- CFA Exams
- CFA Level I Exam
- Study Session 2. Quantitative Methods (1)
- Reading 8. Probability Concepts
- Subject 1. Introduction

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**CFA Practice Question**

Which of the following is true regarding probability?

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.

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.

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**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. |