FRM Part I · FRM Exam Part I · Linear Regression
A risk analyst tests whether a regression slope is zero and obtains a p-value of 0.03. Which conclusion is correct?
A p-value of 0.03 is the smallest significance level at which the null can be rejected. It is below 5% but above 1%, so the null is rejected at the 5% level but not at the 1% level.
- AThe null is rejected at the 5% level but not at the 1% levelCorrect
- BThe null is rejected at the 1% level but not at the 5% level
- CThe null is not rejected at the 5% level
- DThere is a 3% probability that the null hypothesis is true
Explanation
The p-value is the smallest significance level at which the null can be rejected. Since 0.03 is below 0.05 but above 0.01, the null is rejected at 5% and not at 1%. A p-value is not the probability that the null is true.
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