-1 = 1.2. If you choose a 5% significance level you should:

A) fail to reject the null hypothesis and conclude that the population mean is not greater than 100. B) reject the null hypothesis and conclude that the population mean is greater than 100. C) fail to reject the null hypothesis and conclude that the population mean is greater than 100.

#2

The t-crit value for a one-tail test at the 5% level with 29 df is 1.699. You cannot reject H0.

Sad as it is to report, the employees aren’t that bright.

#3

Answer is A.

The test is a one tailed test with

H0: mean < = 100

H1: mean > 100

Looking at t table critical values for d.f = 29 (30 - 1) at the 0.05 significance level we get a value of 1.699.

We are given the computed test statistic as 1.2.

Therefore, we have test statistic < critical z value (1.2 < 1.699) so we can conlcude that we fail to reject the null hypothesis and concolude that the population mean is not greater than 100.

Hope this helps.

#4

Thanks s2000magician

#5

Thanks amzi160586. nicely explained.