Hello I need help to solve the task
At the start of the year a bond portfolio consists of 2 bonds each worth $100.At the end of the year if a bond defaults it will be worth $20.If it does not default the bond will be worth $100. The probability that both bond default is 20%.The probability that neither bond defaults is 45%. What is the mean of the year end portfolio value??
I know the answer is $140 but i don`t know how to calculate. Please help and explain.