Consider Two Firms with One-Year Probabilities of Default Of $p _ { 1 } = 0.10$

question 12

Multiple Choice

Consider two firms with one-year probabilities of default of $p _ { 1 } = 0.10$ and $p _ { 2 } = 0.05$ , respectively. The correlation of default of these two firms is $\rho = 0.30$ . What is the probability that both firms default in one year?

• A) 1.0%
• B) 1.5%
• C) 2.0$
• D) 2.5%

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Definitions:

Organizational Politics

The activities and behaviors individuals engage in within a workplace to gain power, influence decisions, and achieve personal or organizational objectives.

Beneficial

Refers to something that provides an advantage or contributes to well-being.

Strategic Contingencies

Critical events or factors that significantly influence the success of strategies or decision-making processes within organizations.

Source Of Uncertainty

Any factor or condition that creates doubt or ambiguity in decision-making or planning.