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FRM Part I · FRM Exam Part I · Hypothesis Testing

An analyst runs a two-tailed test of a population mean and obtains a p-value of 0.036. Which conclusion is correct?

Reject the null hypothesis at the 5% level but not at the 1% level. The p-value of 0.036 is smaller than 0.05, which supports rejection, but larger than 0.01, so the evidence is not strong enough to reject at the stricter 1% significance level.

  1. AReject H0 at the 5% level but not at the 1% levelCorrect
  2. BReject H0 at both the 5% level and the 1% level
  3. CFail to reject H0 at the 5% level but reject at the 1% level
  4. DFail to reject H0 at both the 5% and 1% levels

Explanation

H0 is rejected whenever the p-value is below the significance level. 0.036 < 0.05, so reject at 5%; 0.036 > 0.01, so do not reject at 1%. Option C reverses the comparison rule.

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