Quantitative

Techniques

M. Viswanathan
viswanthrissur@gmail.com
9447614792
 Module 1
Probability: basic concepts;
approaches; theorems-
addition, multiplication,
conditional and Bayes;
business applications of
probability.
 Probability
Basic Concepts

Random Experiment

A phenomenon or an experiment which can result

into more than one possible outcome is called a
random phenomenon or random experiment or
statistical experiment. Probability theory is based on
the paradigm of a random experiment; that is, an
experiment whose outcome cannot be predicted with
certainty, before the experiment is run. But the use
of probability theory, it is possible to assign a
quantitative measure to express the extent of
uncertainty.
For example, when a coin is tossed, the possible
outcomes are either head or tail. We cannot predict
the outcome of head with certainty. So, coin tossing
is a random experiment.
 Classical Definition of Probability
Definition
If n is the number of equally likely, mutually
exclusive and exhaustive outcomes of a random
experiment out of which m outcomes are to the
occurrence of an event A, then the probability
that A occurs, denoted by P(A), is given by
Number of outcomes favourable to A
P(A) = ------------------------------------------------
Total number of outcomes
= m/n

This definition given by J. Bernoulli.

Classical definition is also known as 'a priori‘
definition of probability.
 …Classical Definition of Probability
Equally likely outcomes
The outcomes of a random experiment are said
to be equally likely, if none of them occurs in
preference to others.
For example, if an unbiased coin is tossed, the
two possible outcomes, a head or a tail are
equally likely.
Mutually exclusive outcomes
Two or more outcomes of an experiment are said
to be mutually exclusive, if the occurrence of
one of them precludes the occurrence of all
others. For example, if an unbiased coin is
tossed, the two possible outcomes, a head or a
tail are mutually exclusive.
 …Classical Definition of Probability
Exhaustive outcomes

It is the totality of all possible outcomes of a

random experiment.
For example, the number of exhaustive
outcomes in the roll of a die are six. Similarly,
there are 52 exhaustive outcomes in the
experiment of drawing a card from a pack of 52
cards.
 …Classical Definition of Probability
Event
The occurrence or non-occurrence of a
phenomenon is called an event.
For example, in the toss of 2 coins, there
are 4 exhaustive outcomes, viz. (H,H),
(H,T), (T,H), (T,T). The event can be
defined in a number of ways.
1. The event of occurrence of two heads
2. The event of occurrence of two tails
3. The event of occurrence of at least one
head
 …Classical Definition of Probability
Example
What is the probability of obtaining a head in
the toss of an unbiased coin?
Solution
The experiment has two possible outcomes
head or tail. These two outcomes are mutually
exclusive and exhaustive. Since the coin is
given to be unbiased, the two outcomes are
equally likely. Thus all the conditions of the
classical definition are satisfied.
Let A be the event of getting a head. Then the
number of favourable outcomes of A = 1
Total number of outcomes = 2
Therefore, P(A) = ½.
 Fundamental Principle of Counting
If the first operation can be performed in
any one of the m ways and then a second
can be performed together in any one of
the n ways, then both can be performed
together in m x n ways.

This can be generalized. The first operation

in n1 ways, second, n2 ways,…., kth
operation in nk ways.

Then together these operations can be

performed in n1 x n2 x ….. X nk ways.
 Permutation
A permutation is an arrangement of a given
number of objects in a definite order.
1. Permutation of n objects
The total number of permutation of n
distinct objects is n!.
Using symbols, we can write nPn = n!
n
Pn = n(n-1)(n-2)……3.2.1 = n!
Suppose there are n persons to be seated
on n chairs. The first chair can be occupied
by anyone of the n persons. The second
chair can be occupied by n-1 persons and
so on. The total number of ways of chairs
can be occupied ny n persons or the
permutaion of n objects taking all at a time
is given by nPn = n(n-1)(n-2)……3.2.1 = n!
 Permutation
2. Permutation of n objects taking r at a
time
The total number of permutation of n
objects taken r at a time is
n
Pr = n(n-1)(n-2)……(n-r+1)
= n(n-1)(n-2)……(n-r+1)(n-r)!
----------------------------------
(n-r)!
= n!
---------
(n-r)!
 Permutation
3. Permutation of n objects taking r at a time
when any object may be repeated any number
of times
Here, each of the r places can be filled in n
ways.
Therefore, total number of permutations is nr.
 Permutation
4. Permutation of n objects in a circular order
If n objects are seated in a circle, then the
number of permutations in a circular order
= n!/n = (n-1)!

