B. The Union of Events A, A, ......., A Denoted: 1 2 N N I 1 N I I
B. The Union of Events A, A, ......., A Denoted: 1 2 N N I 1 N I I
In probability and statistics, we look at experiments whose outcomes cannot be predicted with
certainty. We may be able to list all the experiment's possible outcomes but we may not be able to
predict the outcome before the experiment with certainty.
Mutually exclusive (disjoint) outcomes are outcomes that cannot occur simultaneously. These
outcomes cannot occur together and their intersection gives the null set. If A and B are mutually
exclusive outcomes then A∩ B=∅
Outcomes are exhaustive if their union is the entire sample space, or equivalently, if at least one of the
outcomes must occur whenever the experiment is performed.
An Event is a collection of sample points, or any subset of the sample space. For example tossing coin
you have two events, the occurrence of a Head is one event and the occurrence of a Tail is another.
Now suppose we have a box with 3 black balls, 3 blue balls and 4 white balls. If 1 ball is drawn from
the box at random we have 3 events. The ball is either black, blue or white.
The union of events A and B denoted A∪ B is the set of all sample points that are either in event A or
n
B. The union of events A1, A2 , .......,An denoted A 1∪ A 2∪...∪ A n=. i∪
=1
A i is the set of all the sample
points that are at least in one of the Ai 's.
The intersection of events A and B denoted A∩ B is the set of all sample points that are both in event
n
A and B. The intersection of events A1, A2 , .......,An denoted A1∩ A2∩...∩ An=. ∩ Ai is the set of all the
i =1
sample points that are simultaneously in all of the Ai 's. ( A∩ B is also denoted A.B or AB)
Event A and B are mutually exclusive if they have no sample points in common, cannot occur
together, or equivalently they have an empty intersection, A∩ B=∅ . Events A1, A2 , .......,An are
mutually exclusive if A i ∩A j=∅ for all i≠ j .
Events B1, B2 , .......,Bn are exhaustive events if their union is equal to the sample space S. That is
B 1∪ B 2∪...∪B n =S
The complement of an event A is a set of all the sample points that are not in A. The complement is
denoted
A , ~ A, A', or Ac and is equal to {x : x ∉ A} . Saying the complement of event A has occurred
is equal to saying event A has not occurred. On the example of a coin toss, if we say A is the event that
Heads come up, then Ac is the event that Tails came up.
A is a subset or subevent of B if all the sample points in A are also contained in B. This is denoted
as A⊂ B .
n
Events A1, A2 , .......,An form a partition of event B if B =. i=1
∪ Ai and the Ai's are mutually exclusive.
These definitions are quite important because they form the basis for computing probabilities. You are
not likely to see an exam question asking you to define any one of them but you may need to use their
understanding to tackle most of the questions on probabilities.
DeMorgan's Laws
A∪B c = A c ∩B c
This can be seen in the following Venn diagrams
c c c
A∪B A ∩B
Both diagram are the same with the unshaded region represents either side of the equation. This law
can be extended to any number of events
A∩B c = A c ∪B c
This can also be shown using Venn diagrams and can be generalized to any number of events.
If you find yourself requiring to use the DeMorgan's laws during practice or exam , just picture the
diagrams. Notice the two laws are like the opposite of each other, and once you figure out one you can
figure out the other by interchanging the union and intersection signs.
{
1 if x∈ A
The function I A x= 0 if x ∉ A } is the indicator function for event A, where x denotes a sample point
in event A.
These definitions are available in the Actex Study Manual by S. A.Broverman. There is an example in
the study guide that illustrates some of this definitions. You can also look at the following examples.
Example 1
If two dice are cast and the total number of the spots on the sides that are up are counted , what are the
sample points and what is the sample space?
