EXCERPTS FROM ACTEX STUDY MANUAL FOR SOA EXAM P/CAS EXAM 1

Table of Contents Introductory Comments
Section 2 - Conditional Probability and Independence

© ACTEX 2006

SOA Exam P/CAS Exam 1 - Probability

COMBINATORIAL PRINCIPLES Permutations and Combinations 49 51 55 59 Problem Set 3 and Solutions SECTION 4 . Bayes' Theorem and the Law of Total Probability Independent Events Problem Set 2 and Solutions SECTION 3 .TABLE OF CONTENTS INTRODUCTORY COMMENTS SECTION 0 .EXPECTATION AND OTHER DISTRIBUTION PARAMETERS Expected Value Moments.CONDITIONAL PROBABILITY AND INDEPENDENCE Definition of Conditional Probability Bayes' Rule.RANDOM VARIABLES AND PROBABILITY DISTRIBUTIONS Discrete Random Variable Continuous Random Variable Mixed Distribution Cumulative Distribution Function Independent Random Variables 73 79 Problem Set 4 and Solutions SECTION 5 .BASIC PROBABILITY CONCEPTS Probability Spaces and Events Probability 29 33 43 Problem Set 1 and Solutions SECTION 2 .Probability . Median and Mode 83 84 85 85 90 95 Problem Set 5 and Solutions 101 103 103 105 111 © ACTEX 2006 SOA Exam P/CAS Exam 1 .REVIEW OF ALGEBRA AND CALCULUS Set Theory Graphing an Inequality in Two Dimensions Properties of Functions Differentiation Integration Geometric and Arithmetic Progressions Problem Set 0 and Solutions 1 9 10 12 14 17 19 SECTION 1 . Variance and Standard Deviation Moment Generating Function Percentiles.

FREQUENTLY USED CONTINUOUS DISTRIBUTIONS Continuous Uniform Distribution Normal Distribution Exponential Distribution Gamma Distribution and Pareto Distribution Lognormal.Probability .FREQUENTLY USED DISCRETE DISTRIBUTIONS Discrete Uniform Distribution Binomial Distribution Poisson Distribution Geometric Distribution Negative Binomial Distribution Hypergeometric Distribution Multinomial Distribution Summary of Discrete Distributions 123 123 125 128 129 130 131 132 133 Problem Set 6 and Solutions SECTION 7 .SECTION 6 . and Chi-Square Distributions Summary of Continuous Distributions Problem Set 7 and Solutions SECTION 8 . MARGINAL.JOINT. Weibull.RISK MANAGEMENT CONCEPTS Loss Distributions and Insurance The Normal Approximation to Aggregate Claims Insurance Policy Deductible Insurance Policy Limit Proportional Insurance 205 206 207 211 212 214 217 Problem Set 10 and Solutions PRACTICE EXAM 1 235 240 243 245 246 249 271 © ACTEX 2006 SOA Exam P/CAS Exam 1 . Beta. AND CONDITIONAL DISTRIBUTIONS Definition of Joint Distribution Marginal Distributions Independence of Random Variables Conditional Distributions Covariance Between Random Variables Moment Generating Function for a Joint Distribution 145 145 148 151 152 153 155 Problem Set 8 and Solutions SECTION 9 .TRANSFORMATIONS OF RANDOM VARIABLES Distribution of a Transformation of \ Distribution of a Transformation of Joint Distribution of \ and ] Distribution of a Sum of Random Variables Distribution of the Maximum of Minimum of Independent Ö\" ß \# ß ÞÞÞß \8 × Order Statistics Mixtures of Distributions 165 168 1( 1 172 176 177 183 Problem Set 9 and Solutions SECTION 10 .

