b. What is the probability that neither
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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An analyst estimates that the probability of default on a seven-year AA-rated bond is 0.06, while that on a seven-year A-rated bond is 0.13. The probability that they will both default is 0.04.
a. What is the probability that at least one of the bonds defaults? (Round your answer to 2 decimal places.)
b. What is the probability that neither the seven-year AA-rated bond nor the seven-year A-rated bond defaults? (Round your answer to 2 decimal places.)
c. Given that the seven-year AA-rated bond defaults, what is the probability that the seven-year A-rated bond also defaults? (Round your answer to 2 decimal places.)
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