Financial Risk Manager Part 1
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Which of the following best defines the term "hypothesis" as used in statistics?
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NNikitesh
A
An assumption about a problem
B
The current state of knowledge or belief about the value of a population parameter
C
A test that divides the sample space into a region of acceptance and the critical region
D
A statement about the value of a population parameter developed to test a theory or belief
Explanation:
In statistics, a hypothesis is a formal statement about the value of a population parameter that is developed to test a theory or belief. It is not simply an assumption about a problem (option A), nor is it the current state of knowledge (option B), which would be more aligned with the null hypothesis. Option C describes a hypothesis test rather than the hypothesis itself. The correct definition is that a hypothesis is a statement about the value of a population parameter developed to test a theory or belief, as illustrated in the example where a risk manager formulates hypotheses about mean monthly returns on stock options.
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