PRACTICE EXAM 2 PRACTICE EXAM 3 PRACTICE EXAM 4 PRACTICE EXAM 5 291 313 339 359 © ACTEX 2006 SOA Exam P/CAS Exam 1 .Probability .

of tossing a 2. $ The conditional probability of E given G is T ÒElGÓ œ ". When we condition on event E. Then within the reduced probability space F . This is the explanation behind the definition of the conditional probability T ÒFlEÓ. then the toss must be 2. Dividing by T ÒEÓ scales all probabilities so that E is the entire probability space.CONDITIONAL PROBABILITY AND INDEPENDENCE Conditional probability of event F given event E: If T ÒEÓ  !. The interpretation of this conditional T ÒÖ#×Ó "Î' probability is that if we know that event F has occurred. We define the following events: E œ "the number tossed is Ÿ $" œ Ö"ß #ß $× . The conditional probability of E given F is T ÒElFÓ œ T ÒÖ"ß#ß$×∩Ö#ß%ß'×Ó T ÒÖ#ß%ß'×Ó " œ T ÒÖ#ß%ß'×Ó œ "Î# œ $ . To say that event F has occurred given that event E has occurred means that both F and E (F ∩ E) have occurred within the probability space E. It is then guaranteed that event E has occurred. H œ "the number tossed doesn't start with the letters 'f' or 't'" œ Ö"ß '× .Probability . then T ÒFlEÓ œ T ÒF∩EÓ T ÒEÓ is defined to be the conditional probability that event F occurs given that event E has occurred. Since the original 6 possible tosses of a die were equally likely. 4 or 6. and T ÒElEÓ œ ". if we are given the additional information that the toss is 2. which is referred to as the multiplication rule. Example 2-1: Suppose that a fair six-sided die is tossed. in the reduced space. we are assuming that event F has occurred so that E becomes the new probability space. each with a probability of " . 4 or 6. To say that G has occurred means that the toss is 1 or 2. it seems reasonable that each of those is equally. F œ "the number tossed is even" œ Ö#ß %ß '× . since G § E. The conditional probability of F given G is T ÒFlGÓ œ " . and all conditional events must take place within event E (the new probability space). the (conditional) probability that a event E $ occurs is the probability. The probability space is W œ Ö"ß #ß $ß %ß &ß '×. this is " . # © ACTEX 2006 SOA Exam P/CAS Exam 1 . Rewriting the equation results in T ÒF ∩ EÓ œ T ÒFlEÓ † T ÒEÓ . G œ "the number tossed is a " or a #" œ Ö"ß #× .SECTION 2 .

' find T ÒE ∩ FÓ . Finally. This relationship is valid since for any events F and E. we have T ÒEÓ œ T ÒE ∩ FÓ  T ÒE ∩ F w Ó . Find the probability that the ball chosen is white. We then use the relationships T ÒE ∩ FÓ œ T ÒElFÓ † T ÐFÑ and T ÒE ∩ F w Ó œ T ÒElF w Ó † T ÐF w Ñ . it is assumed that each ball has the same chance of being chosen). Therefore. We can now apply the relationship described prior to this & example. and a ball is randomly selected from that Urn.Probability . An application of this concept occurs when an experiment has two (or more) steps. The implicit assumption is that both Urns are equally likely to be chosen (this is the meaning of "an Urn is chosen at random"). In a similar way. T ÒE ∩ FÓ œ T ÒElFÓ † T ÒFÓ œ Ð " ÑÐ " Ñ œ " . if Urn II is chosen. An Urn is chosen at random. Let E be the event that the # # ball chosen in white. If we know the conditional probabilities for event E given some other event F and if we also know the conditional probability of E given the complement F w . and # # % $ T ÒE ∩ F w Ó œ T ÒElF w Ó † T ÒF w Ó œ Ð $ ÑÐ " Ñ œ "! . Solution: Let F be the event that Urn I is chosen and F w is the event that Urn II is chosen. Solution: T ÒFlEÓ œ T ÒE∩FÓ T ÒEÓ œ 'T ÒE ∩ FÓ and T ÒElFÓ œ T ÒE∩FÓ T ÒFÓ œ "# T ÒE ∩ FÓ & ( " p Ð'  "# Ñ † T ÒE ∩ FÓ œ "! p T ÒE ∩ FÓ œ "2 Þ & IMPORTANT NOTE: The following manipulation of event probabilities arises from time to time: T ÒEÓ œ T ÒElFÓ † T ÐFÑ  T ÒElF w Ó † T ÐF w Ñ . The following example illustrates this idea. then we can find the (unconditional) probability of event E. & # $ T ÒEÓ œ T ÒE ∩ FÓ  T ÒE ∩ F w Ó œ "  "! œ "" . T ÐEÑ œ T ÐE ∩ FÑ  T ÐE ∩ F w Ñ © ACTEX 2006 SOA Exam P/CAS Exam 1 . and T ÒElFÓ  T ÒFlEÓ œ "! . If we know that Urn I was chosen. % #! The order of calculations can be summarized in the following table E F 1. then there is " probability of choosing a # white ball (2 white out of 4 balls. T ÐE ∩ FÑ œ T ÒElFÓ † T ÒFÓ Fw 2. T ÐE ∩ F w Ñ œ T ÒElF w Ó † T ÒF w Ó 3.& ( Example 2-2: If T ÒEÓ œ " and T ÒFÓ œ "# . T ÒFÓ œ " and T ÒF w Ó œ " . this can be described as T ÒElFÓ œ " . Example 2-3: Urn I contains 2 white and 2 black balls and Urn II contains 3 white and 2 black balls. This relationship is a version of the Law of Total Probability. and if we are given the (unconditional) probability of event F . then # T ÒElF w Ó œ $ (3 white out of 5 balls).