Solution
To show all the possible outcomes look at the following table
Die 1
1,1 1,2 1,3 1,4 1,5 1,6
2,1 2,2 2,3 2,4 2,5 2,6
Die 2 3,1 3,2 3,3 3,4 3,5 3,6
4,1 4,2 4,3 4,4 4,5 4,6
5,1 5,2 5,3 5,4 5,5 5,6
6,1 6,2 6,3 6,4 6,5 6,6
From the table, each cell represents a possible outcome. You can either get a (1, 1), (1, 2), and so on.
The sum of each of these numbers is the is the sum of the spots on the side that is up. These sums will
range from 2 to 12 and each sum is a sample point. The sample space is S = {2, 3, 4, 5, 6, 7, 8, 9, 10,
11, 12}.
Example 2
If a fair coin is tossed successively at random until Tails is observed on three successive tosses, what
are the sample points and sample space.
Solution
You need at least 3 tosses to observe 3 successive tails, and any number of tosses greater than three is a
possibility. If we let x be the number of tosses required then the sample space is S = {x: x = 3, 4, 5,...}
a) Associative
A∩ B 1∪B 2∪...∪B n= A∩ B 1 ∪ A∩B 2 ∪...∪ A∩B n and
PROBABILITY
Probability is simply the chance or odds that an event will occur. Probability is usually expressed
mathematically in form of percentages, decimals, or fractions. Discrete probabilities involve a finite
or countable infinite number of sample points. Suppose a die is cast until a 2 appears. It may take a
large number of tosses for this to occur, and this is a case of countable infinite number of sample
points. The probability of an event A occurring is equal to the ratio of the number sample points in that
event to the total number of sample points.
total number of sample points∈ A
P [event A] = P [A] = total number of sample points∈S
There are many ways of denoting probability of an event A but the study guide uses P [A ] .It does not
really matter how its denoted as long as you understand what it means. In later chapters you will notice
expressions like f (x), p(x), or P(X = x) etc but like i said it doesn't really matter for this exam.
The probability of any event range from 0 to 1 and the sum of all probabilities in a given sample
space must add up to one. These two conditions are expressed as follows
a) 0 ≤P [ A ]≤1
b) P [ A 1 ]P [ A 2]...P [ A n ]=1
A probability function is said to be uniform if each sample point has the same probability of happening.
1
A good example is given in the study manual where each of the 6 side of fair die has a 6 chance of
occurring.
Questions on probability involve a lot of counting/ enumeration and may take long to come up with
correct answers. Using Venn diagrams, tree diagrams, tables and other visual tools could save a lot
time. The questions in exam P rarely touch on simple events but rather a combination of events, unions
and intersections. The more you practice the better.
Experiments do not always result in whole numbers and outcomes of some experiments may be any
point between two numbers or two points. In this case the probability (sample) space is said to be
continuous. The easiest way to determine if a sample space is continuous or discrete is by assessing
whether the sample points take distinct whole number values, or can take any value in the number line.
Quantities like time, distance, age , weight etc (all random variables) are not likely to take whole values
if the experiment is random unless the smallest unit of measurement is used. Continuous probability
functions form the bigger part of the actuarial practice and are covered in later chapters.
Rules Concerning Probability
a) P [entire sample space] = P [S] = 1. This means that the probability of either of the sample
points occurring is 1. For example in the case of tossing a coin, the probability of getting either
1 1
a head or a tail is 2 2 =1 . Again in the case of a fair die the probability of getting either a 1,
1 1 1 1 1 1
or a 2, or.....or a 6 is 6 6 6 6 6 6 =1 In other word one of the sample points must
occur.
b) P [ ∅]=0 If you do an experiment one of the sample points must occur. If you toss a coin one
of the sides of the coin must occur, and the probability of none of the sides occurring is 0
c) P [ A 1∪ A 2∪....∪ A n ]=P [ A1 ]P [ A 2 ]...P [ A n ] . If the events A1, A2, ...An are mutually
exhaustive then P [ A 1 ]P [ A 2]...P [ A n ]=1
d) For any event A, 0 ≤P [ A ]≤1
e) If A⊂ B then P [ A ] P [B ]
f) For any events A, B, and C, P [ A∪B ]=P [ A]P [ B ]− P [ A∩B ] and
P [ A∪B ∪C ]=P [ A ]P [ B ]P [ C ]−P [ A∩B ]−P [ A∩C ]−P [ B∩C ]P [ A∩B ∩C ] .
