Consider Two Firms,each of Which Has a Distance-To-Default of 1 $$\rho = 0.5$$

question 22

Multiple Choice

Consider two firms,each of which has a distance-to-default of 1.The correlation of default of the two firms is $$\rho = 0.5$$ .Assuming bivariate normality,what is the probability that both firms default?

• A)4.50%
• B)6.25%
• C)8.75%
• D)10.25%

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Definitions:

Volunteer Bias

A bias in research outcomes that occurs due to differences between those who choose to participate in studies and those who do not.

Correlational Method

A research method used to establish the degree of relationship (correlation) between two characteristics, events, or behaviors.

Alcohol Consumption

The act of drinking beverages containing ethanol, which can range from moderate intake to heavy or problematic drinking.

Correlation Coefficient

A statistical measure that describes the extent to which two variables change together.