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Dilfraz Singh, Lovely Professional University Unit 12: Probability and Expected Value

Unit 12: Probability and Expected Value Notes

CONTENTS
Objectives

Introduction
12.1 Definitions

12.2 Theorems on Expectation
12.2.1 Expected Monetary Value (EMV)
12.2.2 Expectation of the Sum or Product of two Random Variables

12.2.3 Expectation of a Function of Random Variables
12.3 Counting Techniques
12.3.1 Fundamental Principle of Counting

12.3.2 Permutation
12.3.3 Combination
12.3.4 Ordered Partitions

12.3.5 Statistical or Empirical Definition of Probability
12.3.6 Axiomatic or Modern Approach to Probability

12.3.7 Theorems on Probability
12.4 Summary
12.5 Keywords

12.6 Review Questions
12.7 Further Readings

Objectives

After studying this unit, you will be able to:

Define the term random experiment and probability
Discuss various associated terms while defining probability
State Addition theorem of probability
Explain multiplicative theorem of probability

Describe various theorem of expectation

Introduction

The theory of probability is a study of Statistical or Random Experiments. It is the backbone of
Statistical Inference and Decision Theory that are essential tools of the analysis of most of the
modern business and economic problems.

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