5. Permutation with restrictions

If out of n objects, n1 are alike of one kind, n2
are alike of another kind, ……, nk are alike,
then the number of permutations = n!
------------------
n1! n2! …..nk!
Example
What is the total number of ways of
simultaneous throwing of 3 coins and 2 dice
Solution
Each coin can be thrown in 2 ways (either head
or tail).
Therefore, the number of ways of simultaneous
throwing of 3 coins = 23 = 8.
Similarly, the number of ways of simultaneous
throwing of 2 dice = 62 = 36.

Therefore the total number of ways of

simultaneous throwing of 3 coins and 2 dice =
8 x 36 = 288.
 Combination
Combination is a selection of objects rather than
arrangement.
1. Combination of n objects
The total number of combination of n objects taken
r at a time is denoted by nCr.
n
Cr = n!
-----------
r! (n-r)!

Note: Also, nCr = nCnn-r and nCr = nPr / r!

Example: In how many ways 2 balls can be selected

from 8 balls?
Solution: 8C2 = 8x7
------ = 28 ways
1x2
Example: A committee of 8 teachers is to be formed from
6 science teachers , 8 arts teachers and a physical
instructor. In how many ways the committee can be
formed.
Solution: There are 6+8+1 = 15 teachers. Then the
number of ways of selection of 8 teachers from 15
teachers = 15C8 = 15!
------ = 6435 ways.
8!x7!
Example: In the above example, if there should be 3
science and 4 arts teachers in the committee, find the
number of ways then can be selected?
Solution: Since the committee should consists of 3
science and 4 arts teachers, the last person must be
from physical education.
There are 6 science teachers, out of which 3 can be
selected in 6C3 ways. The 4 arts teachers from 8 arts
teachers can be selected in 8C4 ways. Since there is only
one physical instructor, he/she can be selected in
1
C1ways. Hence, the number of ways of selection
= 6C3 x 8C4 x 1C1 = 1400 ways.
 Statistical or Empirical Definition of Probability

The scope of the classical definition was found to

be very limited as it failed to determine the
probabilities of certain events in the following
circumstances:

1. When n, the exhaustive outcomes of a random

experiment is infinite.
2. When actual value of n is not known.
3. When various outcomes of a random experiment
are not equally likely.

To overcome the difficulties of classical

definition, an attempt was made to establish the
probability by the repetition of conducting the
experiment for sufficiently large times.
 Empirical Definition of Probability

Definition
If an experiment is repeated n times, under essentially
the identical conditions and, if, out of these trials, an
event A occurs m times, then the probability that A
occurs is given by
P(A) = lim m
n→∞ ----- ,
n
provided the limit exists. m/n is the relative frequency
and it is calculated by actual experimentation.
Limitations:
1. The conditions of the experiment may not remain
identical, particularly when the number of trials is
sufficiently large.
2. The relative frequency, m/n may not attain a unique
value no matter how large is the total number of trials.
3. It may not be possible to repeat an experiment a large
number of times
Axiomatic or Modern Approach to Probability

This approach was introduced by the Russian

mathematician, A. Kolmogorov in 1930s. He introduced
probability as a function of the outcomes of an
experiment, under certain restrictions. These
restrictions are known as Postulates or Axioms of
probability theory.

