Chapter - 6 - 11th Edition - SD - 3 Slides

Chapter 6
Probability
© Michael Rochon | Distribution is NOT permitted | Use is restricted to ADMS 2320 Registered INTERNET Students
6.1 Assigning probabilities to Events
• Random experiment
– a random experiment is a process or course of action, whose
outcome is uncertain.
• Examples
Experiment Outcomes
• Flip a coin Heads and Tails
• Record a statistics test marks Numbers between 0 and 100
• Measure the time to assemble numbers from zero and above
a computer
6.1 Assigning probabilities to Events

• Performing the same random experiment
repeatedly, may result in different outcomes (try
flipping a coin 10 times and record the results and then flipping the same coin another
10 times and recording the results, are they the same (they may or may not be),
therefore, the best we can do is consider the

probability of occurrence of a certain outcome.
• To determine the probabilities we need to define
and list the possible outcomes first.
1
Sample Space
• Determining the outcomes.
– Build an exhaustive list of all possible outcomes.
– Make sure the listed outcomes are mutually exclusive (this
means the two events cannot occur together – when you flip a coin you get either
heads or tails, they both cannot occur at the same time – I am assuming you are
not using one of those funny coins that have heads on both sides ).
• A list of outcomes that meets the two conditions

above is called a sample space.
Sample Space: S = {O1, O2,…,Ok}
O1 O2
Sample Space Simple Events

a sample space of a The individual
random experiment outcomes are called
is a list of all possible simple events.
outcomes of the Event Simple events cannot
experiment. The An event is any collection be further
outcomes must be Ourof objective is to events
one or more simple decomposed
mutually exclusive and determine P(A), the into constituent
exhaustive.
probability that event A outcomes.
will occur.
Assigning Probabilities
– Given a sample space S={O1,O2,…,Ok}, the following
characteristics for the probability P(Oi) of the simple
event Oi must hold:
1. 0 ≤ P(Oi ) ≤ 1 for each i
k
2.  P(O ) = 1
i =1
i
1. All probabilities must be between 0 and 1 or 0% and

100%
• i.e. the probability of rain tomorrow cannot be 150%.
2
Assigning Probabilities
– Given a sample space S={O1,O2,…,Ok}, the following
characteristics for the probability P(Oi) of the simple
event Oi must hold:
1. 0 ≤ P(Oi ) ≤ 1 for each i
k
2.  P(O ) = 1
i =1
i
2. The sum of the probabilities must always sum to a

total of 1 or 100%.
Approaches to Assigning Probabilities and Interpretation of Probability
• Approaches
– The classical approach – game of chance – coin toss
– The relative frequency approach – past historical data
used to identify the probability of future events – we
explored relative frequencies in chapter 2.
– The subjective approach – we assign probabilities based
on our belief as to what may happen – expert opinion.
• Interpretation
– If a random experiment is repeated an infinite number of
times, the relative frequency for any given outcome is the
probability of this outcome.
6.2 Joint, Marginal, and Conditional Probability
• We study methods to determine probabilities of

events that result from combining other events in
various ways.
• There are several types of combinations and
relationships between events:
– Intersection of events
– Union of events
– Dependent and independent events
– Complement event
3
Intersection (Joint Probabilities)
• The intersection of event A and B is the event that

occurs when both A and B occur.
• The intersection of events A and B is denoted by (A and

B).
• The joint probability of A and B is the probability of the

intersection of A and B, which is denoted by:
P(A and B)
10

• Example 6.1 (pg. 161)
– A potential investor examined the relationship between
the performance of mutual funds and the school the fund
manager earned his/her MBA.
– The following table describes the joint probabilities.
Mutual fund Mutual fund doesn’t

outperform the outperform the
market (B1) market (B2)
Top 20 MBA program (A1) .11 .29
Not top 20 MBA program .06 .54
(A2)
11

