Joint Probability Formula | CFA Level 1 Exam | Test Prep

The Formula for Joint Probability

Prev Question Next Question

Question

The formula for joint probability is given by:

Answers

Explanations

Click on the arrows to vote for the correct answer

A. B. C. D.

C

A joint probability takes the form of P(AB) = P(A | B) * P(B). Note that this is just a rearranged form of the formula for conditional probability.

The correct answer for the formula of joint probability is A. P(AB) = P(A | B) * P(B).

To understand this formula, let's break it down step by step:

  1. Joint probability refers to the probability of two events A and B occurring simultaneously.

  2. P(A | B) represents the conditional probability of event A occurring given that event B has already occurred. This can be interpreted as the probability of event A happening "under the condition" that event B has already taken place.

  3. P(B) represents the probability of event B occurring.

  4. Multiplying P(A | B) by P(B) gives us the joint probability P(AB), which is the probability of both events A and B occurring together.

Here's an intuitive way to understand the formula:

Imagine you have a bag of colored marbles. Event A represents picking a red marble from the bag, and event B represents picking a blue marble from the same bag.

  • P(A | B) represents the probability of picking a red marble (event A) given that you already know a blue marble has been picked (event B). In other words, it is the probability of drawing a red marble from the remaining marbles after a blue marble has been removed.

  • P(B) represents the probability of picking a blue marble from the bag, which is the initial probability before any marbles are drawn.

  • P(AB) represents the joint probability of picking both a red marble and a blue marble together.

Using this example, we can see that the formula P(AB) = P(A | B) * P(B) is the correct formula for joint probability.

Therefore, the correct answer is A. P(AB) = P(A | B) * P(B).