Sample Space
It is the set of all possible outcomes of a random
experiment. Each element of the set is called a sample
point or a simple event or an elementary event. The
sample space of a random experiment is denoted by S
and its element are denoted by ei, where i = 1, 2, ...... n.
Thus, a sample space having n elements can be written
as : S = {e1, e2, ......, en}.
Example: The sample space, when tossing a coin is
S = {H, T}. When two coins are tossed, the sample space
is
S = {(H,H), (H,T), (T,H), (T,T)}.
Axiomatic or Modern Approach to Probability

Finite and Infinite Sample Space

A sample space consisting of finite number of
elements is called a finite sample space, while
if the number of elements is infinite, it is called
an infinite sample space.
The sample space obtained by tossing a coin is
finite sample space.
As an example of infinite sample space,
consider repeated toss of a coin till a head
appears. Various elements of the sample space
would be:
S = {(H), (T, H), (T, T, H), ...... }.
Axiomatic or Modern Approach to Probability

Discrete and Continuous Sample Space

A discrete sample space consists of finite or

countably infinite number of elements. The
sample space of rolling two dices are example
of discrete sample spaces.

A continuous sample space consists of an

uncountable number of elements.

This type of sample space is obtained when the

result of an experiment is a measurement on
continuous scale like measurements of weight,
height, area, volume, time, etc.
Axiomatic or Modern Approach to Probability

Event
An event is any subset of a sample space. In
the experiment of roll of a die, the sample
space is
S = {1, 2, 3, 4, 5, 6}. It is possible to define
various events on this sample space, as shown
below :
Let A be the event that an odd number appears
on the die. Then A = {1, 3, 5} is a subset of S.
Further, let B be the event of getting a number
greater than 4. Then B = {5, 6} is another
subset of S. Similarly, if C denotes an event of
getting a number 3 on the die, then C = {3}.
Axiomatic or Modern Approach to Probability
Definition of Probability (Modern Approach)
Let S be a sample space of an experiment and A be
any event of this sample space. The probability of A,
denoted by P(A), is defined as a real value set
function which associates a real value corresponding
to a subset A of the sample space S. In order that
P(A) denotes a probability function, the following
rules, popularly known as axioms or postulates of
probability, must be satisfied.
Axiom I : For any event A in sample space S, we have
0 ≤ P(A) ≤1.
Axiom II : P(S) = 1.
Axiom III : If A1, A2, ...... Ak are k mutually
exclusive events.
(i.e., Ai ∩Aj = ϕ where ϕ denotes a null set) of the
sample space S, then
P (A1 U A2 …… U Ak) = P(A1) + P(A2) + ….. + P(Ak)
= ∑ P(Ai).
Axiomatic or Modern Approach to Probability
The first axiom implies that the probability of an event is a
non-negative number less than or equal to unity.
The second axiom implies that the probability of an event
that is certain to occur must be equal to unity.
Axiom III gives a basic rule of addition of probabilities
when events are mutually exclusive.
The above axioms provide a set of basic rules that can be
used to find the probability of any event of a sample
space.
Subjective Assignment:
The assignment of probabilities on the basis of the
statistical
and the classical definitions is objective. Contrary to this,
it is also possible to have subjective assignment of
probabilities. Under the subjective assignment, the
probabilities to various elementary events are assigned on
the basis of the expectations or the degree of belief of the
statistician. These probabilities, also known as personal
probabilities, are very useful in the analysis of various
business and economic problems.
Axiomatic or Modern Approach to Probability
The first axiom implies that the probability of an event
is a non-negative number less than or equal to unity.
The second axiom implies that the probability of an
event that is certain to occur must be equal to unity.
Axiom III gives a basic rule of addition of probabilities
when events are mutually exclusive.
The above axioms provide a set of basic rules that can
be used to find the probability of any event of a sample
space.
Subjective Assignment:
The assignment of probabilities on the basis of the
statistical and the classical definitions is objective.
Contrary to this, it is also possible to have subjective
assignment of probabilities. Under the subjective
assignment, the probabilities to various elementary
events are assigned on the basis of the expectations or
the degree of belief of the statistician. These
probabilities, also known as personal probabilities, are
very useful in the analysis of various business and
economic problems.
 Theorems of Probability
Theorem 1: P(ϕ) = 0, where ϕ is a null set.
Proof: For a sample space S of an experiment, we
can write SUϕ = S .
Taking probability of both sides, we have
P(SUϕ) = P(S).
Since S and ϕ are mutually exclusive, using axiom
III, we can write P(S) + P(ϕ ) = P(S).
Hence, P(ϕ ) = 0.
Theorem 2: P(Ā) =1 – P(A), where Ā is compliment
of A.
Theorem 3: For any two events A and B in sample
space S, then P(Ā∩B) = P(B)-P(A∩B)
 Addition Theorem of Probability
If A and B are any two events in the sample space
S, then P(AUB) = P(A) + P(B) – P(A∩B).
If A and B are mutually exclusive then P(A∩B)=0
and therefore P(AUB) = P(A) + P(B).
Note:
1. The event AUB denotes the occurrence of either
A or B or both. Alternatively, it implies the
occurrence of at least one of the two events.
2. The event A∩B is a compound event that denotes
the simultaneous occurrence of the two events.
3. Alternatively, the event AUB is also denoted by
A + B and the event A∩B by AB.
4. P(AUB) = 1-P(A’∩B’). ie. 1-P(A bar intersection B
bar).
 Addition Theorem of Probability for
Three Events