• Example 6.1 (pg. 161) - continued
– The joint probability of P(A1 and B1)
[mutual fund outperform…] and […from a top 20 …] = .11
– The joint probability of
[mutual fund outperform…] and […not from a top 20 …] = .06

outperforms the market outperform the market
(B1) (B2)
Not top 20 MBA program .06 .54
(A 2)
12
4
• Example 6.1 (pg. 161) – continued
– The joint probability of P(A1 and B1)
[mutual fund outperform…] and […from a top 20 …] = .11
– The joint probability of
[mutual fund outperform…] and […not from a top 20 …] = .06
P(A2 and B1)

outperforms the market outperform the market
(B1) (B2)
Not top 20 MBA program (A2) .06 .54
13

• So from the table of data we know:
– P(A1 and B1) = .11
• There is an 11% chance that the person went to a top 20 MBA and their
Mutual fund outperformed the market .
– P(A1 and B2) = .29
• There is a 29% chance that the person went to a top 20 MBA and their
Mutual fund did not outperformed the market .
– P(A2 and B1) = .06
• There is a 6% chance that the person did not go to a top 20 MBA and their
Mutual fund outperformed the market .
– P(A2 and B2) = .54
• There is a 54% chance that the person did not go to a top 20 MBA and their
Mutual fund did not outperformed the market .
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Marginal Probability
• Example 6.1 (pg. 161)
• So far we have a bunch of joint probabilities that we
identified from the information in the problem.
• We can use these joint to find the marginal probabilities.
• It would be useful to know:
– the probability that the person went to a top 20 MBA program
P(A1)
– the probability that the person did not go to a top 20 MBA program
P(A2)
– the probability that the mutual fund outperformed the market P(B1)
– the probability that the mutual fund did not outperformed the market
P(B2)
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5
• Example 6.1 (pg. 161)
• These probabilities are computed by adding
across rows and down columns
Mutual fund Mutual fund Marginal
outperforms the doesn’t outperform Prob.
market (B1) the market (B2) P(Ai)
Top 20 MBA program (A1) P(A1 and B1)+ P(A1 and B2) = P(A1)
Not top 20 MBA program (A2) P(A2 and B1)+ P(A2 and B2) = P(A2)
Marginal Probability P(Bj)
P(A1 and B1)+ P(A1 and B2) = P(A1)

Notice that the A1’s are present in both the joint probabilities.
16
• Example 6.1 (pg. 161)

outperforms doesn’t Prob.
the market outperform the P(Ai)
(B1) market (B2)
Top 20 MBA program (A1) .11 + .29 = .40
Not top 20 MBA program .06 + .54 = .60
(A2)
Marginal Probability P(Bj)
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• Example 6.1 (pg. 161)

Top 20 MBA program (A1) P(A1 and B1) P(A1 and B2) .40
+ +
Not top 20 MBA program (A2) P(A2 and B1 P(A2 and B2 .60
= =
Marginal Probability P(Bj) P(B1) P(B2)
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6
• Example 6.1 (pg. 161)

Top 20 MBA program (A1) .11 .29 .40
+ +
Not top 20 MBA program (A2) .06 .54 .60
Marginal Probability P(Bj) .17 .83
19
• Example 6.1 (pg. 161)

Marginal Probability P(Bj) .17 .83 1.00
Notice that the sum of the marginal row and column equal 1
20
• Example 6.1 (pg. 161)
Marginal Probability P(Bj) .17 .83 1.00
Notice that the rules of probability on the prior slide are met. That
is the sum of the probabilities is equal to 1 and that the
probabilities fall between 0 and 1.
21
7
• So now we have:
– Joint Probabilities
• P(A1 and B1) = .11
• P(A1 and B2) = .29
Sums to 100%
• P(A2 and B1) = .06
• P(A2 and B2) = .54
– Marginal Probabilities
• P(A1 ) = .40
Sums to 100%
• P(A2 ) = .60
• P(B1) = .17 Sums to 100%

• P(B2) = .83
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Practice Question – Marginal Probabilities

• Try this question before proceeding….answer on
next slide
23
Practice Question – Marginal Probabilities