T ÒEÓ œ T ÒE ∩ FÓ  T ÒE ∩ F w Ó T ÒF w Ó œ "  T ÒFÓ Step 4: T ÒFlEÓ œ T ÒF∩EÓ T ÒEÓ E w T ÒElFÓ 1. T ÒE∩FÓ T ÒElFÓ†T ÒFÓ where all the factors in the final expression were originally known. T ÒElFÓ and T ÒElF w Ó (from T ÒFÓ we get T ÒF w Ó œ "  T ÒFÓ).Bayes' rule and Bayes' Theorem (basic form): For any events E and F with T ÒEÓ  !. E F ß T ÒFÓ Fw ß T ÒF w Ó "  T ÒFÓ T ÒElF w Ó 2. but might be needed in related calculations). we are asked to "turn around" the conditioning of the events E and F ). given Ì T ÒE ∩ F w Ó œ T ÒElF w Ó † T ÒF w Ó œ T ÒE∩FÓT ÒE∩F w Ó œ T ÒElFÓ†T ÒFÓT ÒElF w Ó†T ÒF w Ó . T ÒElF w Ó .Probability . T ÒElFÓ . we have done the following calculation: T ÒFlEÓ œ T ÒF∩EÓ T ÒEÓ T ÒF w Ó œ "  T ÒFÓ . This can also be summarized in the following sequence of calculations. and we are asked to find T ÒFlEÓ (in other words. T ÒE ∩ FÓ œ T ÒElFÓ † T ÒFÓ T ÒEw lFÓ œ "  T ÒElFÓ T ÒEw ∩ FÓ œ T ÒEw lFÓ † T ÒFÓ T ÒEw lF w Ó œ "  T ÒElF w Ó T ÒEw ∩ F w Ó œ T ÒEw lF w Ó † T ÒF w Ó T ÒEw Ó œ "  T ÒEÓ . The usual way that this is applied is in the case that we are given the values of T ÒFÓ . We can summarize this process by calculating the quantities in the following table in the order indicated numerically (1-2-3-4) (other entries in the table are not necessary in this calculation. © ACTEX 2006 SOA Exam P/CAS Exam 1 . T ÒE ∩ F w Ó œ T ÒElF w Ó † T ÒF w Ó 3. given Ì T ÒE ∩ FÓ œ T ÒElFÓ † T ÒFÓ Ì T ÒEÓ œ T ÒE ∩ FÓ  T ÒE ∩ F w Ó Algebraically. T ÒFÓ . T ÒFlEÓ œ T ÒF∩EÓ T ÒEÓ œ T ÒElFÓ†T ÒFÓ T ÒEÓ . Note that the numerator is one of the components of the denominator.

