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Wow. haha i never thought id ever have to use probability

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CEO
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Wow. haha i never thought id ever have to use probability [#permalink] New post 25 Feb 2008, 16:55
Wow. haha i never thought id ever have to use probability but i was wrong.

Heres a relatively easy probability problem from a CFA question. The CFA is my next hurdle now. All I gotta say is thank you GMAT.

For a certain class of junk bonds, the probability of default in a given year is 0.2. Whether one bond defaults is independent of whether another bond defaults. For a portfolio of five of these junk bonds, what is the probability that zero or one bond of the five defaults in the year ahead?
a) .5904
b) .0819
c) .4096
d) .7373
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Re: CFA probability [#permalink] New post 25 Feb 2008, 17:10
C ? :)

Wow, i didnt know hat the CFA had questions like this
CEO
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Re: CFA probability [#permalink] New post 25 Feb 2008, 17:26
easy. use the calculator. :-D

that 8 hour test (3 morning,2 break, 3 afternoon) was brutal. i was delirious when 4:45 rolled around. but i got those "i survived the CFA exam" shirts. i never wear it. :)
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You tried your best and you failed miserably. The lesson is 'never try'. -Homer Simpson

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Re: CFA probability [#permalink] New post 25 Feb 2008, 17:27
could you please explain your answer?
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Re: CFA probability [#permalink] New post 25 Feb 2008, 17:35
is it d?

P(none default) = (.8)^5
P(one default) = P(non-default)^4

(.8)^5 + (.8)^4
D
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You tried your best and you failed miserably. The lesson is 'never try'. -Homer Simpson

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Re: CFA probability [#permalink] New post 25 Feb 2008, 17:41
OA is D.

.8^5+ 5(.8^4*.2) ~.7373
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Re: CFA probability [#permalink] New post 25 Feb 2008, 17:44
hhhmmm is it because its

5C1 * .8^4 * .2^1
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You tried your best and you failed miserably. The lesson is 'never try'. -Homer Simpson

Re: CFA probability   [#permalink] 25 Feb 2008, 17:44
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Wow. haha i never thought id ever have to use probability

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