THE INSTITUTE OF FINANCE MANAGEMENT (IFM)

Department of Mathematics and

Acturial studies
Business Statistics 1
MTU 07203, ACU 07210, TMU 07218, SPU
07210, BFU07208,IRU 07209

BASIC PROBABILITY THEORY

Module Coverage
• Explain the concepts of probability
• State and apply basic rules of probabilities
in solving probability problems
• Determination of the probability of an
event
• Mutually exclusive and inclusive events
• Conditional probability

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Concepts of Probability
Probability
• Probability is a numerical measure of likehood or quantitative
measure of uncertainties
• Probability is the measure of ones belief in the occurrence of a
future event.
Examples:
1. A chance of win 50 million in paying 1000 Tsh in Sport pesa
2. The probability of person to get HIV positive or negative in
blood testing

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 Application of Probability
• Probability is applied in
i. Selection(choice) of things
ii. Arrangement of things
iii. Games like betting (gambling)
iv. Business, to decide the profit or loss

• Where do we apply probability

Probability can be applied in different fields like Business,
Insurance, finance, weather forecasting, political issues,
education, agriculture, medicines, game theory etc.

Basic probability theory- Mungure D.M

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(2024)
 Experiment
• Experiment is the process that results into one of two or more
distinct outcomes
Example:
1. Student can predict the result of examination. The possible
results are Pass(P) or Fail(F)
2. Betting the result of football game. The possible results are
Win(W), Lose(L) or Draw (D)
3. The politician can predict the result of election. The possible
results are win(w) or Lose(L)
4. Sleeping exercise. The possible results are Walkup(W) or die(D)

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Sample space

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An event

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More example
• Some events associated with a single toss of a
balanced die are these:
A: Observe a number less than 5.
B: Observe a 2 or a 3.
E1: Observe a 1.

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Probability of event
• Is the ratio of number of success outcome of the event to that
of the sample space.
• It is given as

n(E)
P(E) 
Example: n(S)
1. A card is drawn at random from the ordinary pack of 52
playing cards. Find The probability that the card drawn is
seven
2. A vehicle arriving at an intersection roads, it can turn right,
turn left, or continues straight ahead. Find the probability that
the vehicle can turn right
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Answer
• Number of sample space, n(S) = 52
• Number of card drawn is seven, n (A) = 4

n(E)
P(E) 
n(S)

1
P(E) 
13

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 Solution 2

Basic probability theory- Mungure D.M

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(2024)
Questions
1. A coin is tossed in air, find the probability
of head to appear.
2. A die is tossed in air , find the probability
of getting the factors of 8.
3. Numbers are chosen from integers
between -3 and 3 inclusive. Find the
probability of getting odd numbers.

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Questions cont …
4. Peter used to play games after work where
yesterday he played 15 games. Peter won 7
games. Find the probability of winning.
5. Two teams A and B played a game, the team
A won the match. Find the probability of
winning.

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Basic Rules of Probability
Rule of range
• If A is an event, it is probability takes any
value from 0 to 1
• Simply we write as 0 P(A) 1
• Then, if P (A) = 0 the event will not occur
P (A) =1 is called sure event

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Nature of event
There are three nature of events as:
1.Impossible event – in this case the event can
not occur as n(E)=0 hence its P(E)=0
2.Certainty event or sure event- in this case the
occurrence of an event is equal to 100% . Thus
n(s)= n(E) hence P(E)=1
3.Uncertainty event or unsure event- In this
case the occurrence of an event is less than
100% as n(s)>n(E) implies P(E)<1
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Rule of complement
• Let P(A) be the probability of an event A to
occur and P(A) the probability of the event A
not to occur, then
P(A)  P(A) 1

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Types of events
• There are two types of events which takes
place in normal life. These are
1. Mutually exclusive
2. Mutually inclusive
Mutually exclusive events
• The two events are called non- mutually exclusive
events if the two events occurred together. Then
probability of union is given by

P(A B) P(A)  P(B)  P(A B)

• If the two events cannot occur together (Mutually
exclusive event). Then probability of union is given by

P(A  B) P(A)  P(B)

• Mutually exclusive events is called Additive rule

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Examples
1. A die is tossed in air. Find the probability of
getting a five or factors of 9
2. A number is chosen from S={3, 5,7,9,11,13}
find the probability that the number chosen is 9
or prime
3. If (A∩B)=0 and P(A) =0.4 , P(B)= 0.3 find
P(AUB)
4. A pair of die is rolled. What is the probability
that the sum of the numbers rolled is either 7 or
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Mutually inclusive events
• If A and B are independent, then the chance of A to occur
does not affect the chance of B to occur and vice versa.
• The two events A and B will be said to be in depended if
P (A ∩ B) = P (A) P (B)
• Is called multiplicative rule for independent events
Independent events A and B also satisfy the following
condition
P (A/B) = P (A)
P (B/A) = P (B)

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Dependent Events
• Dependent events are those events that the
occurrence of one causes any impact on
occurrence of another.
• The two events A and B will be said to be
depended if P(A  B) P(A/B) P(B)

• Dependent events is called multiplicative rule

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Examples
1. John won the match with probability of 0.4 if he
played two games, what is the probability that
a) He also won the second game
b) He lost the second game
2. Halima passed mathematics with the probability of
0.6 and Aneth did with the probability of 0.8. find
the probability that
a) Both passed
b) Both failed
c) One of them passed

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Examples cont…
3 . The probability that Ali is cured by SP is 0.7
and that Musa is cured is 0.9. find the
probability that
(a) One of them is cured
(b) Neither is cured
(c) Musa is not cured but Ali is cured

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Conditional Probability
• If A and B are two events in a sample space S.
Conditional probability of event A given B
occurred is written as
p(A B)
P(A/B) 
p(B)
P(A ∩ B) is the joint probability of A and B.
P(B/A) is the probability that B will occur
given that A has occurred.

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Example
A manufacturer knows that the probability of an
order being ready on time is 0.80, and the
probability of an order being ready on time and
being delivered on time is 0.72.
i.What is the probability of an order being
delivered on time, given that it is ready on time?
ii.If the probability of being delivered on time is
0.85 what is the probability of an order being
ready on time given that is delivered on time?

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Solution
Let R be order is ready on time
D be order is delivered on time
Given P(R) = 0.80, P(R∩D) = 0.72.
Then
(i) P(D/R) = P(R∩D)/P(R)
= 0.72/0.80
= 0.90

(ii) P(R/D) =P(R∩D)/P(D)

= 0.72/0.85
= 0.847
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Examples cont…
What is the probability that the outcome of a
roll of a die is 2 given that the outcome is even.

ANS = 1/3

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More Questions
• There are six people qualified for selection to the position of
deputy major of Dar es Salaam city. The office is to be filled
by randomly selecting one person from the following list:
Person Sex Experience
1 Male 8
2 Female 7
3 Male 12
4 Female 4
5 Male 8
6 Female 4
• Find the probability that the individual selected will be either
a female or a person with more than 6 years of experience.
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Thanks

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