a. define a random variable, an outcome, an event, mutually exclusive events, and exhaustive events;

b. state the two defining properties of probability and distinguish among empirical, subjective, and a priori probabilities;

c. state the probability of an event in terms of odds for and against the event;

d. distinguish between unconditional and conditional probabilities;

e. explain the multiplication, addition, and total probability rules;

f. calculate and interpret 1) the joint probability of two events, 2) the probability that at least one of two events will occur, given the probability of each and the joint probability of the two events, and 3) a joint probability of any number of independent events.

g. distinguish between dependent and independent events;

e. explain the multiplication, addition, and total probability rules;

f. calculate and interpret 1) the joint probability of two events, 2) the probability that at least one of two events will occur, given the probability of each and the joint probability of the two events, and 3) a joint probability of any number of independent events.

g. distinguish between dependent and independent events;

h. calculate and interpret an unconditional probability using the total probability rule;

i. explain the use of conditional expectation in investment applications;

j. explain the use of a tree diagram to represent an investment problem;

l. calculate and interpret the expected value, variance, and standard deviation of a random variable and of returns on a portfolio;

k. calculate and interpret covariance and correlation;

m. calculate and interpret covariance given a joint probability function;

n. calculate and interpret an updated probability using Bayes' formula;

o. identify the most appropriate method to solve a particular counting problem and solve counting problems using the factorial, combination, and permutation concepts.