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Problem 5 (9) Consider two rms A and B. The weekly returns of Firm A have a normal distribution with p : 2 and a : 4. The distribution of weekly returns as estimate by rm B is Return *4 1 4 Probability 0.4 0.2 0.4 The returns are in percentages. Assume that returns are independent of each other. In the midst of nancial crisis: a) a manager of rm A rm believes that rm A will default if its average return from the next four weeks will be negative. According to the manager, what is the probability that rm A will default? (3) b) a manager of rm B believes that rm B will default if its return will be negative on at least four out of the next ve weeks. According to the manager, what is the probability that rm B will default? (3) c) What is the probability that at least one rm will default? (3)