These two relationship are very important for the exam and you need to do a lot of examples
involving them. The first one has been illustrated in the study manual using a Venn diagram.
g) For any event A , P [ A c ]=1− P [ A ]
h) For any event A and B, . P [ A ]= P [ A∩B ]P [ A∩B c ] .This is another important rule that you
will quite helpful during the exam.
i) For uniform probability, if event A contains x sample points and the sample space contains y
x
sample points, then P [ A ]= y
These are just some of the rules concerning probability . At this point you do not have to worry about
how they are derived. Its is important you master them because you will be required to use them over
and over again during practice and the actual exam. Most of the question that may arise from this
chapter may require you to use Venn diagrams, tabulation or even actual counting. The study manual
gives a few good examples, and problem set 1 has the kind of questions you should expect to find in
the exam. I recommend you exercise as much as possible in order to familiarize yourself with this
rules. Below are a few more questions for your practice.
1. In a class of 100 students, a survey indicates that 70 students like studying Math, and 60 students like
English. Some students like both English and Math and all 100 students like at least one of the two
subjects. If a student is picked at random, what is the probability that he/ she likes Math only?
Ans.
There are a few ways to go about this. You can either work with numbers and Venn diagrams or you
can work algebraically using probabilities. It depends on what you are more familiar or comfortable
with. First you need to figure out how many students like both Math and English. Let A = Math, B =
English and let A∩ B = Math and English. We know A∪ B=100 and therefore
A∪ A c∩ B =100 A c ∩B =100−70 =30 . This is the number of students who like English only
and now we can easily work out the other numbers.
Math only = 40, English only = 30 and Both Math and English = 30. The probability that a student
40
likes Math only is 100 =0.4 . One could have saved time by seeing that these events are not mutually
exclusive and their intersection should be factored in to avoid double counting. In that case its easy to
see that 70 60− A ∩B =100 A∩B=30 and the other numbers will easily follow. Alternatively
this could have been done algebraically as follows
We know P [ A∪B ]=P [ A]P [ B ]− P [ A∩B ]=1 and so 0.70.6−P [ A∩B ] P [ A∩B ]=0.3
Using the rule P [ A ]= P [ A∩B ]P [ A∩B c ] then 0.7=0.3P [ A∩ B c ] P [ A∩B c ]=0.4
2. An insurance company conducted a survey in a school of 500 students and came out with the
following information.
70% of the student were males
18% were not insured
100 students were single
330 students were insured males
340 were married males
30 were insured singles
320 were insured married males
How many of the students were single females without insurance?
Ans.
This kind of a question can become messy and time consuming if you take the wrong direction. You
must decide whether to use a Venn diagram,tabulate the information given or even use the rules of
events. The study manual has a similar question and I will use a slightly different method to solve the
question. I have used a table and then worked my way from what is given towards what is not given.
Males Females Totals
Married Single Married Single
Insured 320 10 60 20 410
Uninsured 20 0 0 70 90
Sub Totals 340 10 60 90
Totals 350 150 500
All the highlighted numbers are already given. We can easily find the number of uninsured married
men (340 -320) and the number of insured single males (330-320). From there we can then find the
number of insured single female (30 – 10) and insured married females ( 410 -(320 + 10 + 20)). We
have 0 uninsured single males. 100 students were single and single uninsured females are (100 – (10 +
20). This easily completes our table. The number of single uninsured females is 70. This method may
save you a lot of time if you arrange the table in any way you can understand. If you look Q 6, Problem
set 1 the solution looks well organized and systematic, but like I said , if you could not form those
equations by yourself then think about how much time you may have spend and how messy it could
get.