• Marginal Probabilities
– P(A1) = .4 + .2 = .6
– P(A2) = .3 + .1 = .4
– P(B1) = .4 + .3 = .7
– P(B2) = .2 + .1 = .3.
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8
Conditional Probability
• Now that we have looked at joint and marginal
probabilities, it is time to focus our attention on
conditional probabilities.
• Conditional probabilities are ones in which a
condition is placed on another event.
• For example, given I know something about an
event, what is likelihood of another event
occurring.
• The key is that a condition is present.
25
Condition
Primary Event
P(A1|B2)
“Given that”
Given B2 has occurred, what is the probability of A1

It is good to read it from the inside (given), to the right (B2), then to the left (A1)
26
• Example 6.2 on pg.160 164 (Example 6.1 –

continued) Primary Event
– Find the conditional probability that a randomly selected fund

is managed by a “Top 20 MBA Program graduate”, given that
it did not outperform the market. Condition
– First you want to locate the conditional rules of probability on
page 160
Now we are able to
– Note that P(A1|B2) converts into P(A1 and B2) Solve it using the
Information we have
P(B2)
– We need to convert because we cannot solve it the way it is
– The symbol “|” above means “given that”
27
9
• Example 6.2 on pg160
164 (Example 6.1 –
continued)
– Find the conditional probability that a randomly selected
fund is managed by a “Top 20 MBA Program graduate”,
given that it did not outperform the market.
Already found this
• Solution
P(A1|B2) = P(A1 and B2) = .29 = .3949
.3493
P(B2) .83 Already found this
• P(A1 and B2) = means “Top 20 MBA Program graduate” and “fund
did not outperform the market” occurs at the same time
• P(B2) = means the probability the mutual fund did not outperform
the market only, regardless if the person graduated from a top 20
MBA or NOT
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• Example 6.2 on pg.164
it did not outperform the market.
• Solution Mutual fund Mutual fund Marginal
outperform doesn’t Prob.
s the outperform P(Ai)
P(A1|B2) = market (B1) the market
P(A1 and B2) (B2)
P(B2) Top 20 MBA program .11 .29
.29 .40
(A1)
=.29/.83 Not top 20 MBA .06 .54 .60
program (A2)
.3493
= .3949 Marginal Probability .17 .83
.83
P(Bj)
29
• Example 6.2 on pg.164
it did not outperform the market.
• Solution = .3493
– Given that the mutual fund did not outperform the market, there is a
34.93% chance that the fund manager went to a top 20 MBA program.
– Recall: The probability that the fund manger went to a top 20 MBA
program was P(A1)=.40 or 40% - we calculated this previously when
finding the Marginal probabilities.
– This means that when we found out that the fund manager did not
outperform the market, it reduced their chances, from 40% to
34.93%, of attending a top 20 MBA program.
– The additional information revised the A1 marginal probability.
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10
Practice Question – Conditional Probabilities
• Try this question before proceeding….answer on

next slide
Given the following Joint Probabilities:
31

• Have you tried the question? 
32

a) 𝑃(𝐴 |𝐵 ) =
𝑃(𝐴 𝑎𝑛𝑑 𝐵 ) .4
= = .5714
𝑃(𝐵 ) .7
𝑃(𝐴 𝑎𝑛𝑑 𝐵 ) .3
b) P(A2|B1) =
𝑃(𝐵 )
= = .4286
.7
c) Yes. They both have B1 in the conditional spot of

the probability. That makes the denominator for
both formulas B1. They should sum to one.
33
11
Conditional Probability – Dependent Events
• Sometimes we would like to know if events are
dependent on each other or independent of each
other.
• In order to test this, we compare conditional to
marginal probabilities.
• Lets test the dependency between A1 and B2
34
Conditional Probability – Dependent Events

• Before the new information becomes available we have
P(A1) = 0.40
• After the new information becomes available P(A1)
changes to
P(A1 | B2) = .3494
• Since the the occurrence of B2 has changed the
probability of A1, the two event are related and are called
“dependent events”.
• They are dependent because we now know that B2 impacts
A1, by taking 40% down to 34.94% (impact of -5.06%)
• If the impact was 0%, then the events would be independent
– the influence of B2 on A1 is not a factor.
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Independence
• Independent events
– Two events A and B are said to be independent if
P(A|B) = P(A)
or
P(B|A) = P(B)
– That is, the probability of one event is not affected by the
occurrence of the other event.
– If the P(A|B) = P(A), then this means that B did not
have an influence on the value of A.
36
12
Dependent and independent events
• Example 6.3 on pg. 165 - Extended

