A Hazard Rate Is 1% Per Annum

question 2

Multiple Choice

A hazard rate is 1% per annum.What is the probability of a default during the first two years?

• A) 2.00%
• B) 2.02%
• C) 1.98%
• D) 1.96%

---

Definitions:

Unambiguous Predictions

Clear, precise, and easily interpretable forecasts that leave little to no room for multiple interpretations or ambiguity.

Falsifiable

A criterion for a theory or hypothesis that it can be proven wrong by observable data or experiment.

Correlation

A measure indicating the extent to which two or more variables fluctuate together, which can be positive, negative, or zero (no correlation).

Demand Characteristics

Cues in an experiment that suggest to participants what behavior is expected, potentially influencing the outcomes of that experiment.