Repeat Problem 19.6 on the assumption that the probability of default applicable to all loans is uncertain.
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Repeat Problem 19.6 on the assumption that the probability of default applicable to all loans is uncertain. It is equally likely to be 0.5% or 1.5%.
Problem 19.6
A bank has 100 one‐year loans, each with a 1% probability of default. What is the probability of six or more defaults, assuming independence?
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In this case we must average the cumulative ...View the full answer
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