– We have already seen the dependency between A1
and B2.
– Let us check A2 and B2.
• P(B2) = .83
These must match to test dependency/independency
• P(B2|A2)=P(B2 and A2)/P(A2) = .54/.60 = .90
– Conclusion: A2 and B2 are dependent.
• They are dependent because we now know that B2 impacts
A2, by taking 83% up to 90%
• We could have also tested: P(A2) against P(A2 | B2)
37
Union
• The union event of A and B is the event that
occurs when either A or B or both occur.
• It is denoted “A or B”.
• Example 6.4 on page 165 (Example 6.1 –
continued)
Calculating P(A or B)
– Determine the probability that a randomly selected fund
outperforms the market or the manager graduated from a
top 20 MBA Program.
38
Union
• Solution
Mutual fund Mutual fund

outperforms doesn’t A1 or B1 occurs
the market (B1) outperform the whenever either:
market (B2) A1 and B1 occurs,
Top 20 MBA program (A1) .11 .29 A1 and B2 occurs,
Not top 20 MBA program (A2) .06 .54 A2 and B1 occurs.
P(A1 or B1) = P(A1 and B1) + P(A1 and B2) + P(A2 and B1) =
.11 +.29 + .06 = .46 Short Cut:
P(A1 or B1) = 1 – P(A2 and B2)
= 1 – .54 = .46
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13
Practice Question - Union
• Try this question
• Answer will be provided on the following slide
Given the following Joint Probabilities:
40
Practice Question - Union
This is actually mutually exclusive – the 2

events cannot occur together
41
6.3 Probability Rules and Trees
• We present more methods to determine the

probability of the intersection and the union of
two events.
• Three rules assist us in determining the
probability of complex events from the probability
of simpler events.
– Compliment Rule
– Multiplication Rule
– Addition Rule
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14
Complement Rule
• The complement of event A (denoted by AC) is

the event that occurs when event A does not
occur.
• The probability of the complement event is
calculated by
A and AC consist of all the
simple events in the Pg. 172
sample space. Therefore, P(AC) = 1 - P(A)
P(A) + P(AC) = 1
43
Multiplication Rule
• For any two events A and B that are dependent
( ) P(A and B) = P(A)P(B|A) Pg. 173

P(A | B ) =
Multiply to find joint
( ) = P(B)P(A|B)
Marginal x Conditional
• When A and B that are independent
P(A and B) = P(A)P(B) Pg. 173
Marginal x Marginal
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Multiplication Rule
• Example 6.5 pg 173
What is the probability that two female students will be
selected at random to participate in a certain research
project, from a class of seven males and three female
students? (without replacement)
If one female student is selected on the
• Solution First selection, then 2 females remain
On the second selection with one less person
– Define the events:
A – the first student selected is a female
B – the second student selected is a female
– P(A and B) = P(A)P(B|A) = (3/10)(2/9) = 6/90 = .067
Events are dependent
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15
Multiplication Rule
• Example 6.6 pg 173
What is the probability that a female student will be
selected at random from a class of seven males and three
female students, in each of the next two class meetings?
(Without Replacement)
• Solution If one female student is selected in the

First selection in class 1, then 3 females remain
– Define the events: On the second selection in class 2.
A – the first student selected is a female in class 1

B – the second student selected is a female in class 2
– P(A and B) = P(A)P(B) = (3/10)(3/10) = 9/100 = .09
Events are independent
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Practice Question – Multiplication Rule

