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Free CFA-Level-I Exam Braindumps (page: 178)

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If the significance level of a test is the probability of incorrectly rejecting the null hypothesis, then the "power of a test" is defined as which of the following? Choose the best answer.

  1. The probability of a Type II error.
  2. More than one of these answers is correct.
  3. The "power of a test" is a nonsensical term.
  4. The probability of incorrectly accepting the alternate hypothesis.
  5. The probability of correctly rejecting the null.
  6. The probability of a Type I error.

Answer(s): E

Explanation:

If the significance level of a test is the probability of incorrectly rejecting the null hypothesis (a Type I error), then the power of the test is defined as the probability of correctly rejecting the null hypothesis. In other words, the power of a test is equal to (1 - the probability of a Type II error). The standard method of hypothesis testing involves stating only the significance level, which is equal to the probability of a Type I error.



There are 2,000 eligible voters in a precinct. Despite protests from knowledgeable persons that a sample size of 500 was too large in relation to the total, the 500 selected at random were asked to indicate whether they planned to vote for the Democratic incumbent or the Republican challenger. Of the 500 surveyed, 350 said they were going to vote for the Democratic incumbent. Using the 0.99 confidence coefficient, what is the confidence limits for the proportion who plan to vote for the Democratic incumbent?

  1. 0.060 and 0.700
  2. 0.826 and 0.926
  3. None of these answers
  4. 0.397 and 0.797
  5. 0.612 and 0.712

Answer(s): C

Explanation:

Interval estimate can be found from p +/- z[p(1-p)/n]^0.5. Here we have n = 500, p = 350/500 = 0.7 and z = 2.58 (for 99%). Therefore 0.7 +/- 2.58*0.02049 and we get 0.647 and 0.7529.



Three defective electric toothbrushes were accidentally shipped to a drugstore by the manufacturer along with 17 nondefective ones. What is the probability that the first two electric toothbrushes sold will be returned to the drugstore because they are defective?

  1. 1/4 or 0.25
  2. 3/20 or 0.15
  3. None of these answers
  4. 3/17 or 0.176
  5. 3/190 or 0.01579

Answer(s): E

Explanation:

3/20*2/19 = 3/190



How many quarters will it take for an original $1,000 deposit to grow to be $2,000, if the deposit earns interest at 6% per year, compounded quarterly?

  1. 22.15
  2. 11.90
  3. 41.12
  4. 51.52
  5. 46.56

Answer(s): E

Explanation:

On the BAII Plus, press 1000 PV, 2000 +/- FV, 0 PMT, 6 divided by 4 = I/Y, then CPT N. On the HP12C, press 1000 PV, 2000 CHS FV, 0 PMT, 6 ENTER 4 divide i, then press n. HP12C answer is shown as 47. Answer should be in quarters, not years. Make sure the BAII Plus has the P/Y value set to 1.






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