Module 4 - Chapter 2 Flashcards
Discrete random variables
can take on only a countable number of values
** Used in PDF and there is a max and min
Continuous random variable
can take on any value within a given range
** Used in PDF and you use any two given numbers
Probability Density Function (PDF)
Probability a variable is equal to a value
(the likelihood of outcomes occurring between any two points)
** AKA probability distribution function
Cumulative Distribution Function (CDF)
The probability a variable is below a value
Inverse of the Cumulative Distribution
What variable would be below this value at a given probability
Mutually exclusive events
two or more events that cannot occur at the same time
Independent events
if the outcome of one random variable is not influenced by the outcome of the other random variable
Joint probability
probability of two events occurring together
When to use probability matrices
When dealing with the joint probabilities of two variables, it is often convenient to summarize the various probabilities in a probability matrix or probability table
Conditional probability is related to what concept?
The concept of independence
Conditional probability
the possibility of an event or outcome happening
How to to calculate the unconditional probability?
By using the conditional probabilities
Geometric series
each term is calculated by multiplying the previous term by a constant ratio
Annuity
a financial term referring to a series of equal payments made at regular intervals