• Try this question out 
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Practice Question – Multiplication Rule
Let:
A = DJIA increase
B = NASDAQ increase
P(A) = .60
P(B | A) = .77
P(A and B) = P(A) x P(B | A) = (.60)(.77) = .462
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16
Addition Rule
For any two dependent events A and B
P(A or B) = P(A) + P(B) - P(A and B)
P(A) =6/13
+ A
P(B) =5/13
_
B
P(A and B) =3/13
P(A or B) = 8/13 A or B
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Addition Rule
When A and B are independent,
P(A or B) = P(A) + P(B)
A B
B
P(A and B) = 0
50
Addition Rule
• Example 6.7 on pg. 175
– The circulation departments of two newspapers in a large
city report that 22% of the city’s households subscribe to
the Sun, 35% subscribe to the Post, and 6% subscribe to
both.
– What proportion of the city’s household subscribe to either
newspaper?
51
17
Addition Rule
• Solution
– Define the following events:
• A = the household subscribe to the Sun
• B = the household subscribe to the Post
– Review the data
• P(A) = .22
• P(B) = .35
• P(A and B) =.06 (Events are not mutually exclusive)
– Calculate the probability

P(A or B) = P(A) + P(B) – P(A and B) = .22+.35 - .06 = .51
52
Practice Question – Unions (“or” function)

• Try this question, the solutions will be provided
on the next slide…
53
Practice Question – Unions (“or” function)
54
18
Probability Trees
• This is a useful technique to calculate probabilities

when using the probability rules.
• It allows for complex problems to be laid out and
organized in a way that is easier to solve.
• It also gives you the ability to see the big picture
• I.e. Remember the problem where we were trying to
select a female for the research project? Our focus
was select 2 females. What about all the other
probabilities, for example, selecting a male on 2
selections.
55
Probability Trees
• Example 6.5 revisited (dependent events).

– Find the probability of selecting two female students (without
replacement), if there are 3 female students in a class of 10.
Joint probabilities
P(FF)=(3/10)(2/9)
Second selection
P(FM)=(3/10)(7/9)
First selection
P(MF)=(7/10)(3/9)
Second selection
P(MM)=(7/10)(6/9)
56
Probability Trees
• Example 6.6 – revisited (independent events)
– Find the probability of selecting two female students (with
replacement), if there are 3 female students in a class of
10.
FF P(FF)=(3/10)(3/10)
Second
selection
First FM P(FM)=(3/10)(7/10)
selection
MF P(MF)=(7/10)(3/10)
Second
selection
MM P(MM)=(7/10)(7/10)
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19
Probability Trees
• Example 6.8 on page 177 (conditional
probabilities)
– The pass rate of first-time takers for the bar exam at a
certain jurisdiction is 72%.
– Of those who fail, 88% pass their second attempt.
– Find the probability that a randomly selected law school
graduate becomes a lawyer (candidates cannot take the
exam more than twice).
58
Probability Trees
• Solution
P(Pass) = .72
First
P(Fail and Pass)= .
exam (.28)(.88)=.2464
Second
exam
P(Fail and Fail) =
(.28)(.12) = .0336
P(Pass) = P(Pass on first exam) + P(Fail on first and Pass on second) =

=.72 + .2464 = .9664
Or
Using the compliment rule: 1- P(Fail and Fail)= 1-.0336 = .9664
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Practice Question – Probability Tree