3. You are given P [A] = 0.3, P [B] = 0.5 and P [ A∩B ]=0.2 , Find (i) P [ A∪B ] , (ii) P [ A∩B c ] and
(iii) P [ A c ∪B c ] .
Ans.
(i) P [ A∪B ]=P [ A]P [ B ]− P [ A∩B ] , so P [ A∪B ]=0.3 0.5−0.2=0.6
(ii) P [ A ]= P [ A∩B ]P [ A∩B c ] , and so 0.3=0.2P [ A ∩B c ] P [ A∩ B c ]=0.1 .
(iii) This will require you to use the DeMorgan's Law .
A∩B c = A c ∪B c
P [ A∩B ]=0.2 P [ A ∩B c ]=1−0.2 =0.8
P [ A∩B ]=P [ A ∪B ] and therefore P [ A c ∪B c ]=0.8
c c c
4. A fair die is rolled. Let A be the event that 5 appears on the first roll and let B be the event that 5
only appears on the second roll. Find P [A], P[B] and P [ A∪B ]
Ans
1
P [ A ]=
6
5 1 5
P [ B ]= P [ A c ]∗P [ A ]= ∗ =
6 6 36 This can also be seen in the table from example 1 where we have
only five cases without a 5 as the first occurrence and with a 5 as the second occurrence (shaded).
1 5 11
P [ A∪B ]=P [ A]P [ B]= = . This two event are mutually exclusive and P [ A∩B ]=0 . In
6 36 36
later chapters you will learn about independence of events.
The questions in problem set 1 and other questions in the practices will help you understand the basic
concepts of probability. The assumption is that if you are planning to do this exam you already know
everything in this study manual and you are using it to prepare for the exam. Exercise and more
exercise is the key.
CONDITIONAL PROBABILITY AND INDEPENDENCE
There is another relationship that is a version of the Law of Total Probability that can be derived using
the multiplication rule. During practice and exam you will find the relationship equally helpful. Earlier
we saw that P [ A ]= P [ A∩B ]P [ A∩B c ] . Substituting the multiplication rule we get
P [ A ]= P [ A∣B ]∗P [ B ]P [ A∣B ]∗P [ B c ]. Similarly , we can express P[B] the same way. Exam P
utilizes all possible concepts and what you need is the ability to manipulate the concepts you know to
reach the desired answer. The examples in the study manual illustrates some of the difficulties that you
may encounter to solve problems. Take your time during practice to go through those examples because
that is the same way way the exams are likely to be set.
There is a note on page 62 of the study manual that helps you to understand the kind of language that
may be used to mean that all the sample points have a equal chance of occurring ('an item is chosen at
random' from a collection of items). Again if an experiment involves an item that is generally unbiased,
like a fair die or a fair coin, then we assume that the sample points have an equal chance of occurring
unless it is stated otherwise.
a) P [ A∩B ]=P [ B∣A]∗P [ A ]=P [ A∣B ]∗P [ B ] for any events A and B.
b) If P [ A 1∩ A 2∩....∩ A n−1 ]0, then
P [ A 1∩ A 2∩....∩ A n ]=P [ A1 ]∗P [ A 2∣A 1 ]∗P [ A 3∣A1∩ A 2 ]∗...∗P [ A n∣A 1∩ A 2∩...∩ A n−1 ]
c) P [ A c∣B ]=1 −P [ A∣B ]
d) P [ A∪B∣C ]=P [ A∣C ]P [ B∣C ]−P [ A∩B∣C ]
P [ A∩ B ] P [ A ]
e) If A⊂ B then P [ A∣B ]= = , and P [ B∣A ]=1
P [B ] P [ B]
f) If A and B are independent then A the sets (Ac and B), (A and Bc) and (Ac and Bc) are also
independent.
g) The empty set is independent of any event A and P [∅]=P [ ∅∩ A ]=P [∅]∗P [ A ]=0
Knowing this concepts and the rules behind conditional probability and independence is not enough.