œ "  : . the probability of a fraternal set is : and an identical set is . T ÒE ∩ FÓ œ T ÒElFÓ † T ÒFÓ œ Ð # ÑÐ " Ñ œ " $ # $ T ÒE ∩ F w Ó œ T ÒElF w Ó † T ÒF w Ó œ Ð " ÑÐ " Ñ œ " # # % ( T ÒEÓ œ T ÒE ∩ FÓ  T ÒE ∩ F w Ó œ "  " œ "# $ % T ÒF∩EÓ "Î$ % T ÒFlEÓ œ T ÒEÓ œ (Î"# œ ( . this is T ÒElFÓ œ # . then Urn II has 4 white and 2 black balls. 2. and the probability of choosing a white ball out of Urn II is " . If the next set of twins are of the same sex. # # If the ball transferred is white. The ball chosen from Urn II is observed to be white. The key starting point is identifying and labeling unconditional events and conditional events and their probabilities in an efficient way. $ $ If the ball transferred is black. 4. then Urn II has 3 white and 3 black balls. what is the probability that they are identical? © ACTEX 2006 SOA Exam P/CAS Exam 1 . From the table described above. Find the probability that the ball transferred from Urn I to Urn II was white. 3. and then a ball is chosen at random from Urn II. meaning that all balls are equally likely to be chosen from Urn I in the first step). and T ÒF w Ó œ " . We are asked to find T ÒFlEÓ . Fraternal twins have a 50-50 chance of being the same sex. we have T ÒFÓ œ " (2 of the 4 balls in Urn I are white). this is T ÒElF w Ó œ " . One ball is chosen at random from Urn I and transferred to Urn II.Probability . Example 2-5: Identical twins come from the same egg and hence are of the same sex. # # All of the information needed has been identified. Solution: Let F denote the event that the ball transferred from Urn I to Urn II was white and let E denote the event that the ball chosen from Urn II is white. Among twins. From the simple nature of the situation (and the usual assumption of uniformity in such a situation. and the probability of choosing a white ball out of Urn II is # . we do the calculations in the following order: 1. Example 2-4: Urn I contains 2 white and 2 black balls and Urn II contains 3 white and 2 black balls.Exam questions on this topic (and the extended form of Bayes' rule reviewed below) have occurred quite regularly.

