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Question
A bond investor has a 99% chance of receiving all of her promised payments on a particular bond issue in the first year of holding the bond, but only a 98% chance in the second year, and a 97% chance in the third year and beyond. What is the cumulative default probability over the first three years she holds the bond?
A. 3.75%
B. 4.24%
C. 5.89%
D. 6.85%
E. 7.33%
Answer
This answer is hidden. It contains 25 characters.
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