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.
 
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