• Try this question out…..
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20
Practice Question – Probability Tree
b) P(RR) = .8091
c) P(LL) = .0091
d) P(RL) + P(LR)
= .0909 + .0909 = .1818
e) P(RL) + P(LR) + P(RR)
= .0909 + .0909 + .8091 = .9909
61
Bayes’ Law
• Conditional probability is used to find the
probability of an event given that one of its
possible causes has occurred.
• We use Bayes’ law to find the probability of the
possible cause given that an event has occurred
– the exact opposite.
62
Bayes’ Law
• The best way to see how Bayes’ Law works is by
doing a question
• It utilizes the same skills you have learned thus
far, however, it applies them a little differently
63
21
Bayes’ Law
• Example 6.9 – pg. 180
– Variety of preparatory courses used to help prepare for GMAT
– A survey of MBA students was conducted
– An applicant needs to score more than 650 to get in to program
they want on their GMAT
– Applicant does not have confidence in achieving a high score
– Applicant considering taking prep course that cost $500
1. What is the probability of scoring 650 or more on the GMAT
given that a preparatory course is taken?
2. Does the probability of achieving 650 double with the prep
course?
64
Bayes’ Law
– Define the following events
• Event A = GMAT score 650 or more
• Event AC = GMAT score less than 650
• Event B = Take prep course
• Event BC = Do not take prep course
– Based on the above defined events, we have the following
information given to us (see next slide)
65
Bayes’ Law
• The following information is available to solve the
problem:
– The probabilities provided are:
• P(A) = .10 P(AC) = .90
• P(B|A) = .52 P(B|AC)= .23
• P(BC|A) = .48 P(BC|AC) = .77
– On the surface it would appear that the question is giving you
everything you need to solve the problem.
– Upon further review, that is just not the case.
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22
Bayes’ Law
• The following information is available to solve the
problem: “C” = compliment
• P(A) = .10 P(AC) = .90
There is a 10% chance There is a 90% chance
you do score Over 650 on the GMAT you do not score Over 650 on the GMAT
• P(B|A) = .52 P(B|AC)= .23
Given you scored over 650, The probability Given you do not score over 650, The
you took a prep course is 52% probability you took a prep course is 23%
• P(BC|A) = .48 P(BC|AC) = .77
Given you scored over 650, The probability Given you do not score over 650, The
you did not take a prep course is 48% probability you did not take a prep course is 77%
– On the surface it would appear that the question is giving you everything you
need to solve the problem.
– Upon further review, that is just not the case.
67
Bayes’ Law
• The following information is available
• P(A) = .10 P(AC) = .90
• P(B|A) = .52 P(B|AC)= .23
• P(B |A) = .48
C P(BC|AC) = .77
– Recall the main question: What is the probability of
scoring 650 or more on the GMAT given the preparatory
course is taken?
• Transforming this into a probability statement gives us the
probability of interest:
P(A | B)
68
Bayes’ Law
• P(A) = .10 P(AC) = .90
• P(B|A) = .52 P(B|AC)= .23
• P(B |A) = .48
C P(BC|AC) = .77
– Recall the main question: What is the probability of
scoring 650 or more on the GMAT given the preparatory
course is taken?
• Transforming this into a probability statement gives us the
probability of interest: P(A | B)
what is the Probability that Given you took
you scored over 650 the prep course
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23
Bayes’ Law
• P(A) = .10 P(AC) = .90
• P(B|A) = .52 P(B|AC)= .23
• P(BC|A) = .48 P(BC|AC) = .77
– The probability to be determined is P ( A | B )
– The really important part now becomes apparent

• What we are looking for is exactly the opposite of what we have
70
Bayes’ Law
• The question gave us:
• P(B|A) = .52 >> Given the GMAT score is over 650, there is a 52%
chance that the person took a prep course (“took” is past tense)
• This is not helpful for the question we have to answer – it assumes you wrote
the GMAT already, then took into consideration whether you took the prep
course in the past. Historical Information is what this is.
• What we need to know is:
• P(A|B) = ?? >> Given the prep course is taken NOW, there is a ??%
chance that you will score over 650 in the FUTURE.
• This is what we need to know: If I take the prep course now, what is the
probability that I score over 650 in the future – much more useful information
when I am trying to decide whether I need to take the prep course now. If it
improves my chances of scoring over 650 in the future, I will consider taking
the prep course now.
71
Bayes’ Law
• We cannot solve for P( A | B) with the given information
• Recall, however, that there is a formula that allows us to

calculate the Conditional probability by using a Joint and
Marginal probability.
P ( AandB)
P( A | B) =
P( B)
• So from the information given, we need to find:

P(A and B) and P(B).
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24
Bayes’ Law
P(A and B)
=.052
P ( AandB)
+ P( A | B) =
P( B)
P(AC and B)
.052
=.207 = = .201
.259
P(B) =.259
73
Bayes’ Law
Prior Conditional
probabilities probabilities
Posterior/Revised
probabilities
P( A | B) .052
= = .201
.259
74
Bayes’ Law
• Let us revisit the original questions:
1. What is the probability of scoring 650 or more on the GMAT given
that the preparatory course is taken?
– When a preparatory course is taken, there is a 20.1%
chance that you will score over 650 on the GMAT
2. Does the probability of achieving 650 double with the prep
course?
– Recall the information that was given in the question: they
gave us P(A) = .10 – which means that the probability of
scoring over 650 on the GMAT was 10% (this is with no
prep course)
– Yes, taking the preparatory course will double your
chances of scoring over 650 to 20.1%
75
25
Practice Problem: Bayes
• Try this question by yourself.
Bad gums may mean a bad heart. Researchers discovered that

85% of people who have suffered a heart attack had periodontal
disease, an inflammation of the gums. Only 29% of healthy people
have this disease. Suppose that in a certain community heart
attacks are quite rare, occurring only 10% of the time. If a person has
periodontal disease, what is the probability that he or she will have a
heart attack?
Hint: Defined events:

A = heart attack
B = periodontal disease
76
Practice Problem: Bayes

Given:
Define events: P(A) = .10
A = heart attack P(B | A) = .85
B = periodontal disease P(B | AC ) = .29
.085 +.261
P(B ) = .085 + .261 = .346
P(A | B) = P(A and B)/P(B) = .085/.346 = .246
77
78
26
Sample Questions
Remember these are just sample questions
and you should be doing as many questions
from the textbook as possible.
79
Sample Question 1
Three unbiased coins are tossed. What is the probability of getting
at most two heads?
80
Sample Question 2
• Marie is getting married tomorrow, at an outdoor
ceremony in the desert. In recent years, it has
rained only 5 days each year. Unfortunately, the
weatherman has predicted rain for tomorrow.
Given it actually rains, the weatherman correctly
forecasts rain 90% of the time. When it doesn't
rain, he incorrectly forecasts rain 10% of the time.
What is the probability that it will rain on the day
of Marie's wedding?
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27
Sample Question 3
If events A and B are mutually exclusive and collectively
exhaustive, what is the probability that event A occurs?
a. 0.25
b. 0.50
c. 1.00
d. Cannot be determined from the information given.
82
Sample Question 4
If A and B are independent events with
P(A) = 0.20 and P(B) = 0.60, then P(A|B) is:
a. 0.20
b. 0.60
c. 0.40
d. 0.80
83
Sample Question 5
Suppose P(A) = 0.60, P(B) = 0.85, and A and B are independent.
The probability of the complement of the event (A and B) is:
a. 0.060
b. 0.550
c. 0.450
d. 0.490
Think Multiplication Rule.
84
28
Solutions to Sample Questions
• 1:
– Here is the sample space = {TTT, TTH, THT, HTT, THH, HTH, HHT, HHH} – 8 options
– Let H represent the event of getting at most two heads.
– Then the event H represents = {TTT, TTH, THT, HTT, THH, HTH, HHT} – 7 options
– Final Answer: 7/8
85

