Addition Rule For Probabilities

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

BREAKING DOWN '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. Joint Probability

    A statistical measure where the likelihood of two events occurring ...
  2. Compound Probability

    A mathematical term relating to the likeliness of two independent ...
  3. Conditional Probability

    Probability of an event or outcome based on the occurrence of ...
  4. Posterior Probability

    The revised probability of an event occurring after taking into ...
  5. Objective Probability

    The probability that an event will occur based an analysis in ...
  6. Prior Probability

    The probability that an event will reflect established beliefs ...
Related Articles
  1. Trading

    Financial Forecasting: The Bayesian Method

    This method can help refine probability estimates using an intuitive process.
  2. Investing

    Estimating with Subjective Probability

    Subjective probability is someone’s estimation that an event will occur.
  3. Investing

    Scenario Analysis Provides Glimpse Of Portfolio Potential

    This statistical method estimates how far a stock might fall in a worst-case scenario.
  4. Investing

    What are Mutually Exclusive Events?

    In statistics, mutually exclusive situations involve the occurrence of one event that does not influence or cause another event.
  5. Investing

    What Are The Odds Of Scoring A Winning Trade?

    Just because you're on a winning streak doesn't mean you're a skilled trader. Find out why.
  6. Investing

    Understand The Math Behind Betting Odds & Gambling

    A betting opportunity should be considered valuable if the probability assessed for an outcome is higher than the implied probability estimated by the bookmaker. Furthermore, the odds on display ...
  7. Investing

    Explaining Expected Return

    The expected return is a tool used to determine whether or not an investment has a positive or negative average net outcome.
  8. Trading

    Multivariate Models: The Monte Carlo Analysis

    This decision-making tool integrates the idea that every decision has an impact on overall risk.
  9. Trading

    Profiting From Panic Selling

    When everyone rushes to dump their stocks, you may find yourself with a great buying opportunity. Learn about it here.
  10. Investing

    Find The Right Fit With Probability Distributions

    Discover a few of the most popular probability distributions and how to calculate them.
RELATED FAQS
  1. Should I get into a margin account if I need annual income?

    Should an 86 year old who has an annuity worth $100,000.00, an IRA worth $38,000.00 and $54,000.00 in open end funds get ... Read Answer >>
  2. Is there something wrong with the calculation of my SS benefits and widow's pension?

    My spouse did not work some of the years during our marriage of 37 years. How is it possible th... Read Answer >>
  3. Would I owe taxes on a 1035 exchange?

    I have an old paid-up life policy with a substantial outstanding loan. If I surrender the policy, the ... Read Answer >>
  4. Do you have any suggestions since I can no longer draw spousal benefits under the ...

    My husband is 71. He retired at 65 (not his FRA) and is drawing SS. I am 63 and was planning on retiring at 66, drawing on ... Read Answer >>
  5. What are some examples of different taxable events?

    Learn what a taxable event is and how it affects investors and taxpayers with examples of taxable events that can result ... Read Answer >>
Hot Definitions
  1. Put Option

    An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security ...
  2. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  5. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  6. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
Trading Center