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The partner of a consulting company joined as CEO

of progressive enterprise dealing with export and
import of consumer electronic products.
Soon after joining he convened a meeting of the top
level executives , to deliberate the next year
prospects for the company.
He invited presentation from each one of them
about their area of operation and control
Somehow he felt that the presentations were hazy ,
and uses lot of phrases like “quite likely”,
“expected to”, “almost certain”, “may not”, etc.
After carefully listening to each one of them he announced
that another meeting would be convened after two
weeks but at that meeting he would expect
Each one of them to express confidence in their statements
in quantitative terms like 90% as he believed that if one
could not measure what one is talking about , one’s
knowledge and understanding was inadequate. He hired
the service of consultant well versed in statistics to help
the executives in arriving at quantitative assessment of
uncertainty associated with their area of operations. The
initiative by CEO forced the executives to gather more
information and subjected to sophisticated analysis. At
the next meeting executives were more informed and
analytical in their approach.
 Decision making problems
• Deterministic Model
(where everything related to situation is known
with certainty to the decision maker)
• Probabilistic Model
(The totality of the outcome is known but it
cannot be certain, which particular outcome
will appear)
 Probability
Probability is a quantitative measure of un-
certainty.
A number that conveys the strength of
belief in the occurrence of an uncertain
event.
A probability value ranges between 0 and 1
inclusive and represents the likelihood that
a particular event will happen
0- no chance that an will happen
1- 100 percent chance that the event will
happen.
• Understanding probability is helpful for
decision-making.
• Probability of 0.80 indicates
• Probability of 0.15 indicates
Experiment: is a process which produce
outcomes.
If you appear for Exams
A,B,C,D,F
There are five possible outcomes.
If you roll a die
1,2,3,4,5,6
6 possible outcome
• Event: outcome of an experiment.
• The set of all possible outcomes of an
experiment is called the sample space (card
experiment)
• It is denoted by italics (A and E1,E2,E3,E4,E5)
Types of events
Simple or elementary-only one outcome
 Collectively Exhaustive
• When a list of the possible events that can result
from an experiment includes every possible
outcome, the list is said to be collectively exhaustive.
• In the coin example the list “ Head and Tail is
collectively exhaustive.
• Probability of happening an event E=m/N
m=no of outcomes where the desired event E has
occurred
N=total no of possible outcomes
 Joint/Compound
• Events are joint or compound if two or more
events happens at the same time.
Driving auto-one event
Talking on cell phone-another event
When some one talk on mobile and drive a car it
is joint event.
P(A or B)=P(A)+P(B)-P(A and B)
50% of Citi-bank customers having saving
account.30% have market rate account and
60% have both.
Either they have saving account or market rate
account
1-According to an article in fortune, the investors have
recently changed the proportions of their portfolio
towards public sector funds. The article implies that 8%
of the investors invest in public sector fund and 6% in
corporate funds. Assume that 2% invest in both kinds. If
an investor is chosen at random, what is the probability
that this investor has either public or corporate funds.
2-Suppose that 25% of the population in a given area is
exposed to a television commercial for ford automobiles,
and 34% is exposed to Ford’s radio advertisement. Also it
is known that 10% of the population is exposed to both
means of advertising . If a person is randomly chosen out
of the entire population in this area , what is the
probability that he or she was exposed to at least one of
the two modes of advertising.
3-85% of the people who inquire about investment
opportunities at a brokerage house end up purchasing
stock, and 33%end up purchasing bonds. It is also known
that 28% of the inquirers end up getting a portfolio with
both stock and bonds. If a person is just making an
inquiry, what is the probability that he or she was
exposed to at least one of the two modes of advertising?
4-A firm has 550 employees, 380 of them have least some
college education, and 412 of the employee underwent a
vocational training program. Furthermore, 357
employees both are college educated and have had the
vocational training. If an employee is chosen at random,
what is the probability that he or she is college educated
or has had the training or both?
Independent: if the occurrence of one event does
not affect the occurrence of another event.
Two traffic lights on NH2 are operating
independently. The probability of being stopped
at one is 0.4 and the probability of being stopped
at second is 0.7
Applicable Rule is : P(A and B)=P(A).P(B)
Special rule of multiplication
Stopped at both light= 0.4*0.7=0.28
Neither light=0.6*03=0.18
First stop but not second=0.4*0.3=0.12
Second stop not first=0.6*0.7=0.42
• A dresser drawer contains one pair of socks with each of the
following colors: blue, brown, red, white and black. Each pair
is folded together in a matching set. You reach into the sock
drawer and choose a pair of socks without looking. You
replace this pair and then choose another pair of socks. What
is the probability that you will choose the red pair of socks
both times?
• A coin is tossed and a single 6-sided die is rolled. Find the
probability of landing on the head side of the coin and rolling
a 3 on the die.
Intersection Rule: 1-the rate of defects in cork of
wine bottle is very high, 75%. Assuming
independence, if four bottles are opened,
what is the probability that all four corks are
defective.
The projected probability of increase in online
holiday sales from 2004-2005 is 95% in
US,90% in Australia and 85% in India. Assume
these probabilities are independent. What is
the probability that holiday sale will increase
in all the three countries from 2004-2005.
Probability of union of several independent
event is the event at least one of the event
happens
P(A1 цA2 цA3………………An)=1-P(A1)*P(A2)….
P(An)
• American investment institution are entering
the new market. The probability of successful
instrument are
• Goldman 70%
• Salomon Brothers 82%
• Fidelity 80%
• Smith Barney 90%
Probability of at least one event successful
assuming independence.
 Poor Nation’s Mother’s at serious
health risk
• In an industrialized world, a woman’s odds of
dying from problem’s related to pregnancy are
1 in 1687. But in the developing world the
figure is 1 in 51. world bank also says that
each year 7 million newborn die within a week
of birth because of maternal health problem.
• Three woman in a developing country are
pregnant. What is the probability that at least
one will die.
• P (at least one will die)=1-P
 Dependent Events
• Two events are dependent if the outcome or
occurrence of the first affects the outcome or
occurrence of the second so that the
probability is changed.
A card is chosen at random from a standard
deck of 52 playing cards. Without replacing it,
a second card is chosen. What is the
probability that the first card chosen is a
queen and the second card chosen is a king?
• The probability that the first card is a queen is
4 out of 52. However, if the first card is not
replaced, then the second card is chosen from
only 51 cards. Accordingly, the probability that
the second card is a king given that the first
card is a queen is 4 out of 51.
• The outcome of choosing the first card has
affected the outcome of choosing the second
card, making these events dependent.
• A card is chosen at random from a standard
deck of 52 playing cards. Without replacing it,
a second card is chosen. What is the
probability that the first card chosen is a
queen and the second card chosen is a King?
• P(queen on first pick) = 4/52
• P(king on 2nd pick given queen on 1st
pick)=4/51
• P(Queen and King)=4/52*4/51=16/2652
Ms.Anjali needs two students to help him with a
Moodle demonstration for his class of 18 girls and 12
boys. She randomly chooses one student who comes
to the front of the room. She then chooses a second
student from those still seated. What is the
probability that both students chosen are girls?

