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NEW QUESTION: 1
The probability of default of a security over a 1 year period is 3%. What is the probability that it would not have defaulted at the end of four years from now?
A. 11.47%
B. 88.00%
C. 12.00%
D. 88.53%
Answer: D
Explanation:
Explanation
The probability that the security would not default in the next 4 years is equal to the probability of survival raised to the power four. In other words, =(1 - 3%)