You need to know how to apply them in questions. Most of the questions relating to this chapter will be
in form of statements where you will be required to determine what probabilities are given and what
probabilities you are required to compute. The examples in the study guide is a clear indication of how
hard it could be to determine what probabilities are given and what probabilities are not. In some
questions you may not even know that the question is about conditional probability or independence.
The questions in the study manual will come in handy in helping you understand how to apply the
concepts. Below is a few additional examples.
Examples
1. A boy has 4 red balls and 3 blue balls in a black box and 6 red balls and 5 blue balls in another
white box. If the boy picks a ball at random from the black box and puts the ball in the white box, what
is the probability of picking a red ball from the white box?
Ans.
Let A be the event of picking a red ball from the white box, B the event of picking a blue ball from the
black box and C the event of picking a red ball from the black box. Here we have two scenarios, either
picking a red ball from the black box and a red ball from the white box or picking a blue ball from the
black box and a red ball from the white box. From the given information we know the following,
3
P [ B ]=
7
4
P [C ]=
7
6 1
P [ A∣B ]= =
12 2 and
7
P [ A∣C ]=
12
Then
2. For a student to advance to the next level he has to take two exams A and B and must pass at least 1
of the exams within 6 months. After 6 months the student will be required to pass both exams to
advance to the next level. The probability of passing exam A is 0.75 and the probability of passing
exam B is 0.65. If the student fails in one of the exams, the probability of failing the other exam is
0.15. What is the probability of NOT advancing to the next level within 6 months?
Ans
This question results in two scenarios too. Either you fail in exam A and fail in exam B or fail in exam
B and fail in exam A. The idea is these two events are not independent because failing one may depend
on whether you failed the other one. If we knew the events were independent then all we would do was
to multiplying the two probabilities to come up with the probability of failing both exams. We know
the following from the given information.
P[failing Exam A] = 0.25 and P[failing exam B] = 0.35.
P[failing exam A given you failed exam B] = 0.15
P[failing exam B given you failed exam A] = 0.15
Let C be the event that you failed in both exams within 6 months then, B the event that you failed exam
B and A the event that you failed exam A
P [ C ]=P [ A∩B ]P [ B ∩ A]=P [ A ]∗P [ B∣A ]P [ B ]∗P [ A∣B ]
3. In a group of 10,000 people, 30% have life insurance, 70% have medical insurance 20% have both
while 20% do not have any kind of insurance. 50% of those with only life insurance will renew their
policies where as 40% of those with only medical insurance will renew their policies. 60% of those
with both life and medical insurance will renew their policies. If one person of those with life or
medical insurance is chosen at random, what is the probability that he will renew at least one of the
policies?
Ans
Let A , B, C, D, and E be the events life insurance, medical insurance, both life and medical, neither
life nor medical and will renew, respectively. We can come up with the following probabilities from the
given information,
P[A] = 0.1, P[B] = 0.5, P[C] = 0.2 and P[D] = 0.2 . You can draw a Venn diagram to visualize this.
4. If you are told the probability of getting a tetanus vaccine is 0.7, the probability of getting a tetanus
infection is 0.5, and the probability of NOT (getting vaccinated or a tetanus infection) is 0.1
Ans.
You need to list down the probabilities that are given and determine the probabilities that require to be
worked out. From the given information we know that, if we let A be the event that one gets vaccinated
and B be the event that one gets infected with tetanus, then.
P [ A ]=0.7
P [ B ]=0.5
P [ A∪B c ]=0.1
The first question is asking for P [ A∩B ]. The first question is the only one you need to figure out to
solve the other two questions
P [ A∩B ] 0.3 3
P [ A∣B ]= = =
P[B] 0.5 5
P [ B∩ A ] 0.3 3
P [ B∣A ]= = =
P [ A] 0.7 7
The number of questions you need to solve for practice is dependent on the amount of time at your
disposal. The more you practice with more question the better you will be able to see the application of
this chapter thus increasing your ability to solve questions in the exam. There are many questions in the
study manual concerning this chapter but if you need more examples then you can look in any study
material that touches on probability.