Why Is It Preferable to Choose a One-Sided Alternative Rather

question 13

Multiple Choice

Why is it preferable to choose a one-sided alternative rather than a two-sided alternative in the situation where you are only interested in results that are extreme in one direction?

• A)Your p-value would be half as much as it would be for a two-sided test (assuming the test statistic is the same each time, and is in the direction of the one-sided alternative you selected.)
• B)Your results don't have to be as extreme in order to achieve statistical significance.
• C)Your conclusions can be more informative because they will have a direction associated with them.
• D)All of the above.

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Definitions:

Net Present Value

A method used in capital budgeting to evaluate the profitability of an investment or project, calculating the difference between the present value of cash inflows and outflows.

Present Value Index

A calculation that compares the present value of cash inflows to the initial investment, often used in capital budgeting.

Compound Interest

The calculation of interest on the initial principal and also on the accumulated interest of previous periods.

Average Rate of Return

A method of determining the profitability of an investment by dividing the average annual profit by the initial investment cost.