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

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CEO
Joined: 29 Mar 2007
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Wow. haha i never thought id ever have to use probability [#permalink]  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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SVP
Joined: 28 Dec 2005
Posts: 1579
Followers: 2

Kudos [?]: 91 [0], given: 2

Re: CFA probability [#permalink]  25 Feb 2008, 17:10
C ?

Wow, i didnt know hat the CFA had questions like this
CEO
Joined: 21 Jan 2007
Posts: 2760
Location: New York City
Followers: 9

Kudos [?]: 387 [0], given: 4

Re: CFA probability [#permalink]  25 Feb 2008, 17:26
easy. use the calculator.

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.
_________________

You tried your best and you failed miserably. The lesson is 'never try'. -Homer Simpson

Manager
Joined: 12 Feb 2008
Posts: 180
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Re: CFA probability [#permalink]  25 Feb 2008, 17:27
CEO
Joined: 21 Jan 2007
Posts: 2760
Location: New York City
Followers: 9

Kudos [?]: 387 [0], given: 4

Re: CFA probability [#permalink]  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
_________________

You tried your best and you failed miserably. The lesson is 'never try'. -Homer Simpson

CEO
Joined: 29 Mar 2007
Posts: 2585
Followers: 17

Kudos [?]: 243 [0], given: 0

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

.8^5+ 5(.8^4*.2) ~.7373
CEO
Joined: 21 Jan 2007
Posts: 2760
Location: New York City
Followers: 9

Kudos [?]: 387 [0], given: 4

Re: CFA probability [#permalink]  25 Feb 2008, 17:44
hhhmmm is it because its

5C1 * .8^4 * .2^1
_________________

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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