Chapter 4 -1

Question 1

What is the definition of probability and what are the prob values assigned

Answer 1

• A numerical measure of the likelihood that an event will occur
• Can be used as measures of the degree of uncertainty
• Probability values are always assigned on a scale of 0 to 1

Question 2

What are probability values always assigned on a scale of and explain those numbers

Answer 2

Probability of 1 = The event is almost certain to occur

Probability of -5 = The event is just as likely as unlikely to occur

Probability of zero = The event is unlikely to Occur

Question 3

Define experiment

Answer 3

A process that generates well defined outcomes

Question 4

Define sample space

Answer 4

The set of all experimental outcomes

Question 5

Define sample point

Answer 5

An experimental outcome

Question 6

What are the three useful accounting rules

Answer 6

1. Multistep experiments
2. Combinations
3. Permutations

Question 7

Explain a multi step experiment

Answer 7

If an experiment can be described as a sequence of key steps with N possible outcomes on the first step and n possible outcomes on the second step and so on

Total number of experimental outcomes is given by

Question 8

Define combinations

Answer 8

Allows us to count the number of experimental outcomes when the experiment involves selecting n objects for a set of N objects

Question 9

What is the formula for multi step experiments

Answer 9

Add

Question 10

What is the formula for combinations

Answer 10

Add

Question 11

What does zero factorial equal

0!

Answer 11

1

Question 12

For combinations does order matter or does it not matter

Answer 12

Order does not matter

Question 13

Explain permutations

Answer 13

Allows us to compute the number of experimental outcomes when n Objects are to be selected from a set of N Objects

Order matters

The same n Object selected in a different order are considered different experimental outcomes

Question 14

Which counting rule results in more outcomes?

Answer 14

Permutations

Because every Selection of n Objects can be ordered in n! Different ways

Question 15

What is the formula for permutations

Answer 15

Add

Question 16

What are the three most used approaches for assigning probabilities

Answer 16

1. The classical method
2. The relative frequency method
3. The subjective method

Question 17

What two basic requirements are needed for assigning probabilities

Answer 17

1. The probability assigned to each experimental outcome must be between zero and one inclusively
2. The sum of probability for all experimental outcomes must equal 1.0

Question 18

Defined the classical method for assigning probabilities

1. When would you use it
2. Are basic requirements satisfied
3. Provide an example

Answer 18

• It’s used when all experimental outcomes are equally likely
• Two basic requirements are satisfied automatically
• Example tossing a coin

Question 19

Defined the Relative frequency method for assigning probabilities

1. When would you use it
2. Are basic requirements satisfied
3. Provide an example

Answer 19

• Use when data are available to estimate the proportion of time the experimental outcome will occur if the experiment is repeated a large number of times
• Two basic requirements are automatically satisfied

Question 20

Defined the Subjective method for assigning probabilities

1. When would you use it
2. Are basic requirements satisfied
3. Provide an example

Answer 20

Use when: We cannot realistically assume that the experimental outcomes are equally likely and when little relevant data is available

• Based on a degree of belief