Page 62 - FINAL CFA SLIDES DECEMBER 2018 DAY 3

Session Unit 2:
9. Probability Concepts (B/C/B/A/C/B/C)

B. EV = (1/4)(1 + 2 + 3 + 4) = 2.5; Variance = (1/4)[(1 – 2.5)2 + (2 – 2.5)2 + (3 – 2.5)2 + (4 – 2.5)2] = 1.25
Note that since each observation is equally likely, each has 25% (1/4) chance of occurrence.

C. Note that since A and B are mutually exclusive P(A | B) and P(AB) must both be equal to zero.

B. P(name 1 or name 2 or name 3 or name 4) = 1/800 + 1/800 + 1/800 + 1/800 = 4/800 = 0.005

A. 35 / 900 = 0.0389

C. Probabilities may range from 0 (meaning no chance of occurrence) through 1 (which means a sure thing).

B. One or the other may occur, but not both.

C. Two events are said to be independent if the occurrence of one event
does not affect the probability of the occurrence of the other event.