What is the probability of this counterparty defaulting in the fourth year?
A. 4.39%
B. 4.64%
C. 4.91%
D. 5.50%
Answer:B
What is the probability of this counterparty defaulting in the fourth year?
A. 4.39% B. 4.64% C. 4.91% D. 5.50%
Explanation: The probability of default in year 4 = (10.055)(10.055)(10.055)(0.055) = 0.06054 = 4.64%.