if the F 's form a partition of 8 œ $ events.Ñ . then T ÒF4 lEÓ œ T ÒE∩F4 Ó T ÒEÓ œ T ÒE∩F4 Ó 8 œ T ÒElF4 Ó†T ÒF4 Ó 8 for each 4 œ "ß #ß ÞÞÞß 8. The values of T ÒF4 Ó are called prior probabilities. . T ÒElF w Ó œ Þ& (given) . ß T ÒF w Ó œ : œ "  .  Þ&: œ . Bayes' rule and Bayes' Theorem (extended form): If F" ß F# ß ÞÞÞß F8 form a partition of the entire probability space W . This can be summarized in the following table E œ Same sex F œ identical prob.  Þ&Ð"  . T ÒEw lF w Ó œ "  T ÒEw lF w Ó œ Þ& œ Þ&Ð". T ÒE ∩ F w Ó œ T ÒElF w Ó † T ÒF w Ó œ Þ&Ð"  . But T ÒE ∩ FÓ œ T ÒElFÓ † T ÒFÓ œ . Thus. T ÒE ∩ FÓ œ T ÒElFÓ † T ÒFÓ œ . . The main application of Bayes' rule occurs in the situation in which the T ÒF4 Ó probabilities are known and the T ÒElF4 Ó probabilities are known.Ñ œ Þ&Ð"  .Ñ . T ÒE∩F3 Ó 3œ" T ÒElF3 Ó†T ÒF3 Ó 3œ" For example. we have T ÒF" lEÓ œ T ÒF" ∩EÓ T ÒEÓ " " œ T ÒE∩F ÓT ÒE∩F ÓT ÒE∩F Ó " # $ T ÒElF Ó†T ÒF Ó œ T ÒElF Ó†T ÒF ÓT ÒElF" Ó†T ÒF" ÓT ÒElF Ó†T ÒF Ó " " # # $ $ 8 T ÒElF Ó†T ÒF Ó The relationship in the denominator.Probability . and the value of T ÒF4 lEÓ is called a posterior probability. © ACTEX 2006 SOA Exam P/CAS Exam 1 . F and F w .Solution: Let E be the event "the next set of twins are of the same sex".Ñ .Ñ . . The basic form of Bayes' rule is just the case in which the partition consists of two events. Ew œ not same sex T ÒEw lFÓ œ "  T ÒElFÓ œ ! F w œ fraternal prob. T ÒEÓ œ T ÒE ∩ FÓ  T ÒE ∩ F w Ó œ . This is illustrated in the following example. The series of calculations can be summarized in a table as in the basic form of Bayes' rule. and we are asked to find T ÒF3 lEÓ for one of the 3's.  Þ&Ð"  . and T ÒFlEÓ œ Þ&Ð". We are given T ÒElFÓ œ " ß T ÒElF w Ó œ Þ& T ÒFÓ œ . : œ "  . and T ÒE ∩ F w Ó œ T ÒElF w Ó † T ÒF w Ó œ Þ&: . and let F be the event "the next sets of twins are identical". T ÒFlEÓ œ T ÒE∩FÓ T ÒEÓ .Ñ Ì T ÒEÓ œ T ÒE ∩ FÓ  T ÒE ∩ F w Ó œ .Ñ œ Þ&Ð"  . T ÒElFÓ œ " (given) . T ÒEÓ œ T ÒElF3 Ó † T ÒF3 Ó is the general Law of Total 3œ" Probability. . Then T ÒFlEÓ œ T ÒE∩FÓ T ÒEÓ is the probability we are asked to find.

T Ðdie 2) œ " $ (given) T Ò"6"ldie 2Ó œ . T Ðdie 3) œ " $ (given) T Ò"6"ldie 3Ó œ < (given) T Ò"6" ∩ die 3Ó œ T Ò"6"ldie 3Ó † T Òdie 3Ó œ<† " $ Toss "6" T Ò"6"Ó œ : † "  . $ $ $ $ In terms of Venn diagrams.Example 2-6: Three dice have the following probabilities of throwing a "six": : ß . the conditional probability is the ratio of the shaded area probability in the first diagram to the shaded area probability in the second diagram.Probability .< . Die 1 . (given) T Ò"6" ∩ die 2Ó œ T Ò"6"ldie 2Ó † T Òdie 2Ó œ. One of the dice is chosen at random and thrown (each is equally likely to be chosen). © ACTEX 2006 SOA Exam P/CAS Exam 1 . ß < ß respectively.† " $ <† " $ œ :. † "  < † " œ " Ð:  .<ц " œ :.  <Ñ . A "six" appeared.< $ $ $ Ê T Òdie "l"'"Ó œ T Ò"'"Ó œ Ð:. T Ðdie 1) œ " $ (given) T Ò"6"ldie 1Ó œ : (given) T Ò"6" ∩ die 1Ó œ T Ò"6"ldie 1Ó † T Òdie 1Ó œ:† " $ Die 2 . What is the probability that the die chosen was the first one? Solution: The event " a 6 is thrown" is denoted by "6" T Òdie "l"'"Ó œ T ÒÐdie "Ñ∩Ð"'"ÑÓ T Ò"'" Ó T Ò"'"ldie "Ó†T Òdie "Ó T Ò"'"Ó $ œ T Ò"'"Ó .† " $ Die 3 . $ :† " :† " : These calculations can be summarized in the following table. œ :† " But T Ò"'"Ó œ T ÒÐ"'"Ñ ∩ Ðdie "ÑÓ  T ÒÐ"'"Ñ ∩ Ðdie #ÑÓ  T ÒÐ"'"Ñ ∩ Ðdie $ÑÓ œ T Ò"'"ldie "Ó † T Òdie "Ó  T Ò"'"ldie #Ó † T Òdie #Ó  T Ò"'"ldie $Ó † T Òdie $Ó œ :† " $ .

