Quantitative Methods Q152

0. AB & Co. has issued two callable bonds with a maturity of 2 and 5 years respectively. The probability that Bond A will be called is 60% and the probability that Bond B will be called is 50%. The probability that at least one of the bonds will be called is closest to:

Answer
Comment
Array

Option : A
Explanation : The probability that at least one of the bonds will be called can be calculated using the Addition rule of probability which is: P(A or B) = P(A) + P(B) – P(A and B) where P(A and B) is P(A) * P(B) P(A or B) = 0.6 + 0.5 - 0.6 * 0.5 = 0.8.

Forgot your password?

I agree with the Terms.