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Unformatted text preview: Chapter 5 A Survey of Probability Concepts Chapter Goals After completing this chapter, you should be able to: Explain two approaches to assessing probabilities Apply common rules of probability Important Terms Probability – the chance that an uncertain event will occur (always between 0 and 1) Experiment – a process of obtaining outcomes for uncertain events Elementary Event – the most basic outcome possible from a simple experiment Sample Space – the collection of all possible elementary outcomes Sample Space The Sample Space is the collection of all possible outcomes e.g. All 6 faces of a die: e.g. All 52 cards of a bridge deck: Events Elementary event – An outcome from a sample space with one characteristic Example: A red card from a deck of cards Event – May involve two or more outcomes simultaneously Example: An ace that is also red from a deck of cards Visualizing Events Contingency Tables Tree Diagrams Red 2 24 26 Black 2 24 26 Total 4 48 52 Ace Not Ace Total Full Deck of 52 Cards Sample Space Sample Space 2 24 2 24 Elementary Events A automobile consultant records fuel type and vehicle type for a sample of vehicles 2 Fuel types: Gasoline, Diesel 3 Vehicle types: Truck, Car, SUV 6 possible elementary events:...
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This note was uploaded on 03/22/2012 for the course FINA 210 taught by Professor Dakroub during the Spring '12 term at American University in Cairo.
 Spring '12
 Dakroub
 Finance

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