• 2:
• Define the events:
– Event A1. It rains on Marie's wedding.
– Event A2. It does not rain on Marie's wedding.
– Event B1. The weatherman predicts rain.
– Event B2. The weatherman does not predicts rain.
• In terms of probabilities, we know the following:
– P(A1)=5/365=0.014 [It rains 5 days out of the year.]
– P(A2)=360/365=0.986 [It does not rain 360 days out of the year.]
– P(B1|A1)=0.9[When it rains, the weatherman predicts rain 90% of the time.]
– P(B1|A2)=0.1[When it does not rain, the weatherman predicts rain 10% of the time.]
• We want to know P(A1|B1), the probability it will rain on the day of Marie's wedding, given a forecast for rain by the weatherman. Bayes is required
because what we are looking for in the question is the opposite of what they gave us to use in the question.
• Recall: P(A1|B1)=P(A1 and B1) / P(B1) (Using the formula from class)
• Remember, using the multiplication rule, P(A1 and B1) = P(A1) * P(B1|A1) = .014 x .90 = .0126 – This is the top part of our formula.
• Remember, adding the joint probabilities will give you the marginal probability for a specific event: P(B1) = P(A1 and B1) + P(A2 and B1) (Again,
we have to use the multiplication rule to find the joint probabilities so we can add them to find the marginal probability)
• = P(A1 and B1) + P(A2 and B1)
= P(A1)P(B1|A1) + P(A2)P(B1|A2)
=.014×0.9 + 0.986×0.1
= .0126 + .0986
P(B1) = .1112 Could have also have used Bayes formula directly:
– This is the bottom part of our formula.
P(A1|B1)=P(A1)P(B1|A1) / P(A1)P(B1|A1)+P(A2)P(B1|A2)
• Put it all together: P(A1|B1)=0.014×0.90 / .014×0.9+0.986×0.1
• P(A1|B1)=P(A1 and B1) / P(B1) P(A1|B1)=0.11
• P(A1|B1)=.0126 / .1112
• P(A1|B1)=0.11
86

• 3: D (we do not know the probability of A or B therefore we cannot determine the
probability that event A occurs)
• 4: A (if A and B are independent, then B will not affect A in the conditional probability of
P(A|B) and therefore will remain at 0.20 )
• 5: D (1 - (0.60 x 0.85) = 0.490 )
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29

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Chapter 6

6.1 Assigning probabilities to Events

6.1 Assigning probabilities to Events

therefore, the best we can do is consider the

• A list of outcomes that meets the two conditions

Sample Space: S = {O1, O2,…,Ok}

Sample Space Simple Events

1. All probabilities must be between 0 and 1 or 0% and

2. The sum of the probabilities must always sum to a

Approaches to Assigning Probabilities and Interpretation of Probability

6.2 Joint, Marginal, and Conditional Probability

• We study methods to determine probabilities of

• The intersection of event A and B is the event that

• The intersection of events A and B is denoted by (A and

• The joint probability of A and B is the probability of the

Intersection (Joint Probabilities)

Mutual fund Mutual fund doesn’t

Intersection (Joint Probabilities)

Mutual fund Mutual fund doesn’t

Mutual fund Mutual fund doesn’t

Intersection (Joint Probabilities)

P(A1 and B1)+ P(A1 and B2) = P(A1)

Mutual fund Mutual fund Marginal

Mutual fund Mutual fund Marginal

Mutual fund Mutual fund Marginal

Mutual fund Mutual fund Marginal

• P(B1) = .17 Sums to 100%

Practice Question – Marginal Probabilities

Practice Question – Marginal Probabilities

Given B2 has occurred, what is the probability of A1

• Example 6.2 on pg.160 164 (Example 6.1 –

– Find the conditional probability that a randomly selected fund

• Try this question before proceeding….answer on

Practice Question – Conditional Probabilities

Practice Question – Conditional Probabilities

c) Yes. They both have B1 in the conditional spot of

Conditional Probability – Dependent Events

• Example 6.3 on pg. 165 - Extended

Mutual fund Mutual fund

Practice Question - Union

This is actually mutually exclusive – the 2

6.3 Probability Rules and Trees

• We present more methods to determine the

• The complement of event A (denoted by AC) is

( ) P(A and B) = P(A)P(B|A) Pg. 173

• When A and B that are independent

P(A and B) = P(A)P(B) Pg. 173

• Solution If one female student is selected in the

A – the first student selected is a female in class 1

Practice Question – Multiplication Rule

Practice Question – Multiplication Rule

P(A and B) = P(A) x P(B | A) = (.60)(.77) = .462

For any two dependent events A and B

P(A or B) = P(A) + P(B) - P(A and B)

When A and B are independent,

P(A or B) = P(A) + P(B)

– Calculate the probability

Practice Question – Unions (“or” function)

Practice Question – Unions (“or” function)

• This is a useful technique to calculate probabilities

• Example 6.5 revisited (dependent events).

P(Pass) = P(Pass on first exam) + P(Fail on first and Pass on second) =

Practice Question – Probability Tree