Kathy,FRM,calculated the intrinsic value of a Company and expects the stock to generate a 25%annual return in the future.However,Kathy is concerned that her price forecast may be too high.She conducted a hypothesis test and concluded that at a 5%significance level,the null hypothesis can be rejected that the Company's investment return would be equal to or less than 25%per year.The one-tailed test utilized a z-test.Indicate the meaning of the significance level chosen by Kathy and state the correct rejection region.

 

　　A.Significance level：Brown will reject a true null hypothesis 5%of the time,Rejection region：z> 1.645.

 

　　B.Significance level：Brown will reject a false null hypothesis 95%of the time，Rejection region：z<-1.645.

 

　　C.Significance level：Brown will reject a true null hypothesis 5%of the time，Rejection region：z<-1.96.

 

　　D.Significance level：Brown will reject a false null hypothesis 95%of the time，Rejection region：z> 1.96．

 

　　Answer:A

 

　　The level of significance is the probability of rejecting the null hypothesis when it is true.The null hypothesis will be rejected if the z-statistic is greater than 1.645.