Addition Rule For Probabilities

AAA

DEFINITION of 'Addition Rule For Probabilities'

A statistical property that states the probability of one and/or two events occurring at the same time is equal to the probability of the first event occurring, plus the probability of the second event occurring, minus the probability that both events occur at the same time.

Mathematically, this property is denoted by:

Addition Rule For Probabilities

INVESTOPEDIA EXPLAINS 'Addition Rule For Probabilities'

For example, assume we wish to determine the probability of drawing a king and/or a queen out of a deck of cards on only one draw. Using the addition rule for probabilities, we get the following: P(King) = 4/52, P(Queen) = 4/52, and P(King and Queen) = 0.

Since it is impossible to draw both a king and queen on the same draw, we can conclude that the probability of drawing either a king or queen from a deck of cards is 8/52, or about 15.4%.

RELATED TERMS
  1. A Priori Probability

    Probability calculated by logically examining existing information. ...
  2. Dispersion

    A statistical term describing the size of the range of values ...
  3. Probability Distribution

    A statistical function that describes all the possible values ...
  4. Normal Distribution

    A probability distribution that plots all of its values in a ...
  5. Binomial Distribution

    A probability distribution that summarizes the likelihood that ...
  6. Compound Annual Growth Rate - CAGR

    The year-over-year growth rate of an investment over a specified ...
Related Articles
  1. What Are The Odds Of Scoring A Winning ...
    Investing Basics

    What Are The Odds Of Scoring A Winning ...

  2. Find The Right Fit With Probability ...
    Fundamental Analysis

    Find The Right Fit With Probability ...

  3. Bet Smarter With The Monte Carlo Simulation
    Active Trading Fundamentals

    Bet Smarter With The Monte Carlo Simulation

  4. An Introduction To Value at Risk (VAR)
    Options & Futures

    An Introduction To Value at Risk (VAR)

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center