In general pa of the time a occurs pb of time occurs when a


Suppose  that the probability of winning the lottery, event A, is 1 in 10 million and the probability of experiencing an airplane crash , event B is 2.5 in 1 million. These events are independent. You have been granted 10 trillion lifetimes to experience both winning the lottery and crashing on the way to a resort to not enjoy your winnings. On average of 10 trillion lifetimes , you won 10T x 1/10m = 1m lotteries. On the accompanying flights , your plane crashes 2.5 time so the probability that you will win and crash is 2.5/10T

In general, P(A) of the time A occurs. P(B) of time occurs. When A and B share the same time , the events A and B coincide P(A) X P(B) of the time, or P(A and B ) = P (A) x P(B), which is the simple multiplication rule the assumption of independence leads to

  • A and B are independent if P(A and B) = P(A) x P(B)
  • If P ( A and B )= P(A)x P(B), A and B are independent

Returning to the example, P ( winning and Crashing) = 1/10M x 2.5/M. you should fly, but you may consider buying something than a lottery ticket

P(A) =0.500

P(B) =0.200

P(A and B) = 0.100

Are events A and B independent?

TRUE

False

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Finance Basics: In general pa of the time a occurs pb of time occurs when a
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