U6 - Probability Flashcards
Why is a high risk bad for insurance companies?
The higher the risk, the more expensive the insurance will be
What is the absolute risk?
The probability of an event happening
What is the relative risk?
The relative risk is how many times more likely an event is to happen for one group compared to another group
What is a sample space?
A list of all possible outcomes
What are mutually exclusive events?
Events that cannot happen at the same time
What are exhaustive events?
A set of events where the set contains all possible outcomes
What is the sum of the probabilities for a set of mutually exclusive, exhaustive events?
1
What are independent events?
Events where the outcome of one does not affect the outcome of the other
What are conditional events?
Events where the outcome of one affects the outcome of the other
