Suppose That the Cumulative Probability of a Company Defaulting by Years

question 17

Multiple Choice

Suppose that the cumulative probability of a company defaulting by years one,two,three and four are 3%,6.5%,10%,and 14.5%,respectively.What is the probability of default in the fourth year conditional on no earlier default?

• A) 4.5%
• B) 5.0%
• C) 5.5%
• D) 6.0%