If A, B and C are any three events in the

sample space S, then P(AUBUC) = P(A) +
P(B) + P(C) – P(A∩B) – P(B∩C) – P(A∩C) +
P(A∩B∩C).
If A, B and C are mutually exclusive then
P(A∩B∩C)=0 and therefore P(AUBUC) =
P(A) + P(B) + P(C).
Example:
In a group of 1,000 persons, there are 650 who can
speak Hindi, 400 can speak English and 150 can
speak both Hindi and English. If a person is
selected at random, what is the probability that he
speaks (i) Hindi only, (ii) English only, (iii) only one
of the two languages, (iv) at least one of the two
languages?
Solution:
Let H denote the event that a person selected at
random speaks Hindi and E denotes the event that
he speaks English.
Thus, we have n(S) = 1000, n(H) = 650, n(E) =
400, n(H∩E) = 150 where n(H), n(E), etc. denote
the number of persons belonging to the respective
event.
(i) The probability that a person selected at random
speaks Hindi only, is given by P(H∩E’) = P(H) –
P(H∩E) = 650 150
----- - ----- = 1/2
1000 1000

(ii) The probability that a person selected at

random speaks English only, is given by P(E∩H’) =
P(E) – P(H∩E) = 400 150
----- - ----- = 1/4
1000 1000
(iii) The probability that a person selected at
random speaks only one of the language is =
probability that the selected person should speak
hindi and not english or speak english and not hindi
=P[(H∩E’) U (E∩H’)] = P (H∩E’) + P (E∩H’)
P(H) – P(H∩E) + P(E) - P(H∩E) =
= 650 150 400 150
----- - ----- + ----- - ----- = 3/4
1000 1000 1000 1000

(iv) The probability that a person selected at

random speaks at least one of the languages is
given by P(HUE) = P(H) + P(E) – P(H∩E)
= 650 400 150
----- + ----- - ----- = 9/10
1000 1000 1000
Alternative Method

E E’ Total
H 150 500 650
H’ 250 100 350
Total 400 600 1000

From the table, (i) P(H∩E’) = 500/1000 = ½

(ii) P(H’∩E) = 250/1000 = ¼
(iii) P[(H∩E’) U (E∩H’)] = (500+250)/1000 = ¾
(iv) P(HUE) = (650 + 400 - 150)/1000 = 9/10
OR
Also, P(HUE) = 1 - P(H’∩E’) = 1-100/1000 = 9/10
Example:
What is the probability of drawing a black card or a
king from a well shuffled pack of playing cards?
Solution:
There are 52 cards in a pack. Therefore n(S) = 52.
Let A be the event that the drawn card is black and
B be the event that it is a king.
We have to find P(AUB). Since there are 26 black
cards, 4 kings and two black kings in a pack, we
have n(A) = 26, n(B) = 4 and n(A∩B) = 2.
Thus, P(AUB) = P(A) + P(B) – P(A∩B)
= 26/52 + 4/52 – 2/52
= 28/52 = 7/13.
 Conditional Probability