In a shipment of 20 computers, 3 are defective. Three

computers are randomly selected and tested. What is
the probability that all three are defective if the first
and second ones are not replaced after being tested?
 Mutually Exclusive
• Two events are mutually exclusive if by virtue of
one event happening the other cannot happen.
For example, A business can’t be bankrupt, break-
even and profitable at the same. It can only
be one of the three.
Formulae: P(A or B)=P(A)+P(B)
The two most common primary cause of death in
US are heart attack and cancer. Heart attack is the
cause of death of one third Americans(0.33) and
cancer is the cause of one fifth(0.20).the
probability that a randomly select American will
die either of heart attack or cancer is
0.33+0.20=0.53
Special rule of addition
 Equally Likely
Two or more events are said to be equally likely
if each has an equal chance of occurrence.
No event has priority over other.
In an unbiased coin tossing experiment: both
outcomes have equal chance of occurrence.
Sample Space: the sample space denoted by S is
the set of all possible outcomes of an
experiment.
Relation between Event and Sample Space
 Counting Rules
Event Multiple: An event multiple occurs when two or more
independent events are grouped together.
Counting the Total number of possible outcomes
If an experiment is defined as a sequence of k
steps, n1 possible outcome in step 1 and n2-
possible outcome in step2
How many sample points (outcomes) are in the
sample space when a coin is flipped 4 times?
(2)(2)(2)(2) = 16 ways
Total number of possible outcome is
(n1) *(n2)*(nk)
A travel agency offer special weekend trip to
twelve cities with an option to travel either
by rail, bus or air and an option for either
budget or luxury accommodation. How many
different ways trip can be arranged.
K1=
K2=
K3=
My fruit salad is a combination of apples, grapes
and bananas" We don't care what order the
fruits are in, they could also be "bananas, grapes
and apples" or "grapes, apples and bananas", its
the same fruit salad.
"The combination to the safe was 472". Now
we do care about the order. "724" would not
work, nor would "247". It has to be exactly 4-7-
2.So, in Mathematics we use
more precise language:
• If the order doesn't matter, it is a Combination. If
the order does matter it is a Permutation.
So, we should really call this a "Permutation
Lock"!
 Counting Rule for Permutation
Helps in computing the possible number of
experimental outcomes when n items are to
be selected from a set of N items in a
particular order.
NP = ! N / !(N-n)
n
Suppose 2 people are to be randomly chosen
out of 5 people. How many permutation are
possible?
5P =!5/!(5-2)=!5/!3= 5*4*!3/!3=20 permutation
2
 Conditional probability
• As a measure of uncertainty probability
depends on information. thus the, probability
you would give the event “ xerox stock price
will go up tomorow” depends on what you
know about the company and its
performance. The probability is conditional
upon your information set.
• We may define the probability of event A
conditional upon the occurrence of event B.
• The conditional probability is given by
P (AB)=P(AпB)/P(B)
Assuming P(B) is not equal to zero
P(BA)= P(AпB)/P(A)
A consulting firm is bidding for two jobs, one with
each of two large multinational corporations. The
company executives estimate that the probability
of obtaining the consulting job with firm A, event
A is 0.45.the executives also feel that if the
company should get the job with firm A, then
there is 0.90 probability that the firm B will also
give the company the consulting job. What are
the company chance of getting both job.
If a large competitor will buy a small firm, the
firm’s stock will rise with probability 0.85. the
purchase of the company has 0.40 probability.
What is the probability that purchase will take
place and stock will rise?
• Bayes theorem-an extension of conditional
probability
We use for revising a probability value based on
additional information that is later obtained.
One key to understanding the essence of
Bayes' theorem is to recognize that we are
dealing with sequential events, where by new
additional information is obtained for a
subsequent event, and that new information
is used to revise the probability of the initial
event.
 Baye’s Theorem
P(Ei A)=P(Ei)P(A Ei)
∑P(Ei) P(A Ei)