Company A will default with probability .01, company B will default with probability .05, and company...
Company A will default with probability .01, company B will default with probability .05, and company C will default with probability .09. I will buy a bond of company A with probability .5, I will buy a bond of company B with probability .3, and I will buy a bond of company C with probability .2. Given that the bond that I bought defaults, what is the probability that the bond was of Company A?
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Company A will default with probability .01, company B will default with probability .05, and company...
An analyst estimates that the probability of default on a seven-year AA-rated bond is 0.44, while...
An analyst estimates that the probability of default on a seven-year AA-rated bond is 0.44, while that on a seven-year A-rated bond is 0.56. The probability that they will both default is 0.40. a. What is the probability that at least one of the bonds defaults? (Round your answer to 2 decimal places.) b. What is the probability that neither the seven-year AA-rated bond nor the seven-year A-rated bond defaults? (Round your answer to 2 decimal places.) Probability c. Given...
Exercise 4-31 Algo An analyst estimates that the probability of default on a seven-year AA-rated bond...
Exercise 4-31 Algo An analyst estimates that the probability of default on a seven-year AA-rated bond is 0.52, while that on a r A-rated bond is 0.48. The probability that they will both default is 0.36. a. What is the probability that at least one of the bonds defaults? (Round your answer to 2 decimal places.) Probability b. What is the probability that neither the seven-year AA-rated bond nor the seven-year A-rated bond defaults? (Round your answer to 2 decimal...
Consider all of a class of companies with a similar probability of default. Assume that the...
Consider all of a class of companies with a similar probability of default. Assume that the probability that any one company defaults is independent of the probability that the others default. If we expect that three companies will default on their debt in March 2019, what is the approximate probability that no more than 1 company defaults? So far I have noted that E(x) = 3, the probability that any one company defaults = 1/n because they have similar probabilities...
Company A has probability .07 of defaulting. Company B has probability of .001 of defaulting. Assume...
Company A has probability .07 of defaulting. Company B has probability of .001 of defaulting. Assume that the event that company A defaults is independent of the event that company B defaults. a) What is the probability that both company A and company B defaults? b) What is the probability that either company A or company B or both default?
There are 5 companies, each sells a bond that will pay $20 in one month. For...
There are 5 companies, each sells a bond that will pay $20 in one month. For each company the bond costs $10. All of these companies have probability .01 of default, and whether one defaults is independent from whether any of the others default. a) Let X be the number of companies that default. What is the distribution of X? What is the expected value of X? What is the variance of X? b) Consider two portfolios. In portfolio I,...
There are 5 companies, each sells a bond that will pay $20 in one month. For...
There are 5 companies, each sells a bond that will pay $20 in one month. For each company the bond costs $10. All of these companies have probability .01 of default, and whether one defaults is independent from whether any of the others default. a) Let X be the number of companies that default. What is the distribution of X? What is the expected value of X? What is the variance of X? b) Consider two portfolios. In portfolio I,...
c) On the 01/09/2008 an investor is purchasing a bond from a seller; the last coupon on the bond was paid on the 01...
c) On the 01/09/2008 an investor is purchasing a bond from a seller; the last coupon on the bond was paid on the 01/ 05/2008 and the maturity date is 01/ 05/2012. The bond has a coupon rate of 10% and nominal value K1, 000. The yield to maturity is equal to 8%. (2.5 marks) Determine the dirty price paid by the buyer. i. (2.5 marks) i. Calculate the accrued interest.
c) On the 01/09/2008 an investor is purchasing a...
given the following joint probability table A1 A2 B1 .02 .01 B2 .05 .02 Calculate the...
given the following joint probability table A1 A2 B1 .02 .01 B2 .05 .02 Calculate the conditional probability P(A1IB1) round your answer
If a bond has an annual probability of default of 6%, 10% and 12% in years...
If a bond has an annual probability of default of 6%, 10% and 12% in years 1, 2 and 3 respectively, what is the probability that it will not be in default at the end of year 3? Show how you derived your answer.
The expected loss on a debt security is given by the: A. probability of default times...
The expected loss on a debt security is given by the: A. probability of default times the present value of the loss. B. probability of default times the loss given default. C. loss given default minus the recovery rate.
An analyst estimates that the probability of default on a seven-year AA-rated bond is 0.44, while that on a seven-year A-rated bond is 0.56. The probability that they will both default is 0.40. a. What is the probability that at least one of the bonds defaults? (Round your answer to 2 decimal places.) b. What is the probability that neither the seven-year AA-rated bond nor the seven-year A-rated bond defaults? (Round your answer to 2 decimal places.) Probability c. Given...
Exercise 4-31 Algo An analyst estimates that the probability of default on a seven-year AA-rated bond is 0.52, while that on a r A-rated bond is 0.48. The probability that they will both default is 0.36. a. What is the probability that at least one of the bonds defaults? (Round your answer to 2 decimal places.) Probability b. What is the probability that neither the seven-year AA-rated bond nor the seven-year A-rated bond defaults? (Round your answer to 2 decimal...
c) On the 01/09/2008 an investor is purchasing a bond from a seller; the last coupon on the bond was paid on the 01/ 05/2008 and the maturity date is 01/ 05/2012. The bond has a coupon rate of 10% and nominal value K1, 000. The yield to maturity is equal to 8%. (2.5 marks) Determine the dirty price paid by the buyer. i. (2.5 marks) i. Calculate the accrued interest.
c) On the 01/09/2008 an investor is purchasing a...
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