Study for the SOA Fundamentals of Actuarial Mathematics (FAM) Exam. Prepare with flashcards and multiple choice questions with detailed explanations. Get ready for your future as an actuary!

Multiple Choice

P(A|B) is equal to which expression?

Conditional probability asks for the probability of A given that B has occurred. It is defined as the probability of A and B both happening divided by the probability that B occurs, provided P(B) > 0. This reflects restricting attention to outcomes in B and asks what portion of that B-portion also lies in A. So P(A|B) = P(A ∩ B) / P(B). The other forms aren’t correct: P(B)/P(A) is the reverse, P(A ∪ B)/P(B) uses the union, and P(A)P(B) would only equal P(A|B) if A and B were independent.

Conditional probability asks for the probability of A given that B has occurred. It is defined as the probability of A and B both happening divided by the probability that B occurs, provided P(B) > 0. This reflects restricting attention to outcomes in B and asks what portion of that B-portion also lies in A. So P(A|B) = P(A ∩ B) / P(B). The other forms aren’t correct: P(B)/P(A) is the reverse, P(A ∪ B)/P(B) uses the union, and P(A)P(B) would only equal P(A|B) if A and B were independent.