Conditional Probability of an event

is based on the occurrence of a
previous event.
Conditional probability is calculated
by multiplying the probability of the
preceding event by the updated
probability of the succeeding event.
 Conditional Probability
For example, suppose you are drawing three
marbles - red, blue and green - from a bag.
Each marble has an equal chance of being
drawn. What is the conditional probability of
drawing the red marble after already
drawing the blue one?
First, the probability of drawing a blue
marble is about 33% because it is one
possible outcome out of three. Assuming
this first event occurs, there will be two
marbles remaining, with each having a 50%
of being drawn. So, the chance of drawing a
red marble after already drawing a blue
marble would be about 16.5% (33% x
50%).
 Conditional Probability

Definition

If A and B are any two events in the sample space

S, then the Conditional probability of A given B
denoted by P(A/B) is defined as
P(A/B)= P(A∩B)/P(B), P(B)>0.

Similarly, the Conditional probability of B given A

denoted by P(B/A) is defined as
P(B/A)= P(A∩B)/P(A), P(A)>0.
 Multiplication or Compound
Probability Theorem
If A and B are any two events in the sample space
S, then the probability of their simultaneous
occurrence is given by
P(A∩B) = P(A) P(B/A) or
= P(B) P(A/B)
P(B/A) is called the conditional probability of B
given that A has already occurred.

Multiplication theorem for independent events

If A and B are independent events in the sample
space S, then the probability of their simultaneous
occurrence is given by
P(A∩B) = P(A) P(B).
 Multiplication Theorem for three
events
If A, B and C are any three events in the sample
space S, then the probability of their simultaneous
occurrence is given by
P(A∩B∩C)= P(A) P(B/A) P(C/AB).

If A, B and C are indepenedent events then

P(A∩B∩C)= P(A) P(B) P(C).

It can be generalized for n events as

P(A1∩A2∩A3….An)=P(A1).P(A2/A1).P(A3/A1∩A2)
……. P(An/A1A2….An-1)
Result

If A and B are independent events then

1. A’ and B are also independent
2. A and B’ are also independent
3. A’ and B’ are also independent.
Pair-wise and Mutual Independence
Three events A, B and C are said to be mutually
independent if the following conditions
are simultaneously satisfied:
P(A∩B)= P(A) P(B), P(B∩C)= P(B) P(C),
P(A∩C)= P(A) P(C) and P(A∩B∩C)= P(A)P(B)P(C).

If the last condition is not satisfied, the events are

said to be pair-wise independent.
Example
A card is drawn from a pack of cards. (1). What is
the probability of getting a heart? (2) If it is known
that the card drawn is red, what is the probability
that it is a heart?
Solution
There are 52 cards in a pack, out of which there
are 26 red cards and 13 hearts cards. Let A be the
event of getting a red card and B be the event of
getting a heart card. Therefore, event A has 26
favourable outcomes, and event B has 13
favourable outcomes. Event A∩B has 13 favourable
outcomes. Then P(A)=26/52, P(B) = 13/52 and
P(A∩B) = 13/52.
Then (1) The probability of getting a heart = P(B)
= 13/52 = ¼.
(2). P(getting a heart card given that it is a red
card) = P(B/A) = P(A∩B)/P(A) = 13/52
------- = 1/2
26/52
Example
A bag contains 10 red and 8 black balls. Two balls
are drawn at random.
Find the probability that (a) both of them are red,
(b) one is red and the other is black.
Solution
Since there are 18 balls in the bag, two of them can
be selected in 18C2 ways. Among the 10 red balls, two
red balls can be selected in 10C2 ways.
(a) P(both of them are red) = C2 / 18C2
10

= 10x9/1x2 / 18x17/1x2 = 5/17.

(b) P(one is red and the other is black)
= 10C1 x 8C1 / 18C2 = 10 /1 x 8/1
--------------- = 80/153
18x17/1x2
 Bayes’ Theorem
The theorem proposed by Thomas A. Bayes is used
to find the conditional probability of an event
P(A | B), say, when the "reverse" conditional
probability P(B | A) is known.
Bayes Theorem
Let S be a sample space which is partitioned into
‘n’ mutually exclusive events B1, B2, B3, ….., Bn
such that P(Bi) > 0, i=1,2,3,….,n. Let A be any
event of S, P(A) >0.
Then the probability for any event Bi (i=1,2,3,….,n)
given A is
P(Bi/A) = P(Bi). P(A/Bi)
--------------------- , i=1,2,3,….,n
∑ P(Bi). P(A/Bi)
 …… Bayes’ Theorem

