CFA Practice Question

There are 410 practice questions for this study session.

CFA Practice Question

Which of the following is true regarding probability?

I. 0 < P(E) < 1: the probability of event E is a number between 0 and 1, exclusive.
II. The sum of the probabilities of any group of mutually exclusive events equals 1.
III. 0 <= P(E) <= 1: the probability of event E is a number between 0 and 1, inclusive.
A. III only
B. I and II
C. II and III
Explanation: Only III is true: 0 <= P(E) <= 1: the probability of event E is a number between 0 and 1, inclusive. A probability can equal 1 or 0; thus, statement I is false. Statement II would only be true if it read: "The sum of the probabilities of any group of mutually exclusive and exhaustive events equals 1." Throwing a 6-sided die can lead to 6 different outcomes, each with probability of 1/6. However, if the group of mutually exclusive outcomes only included results 1 and 2, the sum of those probabilities would not be 1. Such a group would not be exhaustive because it excludes the outcomes 3, 4, 5, 6.

User Contributed Comments 2

User Comment
Acliner Mutually exclusive events do not have to total 1.
bwbarksdale when it's mutually exclusive AND exhaustive, the sum of the probabilities equals 1.
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