🎓CFA Final Prep All Topics

QM Deck 5 – Probability Trees & Bayes’

Card1 / 30
Question

When a sample space is partitioned into mutually exclusive events Bi​, how do you find P(A)?

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Answer

Apply total probability: P(A)=∑P(A∣Bi​)P(Bi​).

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Question

How do you compute the probability of either of two events occurring when they may overlap?

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Answer

Use P(A or B)=P(A)+P(B)−P(A and B).

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Question

How does conditional expected value incorporate new information?

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Answer

It reweights outcomes using conditional probabilities: E(X∣info)=∑P(xi​∣info)xi​.

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Question

Why is Bayes' formula important in probability problems?

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Answer

It updates a prior probability using new information.

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