Bayes Theorem gives a relationship P(Bi/A)

and P(A/Bi).
The probabilities P(B1), P(B2),… are knows as
the prior probabilities because they are
occurring prior to obtaining any additional
information.
The probabilities P(Bi/A) are often referred to
as posterior probabilities, because they are the
probabilities of the events after we have
obtained additional information.
Bayes theorem plays an important role in
business.
Example:
Three machines A, B and C produce 60, 30 and 10
percent respectively of the total production of a
factory. It is estimated that A produces 2%
defectives, B produces 3% defectives and C
produces 4% defectives in their production. The
Quality Control Manager was selected an item
randomly from the total production and is found to
be defective. What is the probability that it has
from machine (1) A (2) B (3) C?
Solution:
Let B1 be the event that the machine A produces
the item
B2 be the event that the machine B produces the
item
B3 be the event that the machine C produces the
item and
A be the event that the item drawn from production
is defective.
….Solution:
Therefore P(B1) = 60/100, P(B2) = 30/100,
P(B3) = 10/100. Also, P(A/B1) = P(getting a defective
item from machine A) = 2/100. Similarly, P(A/B2) =
3/100 and P(A/B3) = 4/100.

(1) P(the defective item has come from machine A) =

P(B1/A).
By Bayes theorem P(B1/A) = P(B1). P(A/B1)
--------------------
∑ P(B1). P(A/B1)
= P(B1). P(A/B1)
------------------------------------------------------------
P(B1). P(A/B1) + P(B2). P(A/B2) + P(B3). P(A/B3)
= 60/100. 2/100
------------------------------------------------------------
60/100. 2/100 + 30/100. 3/100 + 10/100. 4/100
= 12/25.
….Solution:

(2) P(the defective item has come from machine B) =

P(B2/A).
By Bayes theorem P(B2/A) = P(B2). P(A/B2)
--------------------
∑ P(B2). P(A/B2)
= P(B2). P(A/B2)
------------------------------------------------------------
P(B1). P(A/B1) + P(B2). P(A/B2) + P(B3). P(A/B3)
= 30/100. 3/100
------------------------------------------------------------
60/100. 2/100 + 30/100. 3/100 + 10/100. 4/100
= 9/25.
….Solution:

(3) P(the defective item has come from machine C) =

P(B3/A).
By Bayes theorem P(B3/A) = P(B3). P(A/B3)
--------------------
∑ P(B3). P(A/B3)
= P(B3). P(A/B3)
------------------------------------------------------------
P(B1). P(A/B1) + P(B2). P(A/B2) + P(B3). P(A/B3)
= 10/100. 4/100
------------------------------------------------------------
60/100. 2/100 + 30/100. 3/100 + 10/100. 4/100
= 4/25.

Note: P(B1/A) + P(B2/A) + P(B3/A) = 12/25 + 9/25 +

4/25 = 1.
 Classroom Assignments
Assignment 1
Tickets are numbered from 1 to 100. They are well
shuffled and a ticket is drawn at random. What is
the probability that the drawn ticket has
(a) An even number
(b) Number 5 or multiple of 5
(c) A number which is greater than 75
(d) A number which is a square
Answer (a) 0.5 (b) 0.2 (c) 0.25 (d) 0.1
Assignment 2
A bag contains 7 white and 9 black balls. Two balls
are drawn in succession at random. What is the
probability that one of them is white and the other
is black?
Answer 21/40
 Classroom Assignments
Assignment 3
The word TRIANGLE are arranged at random. Find
the probability that the word so formed:
(a) starts with T
(b) ends with E
(c) starts with T and ends with E
Answer (a) 1/8 (b) 1/8 (c) 1/56
Assignment 4
The odds are 9 : 5 in favour a person A, who is 50
years of living till he is 70 and 8 : 6 against a
person who is 60 living till he is 80. Find the
probability that at least one of them will be alive
after 20 years.
Answer 39/49
 Classroom Assignments
Assignment 5
A can hit target 3 times in 5 shots, B 2 times in 5
shots, C 3 times in 5 shots. They fire a volley.
What is the probability that 2 shots hit?
Answer 51/125
Assignment 6
In a bolt factory, three machines A, B, C produce
respectively 25%, 35% and 40% of the day’s
production. Of the total of their output, 5%, 4%
and 2% are defectives bolts respectively from A, B
and C. A single bolt is drawn at random from the
day’s production and is found to be defective.
Determine the probability that it was
manufactured by machines A, B and C.

