Solution

ID: past-exam-of-the-statistics-course-of-the-university-of-oxford/2014/1/b/ii/solution

For fixed , the likelihood ratio is strictly decreasing as increases. A likelihood-ratio test rejects for small , so its rejection rule is equivalently large . Under the null hypothesis, the standard normal distribution and chi-squared distribution results give independent quantities
Their ratio therefore has Student's t-distribution with statistical degrees of freedom. The exact level- rule is
This is precisely the two-sided Student's t-test; choosing the corresponding cutoff for yields the same rejection region and the same p-value.

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