Probability
&
Simple Interest & Compound Interest
Probability
G-Strategy-GRE: Probability and SI&CI
Probability is a chance of happening anything.
G-Strategy-GRE: Probability and SI&CI
Ratio of Odds Favor of an Event: p/q
Ratio of Odds Against of an Event: q/p
G-Strategy-GRE: Probability and SI&CI
The complement rule
There is a very simple and very important rule relating P(A) and P(not A),
linking the probability of any event happening with the probability of that
same event not happening.
Total probability is always “1”
P(Happening) + P(Not Happening) = 1
P(Happening) = 1- P(Not Happening)
P(Not Happening) = 1- P(Happening)
G-Strategy-GRE: Probability and SI&CI
Generalized OR Rule of Probability for non-disjoint events
Non-Disjoint Event: Some outcomes do overlap. They can both occur at the same time.
These outcomes are called non-disjoint.
P(A or B) = P(A) + P(B) – P(A and B)
or
P(A ∪ B ) = P (A) + P(B) − P (A ∩ B) .
.
G-Strategy-GRE: Probability and SI&CI
Practice Problem
Twenty three cards are numbered with the integers from 1 to 23. If one card is randomly
selected from the 23 cards, what is the probability that the integer on the selected card
will be a multiple of 3 or a multiple of 4 or a multiple of both 3 and 4?
A. 7/23
B. 9/23
C. 11/23
D. 12/23
E. 13/23
G-Strategy-GRE: Probability and SI&CI
The Correct Answer: C
G-Strategy-GRE: Probability and SI&CI
Disjoint-Events (mutually exclusive events)
Two events are disjoint if they are mutually exclusive. In other words, two
events are disjoint if the probability of their simultaneous occurrence is zero,
that is, it is absolutely impossible to have them both happen at the same time.
Simplified OR Rule of Probability for Disjoint events:
.
G-Strategy-GRE: Probability and SI&CI
Practice Problem
Twenty three cards are numbered with the integers from 1 to 23. If one card is randomly
selected from the 23 cards, what is the probability that the integer on the selected card
will be a multiple of 5 or a multiple of 7 or a multiple of both 5 and 7?
(A) 7/23
(B) 8/23
(C) 9/23
(D) 10/23
(E) 11/23
G-Strategy-GRE: Probability and SI&CI
The Correct Answer: A
G-Strategy-GRE: Probability and SI&CI
Independent-Events
Two events are independent if whether one happens has absolutely no influence on whether
the other happens.
Simplified AND Rule Of Probability:
If events A and B are independent, then we can use the simplified AND rule:
P(A and B) = P(A)*P(B) or P(A∩B) = P(A)*P(B)
Note: P(A and B) is always less than or equals to P(A)
Note: P(A and B) is always less than or equals to P(B)
G-Strategy-GRE: Probability and SI&CI
Practice Problem
Set #1 = {A, B, C, D, E}; Set #2 = {K, L, M, N, O, P}
If one letter selected from each set then what is the probability of picking C and M?
(A) 1/30
(B) 1/15
(C) 1/6
(D) 1/5
(E) 1/3
G-Strategy-GRE: Probability and SI&CI
The Correct Answer: A
G-Strategy-GRE: Probability and SI&CI
Generalized OR Rule of Probability for Independent events:
P(A or B) = P(A) + P(B) – P(A and B)
If events A and B are independent events then,
P(A or B) = P(A) + P(B) – P(A)*P(B)
.
G-Strategy-GRE: Probability and SI&CI
Practice Problem
Set #1 = {A, B, C, D, E}; Set #2 = {K, L, M, N, O, P}
If one letter selected from each set then what is the probability of picking C or M?
(A) 1/30
(B) 1/15
(C) 1/6
(D) 1/5
(E) 1/3
G-Strategy-GRE: Probability and SI&CI
The Correct Answer: E
G-Strategy-GRE: Probability and SI&CI
Practice Problem: Medium
G-Strategy-GRE: Probability and SI&CI
The Correct Answer: 0.4
G-Strategy: Probability and SI&CI
Binomial Situation
When to use it?