Answer 25/69, 28/69, 16/69

 Classroom Assignments
Assignment 5
A can hit target 3 times in 5 shots, B 2 times in 5
shots, C 3 times in 5 shots. They fire a volley.
What is the probability that 2 shots hit?
Answer 51/125
Assignment 6
In a bolt factory, three machines A, B, C produce
respectively 25%, 35% and 40% of the day’s
production. Of the total of their output, 5%, 4%
and 2% are defectives bolts respectively from A, B
and C. A single bolt is drawn at random from the
day’s production and is found to be defective.
Determine the probability that it was
manufactured by machines A, B and C.

Answer 25/69, 28/69, 16/69

 Classroom Assignments
Assignment 5
A can hit target 3 times in 5 shots, B 2 times in 5
shots, C 3 times in 5 shots. They fire a volley.
What is the probability that 2 shots hit?
Answer 51/125
Assignment 6
In a bolt factory, three machines A, B, C produce
respectively 25%, 35% and 40% of the day’s
production. Of the total of their output, 5%, 4%
and 2% are defectives bolts respectively from A, B
and C. A single bolt is drawn at random from the
day’s production and is found to be defective.
Determine the probability that it was
manufactured by machines A, B and C.

Answer 25/69, 28/69, 16/69

 Classroom Assignments
Assignment 5
A can hit target 3 times in 5 shots, B 2 times in 5
shots, C 3 times in 5 shots. They fire a volley.
What is the probability that 2 shots hit?
Answer 51/125
Assignment 6
In a bolt factory, three machines A, B, C produce
respectively 25%, 35% and 40% of the day’s
production. Of the total of their output, 5%, 4%
and 2% are defectives bolts respectively from A, B
and C. A single bolt is drawn at random from the
day’s production and is found to be defective.
Determine the probability that it was
manufactured by machines A, B and C.

Answer 25/69, 28/69, 16/69

 Business applications of probability

Probability theory is an important part of Statistical

theory. In business, probability theory is used in the
calculation of long-term gains and losses and also
for many other business related works.
A probability value of 0 means there is no chance
that an event will happen and a value of 1 means
there is 100 percent chance that the event will
happen. Understanding probability is helpful for
decision making.
In business, probability theory is used in the
calculation of long-term gains and losses. This is
how a company whose business is based on risk
calculates "probability of profitability" within
acceptable margins. Every decision made in the
business world has risk to it. So, in business, the
probability is used to assess the company's financial
risks.
 …. Business applications of probability
Probability in Manufacturing
Manufacturing businesses can use probability to
determine the cost-benefit ratio or the transfer of a
new manufacturing technology process by
addressing the likelihood of improved profits.
Other instances of probability in manufacturing
include determining the likelihood of producing
defective products.
Scenario Analysis
Probability distributions can be used to create
scenario analyses. For example, a business might
create three scenarios: worst-case, likely and best-
case. The worst-case scenario would contain some
value from the lower end of the probability
distribution; the likely scenario would contain a
value towards the middle of the distribution; and the
best-case scenario would contain a value in the
upper end of the scenario.
 …. Business applications of probability
Risk Evaluation
In addition to predicting future sales levels,
probability distribution can be a useful tool for
evaluating risk. Consider, for example, a company
considering entering a new business line. Suppose
the company needs to generate $500,000 in
revenue.
If the probability distribution tells them that there
is a 10 percent chance that revenues will be less
than $500,000, the company knows roughly what
level of risk it is facing if it decides to pursue that
new business line.
Sales Forecasting
One practical use for probability distributions and
scenario analysis in business is to predict future
levels of sales.