What is the probability that an AA bond or a Corporate bond outperforms all of the others?
In a portfolio there are 7 bonds: 2 AAA Corporate bonds, 2 AAA Agency bonds, 1 AA Corporate and 2 AA Agency bonds. By an unexplained characteristic the probability of any specific AAA bond outperforming the others is twice the probability of any specific AA bond outperforming the others .
What is the probability that an AA bond or a Corporate bond outperforms all of the others?
A . 5/7
B . 8/11
C . 6/11
D . None of these
Answer: D
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