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The correct answer is A

A Type I error occurs when the null hypothesis is rejected when it is true. A Type II error occurs when the null hypothesis fails to be rejected when it is false.

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9、A Type I error:

A) rejects a false null hypothesis.

B) fails to reject a false null hypothesis.

C) fails to reject a true null hypothesis.

D) rejects a true null hypothesis.

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The correct answer is D

A Type I Error is defined as rejecting the null hypothesis when it is actually true. The probability of committing a Type I error is the significance level or alpha risk.

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10、The first step in the process of hypothesis testing is:

A) the collection of the sample.

B) the calculation of sample statistics.

C) to state the hypotheses.

D) selecting the test statistic.

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The correct answer is C

The researcher must state the hypotheses prior to the collection and analysis of the data. More importantly, it is necessary to know the hypotheses before selecting the appropriate test statistic.

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AIM 16: Define, calculate and interpret the chi-squared test of significance.

1、You have collected monthly returns for a mutual fund and want to test the null hypothesis that the standard deviation exceeds the advertised standard deviation of 3.5 percent. The most appropriate test statistic is based on a:

A) F-test.

B) t-test.

C) chi-square test.

D) z-test.

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The correct answer is C

The chi-square test is used to test hypotheses about a single population variance.

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2、The sampling distribution of variances is described by which distribution?

A) Chi-square distribution. 

B) Normal distribution. 

C) Student’s t-distribution. 

D) F-distribution.

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The correct answer is A

The sampling distribution of variances is described by the chi-square distribution.

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AIM 17: Define, calculate and interpret the F-test of significance.

1、In order to test if Stock A is more volatile than Stock B, prices of both stocks are observed to construct the sample variance of the two stocks. The appropriate test statistics to carry out the test is the:

A) t test.

B) Z test.

C) Chi-square test.

D) F test.

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