This worked because of two aspects of symmetry. and we can think of the numerator as the "6" occurring from die 1. $ :† $ This factor of " cancels in the numerator and denominator of Ð:.In Example 2-6 there is a certain symmetry to the situation and general reasoning can provide a shortened solution.  < . 6 of them are white. :  . © ACTEX 2006 SOA Exam P/CAS Exam 1 . This can also be seen by noting that if we consider the 10 balls together. An Urn is chosen at random and a ball is chosen. with probability :. The symmetry involved here is in the assumption that each die was equally likely to be chosen. The reader should verify using the usual conditional probability ' rules that the probability of choosing a white is "! . equal chance for picking each Urn. In the conditional probability T Òdie "l"'"Ó œ T ÒÐdie "Ñ∩Ð"'"ÑÓ T Ò"'" Ó . Then the conditional probability is the fraction :. so that the chance of picking a white out of ' the 20 is "! . then the events are said to be independent or stochastically independent or statistically independent. Another example of this sort of symmetry is a variation on Example 2-3 above. we would have to apply different "weights" to the three dice. The independence of (non-empty) events E and F is equivalent to T ÒElFÓ œ T ÒEÓ . and also is equivalent to T ÒFlEÓ œ T ÒFÓ . so there is a " chance of any one die being chosen.< . and same number of balls in each Urn. we can think of the denominator as the combination of the three possible ways a "6" can occur. If we had not had this $ $ " : symmetry.Probability .<ц " . Suppose that Urn I has 2 white and 3 black balls and Urn II has 4 white and 1 black balls. Independent events E and F : If events E and F satisfy the relationship T ÒE ∩ FÓ œ T ÒEÓ † T ÒFÓ .

H œ "the number tossed doesn't start with the letters 'f' or 't'" œ Ö"ß '× . # Events F and G are independent. since T ÒF ∩ GÓ œ " œ " † " œ T ÒFÓ † T ÒGÓ (alternatively. We also ' # # % " " see that E and F are not independent because T ÒElFÓ œ $ Á # œ T ÒEÓ Þ Also. The reader should check that both E and F are independent of H. E œ "the number tossed is Ÿ $" œ Ö"ß #ß $× .Example 2-1 continued: A fair six-sided die is tossed. F œ "the number tossed is even" œ Ö#ß %ß '× . and T ÒFlEÓ œ " T ÒEÓ (vi) if E and F are independent events then Ew and F are independent events. G œ "the number tossed is a " or a #" œ Ö"ß #× . Some rules concerning conditional probability and independence are: (i) T ÒE ∩ FÓ œ T ÒFlEÓ † T ÒEÓ œ T ÒElFÓ † T ÒFÓ for any events E and F (ii) If T ÒE" ∩ E# ∩ â ∩ E8" Ó  ! . it follows that g is independent of any event E © ACTEX 2006 SOA Exam P/CAS Exam 1 . and Ew and F w are independent events (vii) since T ÒgÓ œ T Òg ∩ EÓ œ ! œ T ÒgÓ † T ÒEÓ for any event E. then 8 3œ" the events are said to be mutually independent. E and F w are independent events. Mutually independent events E" ß E# ß ÞÞÞß E8 : If events E" ß E# ß ÞÞÞß E8 satisfy the relationship T ÒE" ∩ E# ∩ â ∩ E8 Ó œ T ÒE" Ó † T ÒE# ÓâT ÒE8 Ó œ # T ÒE3 Ó . so that F and G are independent). properties (iv) and (v) are the same properties satisfied by unconditional events (v) if E § F then T ÒElFÓ œ T ÒE∩FÓ T ÒFÓ œ T ÒFÓ . then T ÒE" ∩ E# ∩ â ∩ E8 Ó œ T ÒE" Ó † T ÒE# lE" Ó † T ÒE$ lE" ∩ E# ÓâT ÒE8 lE" ∩ E# ∩ â ∩ E8"Ó (iii) T ÒEw lFÓ œ "  T ÒElFÓ (iv) T ÒE ∪ FlGÓ œ T ÒElGÓ  T ÒFlGÓ  T ÒE ∩ FlGÓ . ' # $ " T ÒFlGÓ œ # œ T ÒFÓ .Probability . since T ÒE ∩ GÓ œ " Á " † " œ T ÒEÓ † T ÒGÓ (also since $ # $ T ÒElGÓ œ " Á " œ T ÒEÓ). E and G are not independent. We have the following probabilities: T ÒEÓ œ " ß T ÒFÓ œ " ß T ÒGÓ œ " ß T ÒHÓ œ " Þ # # $ $ Events E and F are not independent since " œ T ÒE ∩ FÓ Á T ÒEÓ † T ÒFÓ œ " † " œ " .

