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BUSINESS STATISTICS - PROBABILITY 2026–2027
PRACTICE GUIDE: 100 QUESTIONS WITH DETAILED
RATIONALES
Probability & Statistics / Quantitative Methods / Applied Probability (Mathematics)
Exam coverage:
❖ Section 1 (Q1–20): Basic probability concepts, terminology,
classical/empirical/subjective approaches, complement rule,
and sample space.
❖ Section 2 (Q21–40): Addition rule, mutually exclusive events,
union and intersection of events, and contingency tables.
❖ Section 3 (Q41–60): Conditional probability, independence,
multiplication rule, and Bayes' theorem.
❖ Section 4 (Q61–80): Random variables, discrete and
continuous distributions, binomial, Poisson, and normal
distributions.
❖ Section 5 (Q81–100): Expected value, decision making, EVPI,
covariance, correlation, and advanced probability
applications.
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Section 1: Basic Probability Concepts & Terminology
(Questions 1–20)
Question 1
A business analyst is reviewing the foundational terminology
used in probability theory. The analyst must understand the
difference between an experiment, an outcome, and an event.
Which of the following best describes an event in probability?
A. The process of observing a random phenomenon
B. A single possible result of an experiment
C. A collection of one or more outcomes from an experiment
D. The set of all possible outcomes of an experiment
CORRECT ANSWER: C
RATIONALE: An event is a collection of one or more outcomes
from an experiment. Option A describes an experiment. Option
B describes an outcome. Option D describes the sample space.
Question 2
A quality control manager is assessing the probability of
defective products on a manufacturing line. The manager must
determine which of the following values is a valid probability.
Which of the following represents a valid probability?
A. 1.25
B. -0.30
C. 0.75
D. 150%
CORRECT ANSWER: C
RATIONALE: A probability must be between 0 and 1, inclusive.
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Option A (1.25) exceeds 1. Option B (-0.30) is negative. Option D
(150%) exceeds 100%.
Question 3
A financial analyst is categorizing different approaches to
assigning probabilities. The analyst must understand the
classical, empirical, and subjective approaches. Which of the
following best describes the classical approach to probability?
A. Probabilities are based on personal judgment or experience.
B. Probabilities are based on observed data from repeated trials.
C. Probabilities are based on equally likely outcomes.
D. Probabilities are based on expert opinions.
CORRECT ANSWER: C
RATIONALE: The classical approach assumes that all outcomes
are equally likely. Option A describes the subjective approach.
Option B describes the empirical (relative frequency) approach.
Option D is a form of subjective probability.
Question 4
A marketing manager is conducting a survey and wants to
determine the probability that a randomly selected customer
will purchase a product. The manager knows that 240 out of 800
surveyed customers made a purchase. What is the empirical
probability that a randomly selected customer will purchase the
product?
A. 0.24
B. 0.30
C. 0.40
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D. 0.60
CORRECT ANSWER: B
RATIONALE: Empirical probability = Number of times event
occurred ÷ Total number of trials = 240 ÷ 800 = 0.30.
Question 5
A business analyst is examining the complement of an event. If
the probability of a customer defaulting on a loan is 0.15, what
is the probability that the customer will not default?
A. 0.15
B. 0.85
C. 1.00
D. 0.00
CORRECT ANSWER: B
RATIONALE: The complement rule states that P(A') = 1 – P(A).
P(not default) = 1 – 0.15 = 0.85.
Question 6
A project manager is evaluating the possible outcomes of a new
business venture. The manager must understand the concept of
mutually exclusive events. Which of the following best describes
mutually exclusive events?
A. Events that can occur at the same time
B. Events that cannot occur at the same time
C. Events that are independent of each other
D. Events that have the same probability
CORRECT ANSWER: B
RATIONALE: Mutually exclusive events cannot occur
BUSINESS STATISTICS - PROBABILITY 2026–2027
PRACTICE GUIDE: 100 QUESTIONS WITH DETAILED
RATIONALES
Probability & Statistics / Quantitative Methods / Applied Probability (Mathematics)
Exam coverage:
❖ Section 1 (Q1–20): Basic probability concepts, terminology,
classical/empirical/subjective approaches, complement rule,
and sample space.
❖ Section 2 (Q21–40): Addition rule, mutually exclusive events,
union and intersection of events, and contingency tables.
❖ Section 3 (Q41–60): Conditional probability, independence,
multiplication rule, and Bayes' theorem.
❖ Section 4 (Q61–80): Random variables, discrete and
continuous distributions, binomial, Poisson, and normal
distributions.
❖ Section 5 (Q81–100): Expected value, decision making, EVPI,
covariance, correlation, and advanced probability
applications.
, Page 2 of 49
Section 1: Basic Probability Concepts & Terminology
(Questions 1–20)
Question 1
A business analyst is reviewing the foundational terminology
used in probability theory. The analyst must understand the
difference between an experiment, an outcome, and an event.
Which of the following best describes an event in probability?
A. The process of observing a random phenomenon
B. A single possible result of an experiment
C. A collection of one or more outcomes from an experiment
D. The set of all possible outcomes of an experiment
CORRECT ANSWER: C
RATIONALE: An event is a collection of one or more outcomes
from an experiment. Option A describes an experiment. Option
B describes an outcome. Option D describes the sample space.
Question 2
A quality control manager is assessing the probability of
defective products on a manufacturing line. The manager must
determine which of the following values is a valid probability.
Which of the following represents a valid probability?
A. 1.25
B. -0.30
C. 0.75
D. 150%
CORRECT ANSWER: C
RATIONALE: A probability must be between 0 and 1, inclusive.
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Option A (1.25) exceeds 1. Option B (-0.30) is negative. Option D
(150%) exceeds 100%.
Question 3
A financial analyst is categorizing different approaches to
assigning probabilities. The analyst must understand the
classical, empirical, and subjective approaches. Which of the
following best describes the classical approach to probability?
A. Probabilities are based on personal judgment or experience.
B. Probabilities are based on observed data from repeated trials.
C. Probabilities are based on equally likely outcomes.
D. Probabilities are based on expert opinions.
CORRECT ANSWER: C
RATIONALE: The classical approach assumes that all outcomes
are equally likely. Option A describes the subjective approach.
Option B describes the empirical (relative frequency) approach.
Option D is a form of subjective probability.
Question 4
A marketing manager is conducting a survey and wants to
determine the probability that a randomly selected customer
will purchase a product. The manager knows that 240 out of 800
surveyed customers made a purchase. What is the empirical
probability that a randomly selected customer will purchase the
product?
A. 0.24
B. 0.30
C. 0.40
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D. 0.60
CORRECT ANSWER: B
RATIONALE: Empirical probability = Number of times event
occurred ÷ Total number of trials = 240 ÷ 800 = 0.30.
Question 5
A business analyst is examining the complement of an event. If
the probability of a customer defaulting on a loan is 0.15, what
is the probability that the customer will not default?
A. 0.15
B. 0.85
C. 1.00
D. 0.00
CORRECT ANSWER: B
RATIONALE: The complement rule states that P(A') = 1 – P(A).
P(not default) = 1 – 0.15 = 0.85.
Question 6
A project manager is evaluating the possible outcomes of a new
business venture. The manager must understand the concept of
mutually exclusive events. Which of the following best describes
mutually exclusive events?
A. Events that can occur at the same time
B. Events that cannot occur at the same time
C. Events that are independent of each other
D. Events that have the same probability
CORRECT ANSWER: B
RATIONALE: Mutually exclusive events cannot occur
