Assume you are considering four bonds, each with a 11% probability of defaulting over the next year. The event of default for any given bond is independent of the other bonds defaulting.

a What is the probability of defaulting zero of the bonds, two of the bonds, or three of the bonds? (3 points)

b. Interpret your estimates in part 2(a) (2 points)

b. What is the mean and the standard deviation number of defaults? (3 points)

Mean number of defaults = n*p

Variance of defaults = np(1-p)]