40% have (VX ). as are F and Ew . (i) This is T ÒVlX Ó . find the proportion that also have a radio. it follows that T Òexactly one of E and FÓ œ T ÒE ∩ F w Ó  T ÒEw ∩ FÓ . find the proportion that have a radio. Find the probability. T ÒVlX Ó œ T ÒV∩X Ó T ÒX Ó Þ% ) œ Þ&& œ "" Þ T ÒV∩X ∩M w Ó T ÒX ∩M w Ó Þ# % œ Þ#& œ & Þ (ii) This T ÒVlX ∩ M w Ó œ © ACTEX 2006 SOA Exam P/CAS Exam 1 . 55% have electric toasters (X ). The diagram below deconstructs the three events. 50% have (MV ). Then T ÒÐE ∩ F w Ñ ∪ ÐEw ∩ FÑÓ œ T ÒEÓ † T ÒF w Ó  T ÒFÓ † T ÒEw Ó œ T ÒEÓÐ"  T ÒFÓÑ  T ÒFÓÐ"  T ÒEÓÑ œ T ÒEÓ  T ÒFÓ  #T ÒEÓ † T ÒFÓ Example 2-8: A survey is made to determine the number of households having electric appliances in a certain city. in terms of T ÒEÓ and T ÒFÓ. Solution: This is a continuation of Example 1-3 given earlier in the study guide. 30% have (MX ). and 20% have all three. that exactly one of the events E and F occurs.Probability .Example 2-7: Suppose that events E and F are independent. It is found that 75% have radios (V ). Solution: T Òexactly one of E and FÓ œ T ÒÐE ∩ F w Ñ ∪ ÐEw ∩ FÑÓ . Then. The language "of those households that have a toaster" means. (ii) Of those households that have a toaster but no iron. so we are being asked for a conditional probability. Find the following proportions. "given that the household has a toaster". Since E and F are independent. (i) Of those households that have a toaster. Since E ∩ F w and F ∩ Ew are mutually exclusive. 65% have irons (M ). it follows that E and F w are also independent.

and 8 of them took neither English nor Chemistry. T ÐI w ∩ G w lQ Ñ œ T ÐI w ∩G w ∩Q Ñ T ÐQ Ñ ) " œ &' œ ( . 20 took Math and Chemistry. 42 took Chemistry. Find the following proportions. (ii) Of those who took English or Math. Solution: The following diagram illustrates how the numbers of students can be deconstructed. (ii) 82 ( œ )  "%  '  #)  "'  "! in I ∪ Q Ñ students took English or Math (or both). the proportion who also took Chemistry. 56 took Math. 60 took English. We calculate proportion of the numbers in the various subsets. 6 took all three subjects. and 30 of them ( œ "%  '  "! in ÐI ∪ Q Ñ ∩ G ) also took Chemistry . 34 took English and Math. (i) 56 students took Math. the proportion who took neither English nor Chemistry.Example 2-9: In a survey of 94 students.Probability . 16 took English and Chemistry. (i) Of those who took Math. the following data was obtained. T ÐGlI ∪ Q Ñ œ T ÒG∩ÐI∪Q ÑÓ T ÐI∪Q Ñ $! "& œ )# œ %" Þ © ACTEX 2006 SOA Exam P/CAS Exam 1 .

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