I. If one experiment repeated several times
II. Many identical experiment done at a time
We know that the binomial probability distribution is
nCr x pr (1 − p)n−r.
n # of experiment
r # of success experiment
p Prob. that one experiment success
G-Strategy-GRE: Probability and SI&CI
.
G-Strategy-GRE: Probability and SI&CI
Answer: 3/8
G-Strategy-GRE: Probability and SI&CI
A. 10C2. (1/6)2 . (5/6)8
B. 10C2. (1/6)3 . (5/6)7
C. 10C4. (1/6)2 . (5/6)8
D. 10C5. (1/6)2 . (5/6)8
E. 10C6. (1/6)2 . (5/6)8
G-Strategy-GRE: Probability and SI&CI
ANSWER: A
G-Strategy-GRE: Probability and SI&CI
Practice Problem
G-Strategy-GRE: Probability and SI&CI
The Correct Answer: C
G-Strategy-GRE: Probability and SI&CI
Practice Problem
If five coins are tossed simultaneously, what is the probability that exactly two coins
turns-up head?
A. 15/16
B. 2/3
C. ½
D. 5/8
E. 5/16
G-Strategy-GRE: Probability and SI&CI
The Correct Answer: E
G-Strategy-GRE: Probability and SI&CI
Simple Interest & Compound Interest
G-Strategy-GRE: Probability and SI&CI
Interest: Interest is money which paid for use of other money.
G-Strategy-GRE: Probability and SI&CI
Simple Interest
G-Strategy-GRE: Probability and SI&CI
Compound Interest
G-Strategy-GRE: Probability and SI&CI
Compound Interest
G-Strategy-GRE: Probability and SI&CI
Compound Interest
Amount = P ( 1 + r/100 )t
Compound Interest = Amount – P
Compound Interest in case of multiple intervals
Amount = P [1 + r/(n*100) ]t*n
n number of intervals in a year.
G-Strategy-GRE: Probability and SI&CI
Question:
G-Strategy-GRE: Probability and SI&CI
The Correct Answer: $6375.4
G-Strategy-GRE: Probability and SI&CI
Question:
G-Strategy-GRE: Probability and SI&CI
The Correct Answer:
G-Strategy-GRE: Probability and SI&CI
Question: (Very Good)
An investment of $1000 placed into a bank account in the beginning of each year.
If bank pays 10% simple interest per year, then what will be the account balance
after 5 years? (No other transaction made into this account)
A. $ 500
B. $ 1500
C. $ 5500
D. $ 6500
E. $ 7500
G-Strategy-GRE: Probability and SI&CI
The Correct Answer: D
G-Strategy-GRE: Probability and SI&CI
Question : Hard
Amy deposited $1,000 into an account that earns 8% annual interest compounded
every 6
months. Bob deposited $1,000 into an account that earns 8% annual interest
compounded
quarterly. If neither Amy nor Bob makes any additional deposits or withdrawals, in 6
months
how much more money will Bob have in his account than Amy?
(A) $40
(B) $8
(C) $4
(D) $0.40
(E) $0.04
G-Strategy: Probability and SI&CI
The Correct Answer D:
Both Amy and Bob start with $1,000 and earn 8% interest
annually; the difference is in how often this interest is
compounded. Amy’s interest is compounded twice a year at 4%
each time (8% annual interest compounded 2 times a year means
that she gets half the interest, or 4%, every six months). Bob’s
interest is compounded four times a year at 2% (8% divided by 4
times per year) each time. After 6 months, Amy has $1,000 × 1.04
= $1,040.00 (1 interest
payment at 4%) and Bob has $1,000 × (1.02)2 = $1,040.40 (2
interest payments at 2%). The difference is $1,040.40 - $1,040.00
= $0.40.
G-Strategy-GRE: Probability and SI&CI
Thank You