Can somebody explain to me why the answer is A? Thanks. For a certain class of junk bonds, the probability of default in a given year is 0.2. Whether one bond defaults is independent of whether another bond defaults. For a portfolio of five of these junk bonds, what is the probability that zero or one bond of the five defaults in the year ahead?
A) 0.7373. B) 0.0819. C) 0.4096.
The correct answer was A) 0.7373.