{"id":433,"date":"2019-10-10T13:27:00","date_gmt":"2019-10-10T13:27:00","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=433"},"modified":"2026-01-28T10:02:26","modified_gmt":"2026-01-28T10:02:26","slug":"unconditional-vs-conditional-probabilities-example","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/quantitative-methods\/unconditional-vs-conditional-probabilities-example\/","title":{"rendered":"Unconditional Vs Conditional Probabilities"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"VideoObject\",\n  \"name\": \"Probability Concepts (2021 Level I CFA\u00ae Exam \u2013 Reading 8)\",\n  \"description\": \"This video lesson covers key probability concepts in quantitative methods, including random variables, event types, probability rules, odds, conditional probability, Bayes\u2019 formula, counting principles, and portfolio applications. It explains real-world uses of probability in finance, using examples and formulas to build understanding for CFA exam success.\",\n  \"uploadDate\": \"2020-10-01T00:00:00+00:00\",\n  \"thumbnailUrl\": \"https:\/\/i.ytimg.com\/vi\/hu47ZbsskEw\/hqdefault.jpg\",\n  \"contentUrl\": \"https:\/\/www.youtube.com\/watch?v=hu47ZbsskEw\",\n  \"embedUrl\": \"https:\/\/www.youtube.com\/embed\/hu47ZbsskEw\",\n  \"duration\": \"PT48M33S\"\n}\n<\/script>\n\n\n\n<p>\n  <iframe loading=\"lazy\"\n    src=\"\/\/www.youtube.com\/embed\/hu47ZbsskEw\"\n    width=\"611\"\n    height=\"343\"\n    allowfullscreen=\"allowfullscreen\">\n  <\/iframe>\n<\/p>\n\n\n\n<p>Unconditional probability (also known as marginal probability) is simply the probability that an event occurs without considering any other preceding events. In other words, unconditional probabilities are not dependent on the occurrence of any other events; they are \u2018stand-alone&#8217; events. Therefore, if we are interested in the probability of an event, say, A, the standard annotation is P (A). Let us look at a few examples.<\/p>\n<p><!--more--><\/p>\n<ol>\n<li>The probability that it will rain on a given day without considering the rainfall pattern of a given area or any other climatic factor.<\/li>\n<li>The probability that a given stock will earn a 10% annual return without considering the preceding annual returns.<\/li>\n<\/ol>\n<h2><strong>Conditional Probability<\/strong><\/h2>\n<p>A conditional probability is the exact opposite of an unconditional probability. Our interest lies in the probability of an event \u2018A\u2019 <strong>given<\/strong> that another event \u2018B \u2018 <strong>has already occurred. <\/strong>This is what you should ask yourself:<\/p>\n<p>\u201cWhat is the probability of one event occurring <strong>if <\/strong>another event has already taken place?<\/p>\n<p>We pronounce P (A | B) as \u201cthe probability of A given B.\u201d<\/p>\n<p>The bar sandwiched between A and B indicates \u201cgiven.\u201d<\/p>\n<h3>Examples<\/h3>\n<ol>\n<li>What is the probability that it will rain on a given day, given that there have been rains on each of the 3 preceding days?<\/li>\n<li>The probability that a stock will earn a 10% annual return, given that it has earned a 9% return during each of the two previous financial years.<\/li>\n<\/ol>\n<p>Understanding the theory behind conditional and unconditional probabilities will help you understand and work out solutions for quantitative probability questions.<\/p>\n<div class=\"notes_inv\"><hr \/><\/div>","protected":false},"excerpt":{"rendered":"<p>Unconditional probability (also known as marginal probability) is simply the probability that an event occurs without considering any other preceding events. In other words, unconditional probabilities are not dependent on the occurrence of any other events; they are \u2018stand-alone&#8217; events&#8230;.<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[2],"tags":[],"class_list":["post-433","post","type-post","status-publish","format-standard","hentry","category-quantitative-methods","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Unconditional vs. Conditional Probability | CFA Level 1<\/title>\n<meta name=\"description\" content=\"Learn the difference between unconditional and conditional probability. Understand how prior events affect probability calculations in finance.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/analystprep.com\/cfa-level-1-exam\/quantitative-methods\/unconditional-vs-conditional-probabilities-example\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Unconditional vs. Conditional Probability | CFA Level 1\" \/>\n<meta property=\"og:description\" content=\"Learn the difference between unconditional and conditional probability. 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