Infinance, one example of a derivative is a financial asset whose value is determined(derived) from a bundle of variousassets, such as mortgages. Suppose a randomly selected mortgage in a certain bundle has a probability of 0.09 of default.

(a) What is the probability that a randomly selected mortgage will notdefault?

(b) What is the probability that four randomly selected mortgages will not default assuming the likelihood any one mortgage being paid off is independent of theothers? Note: A derivative might be an investment that only pays when all four mortgages do not default.

(c) What is the probability that the derivative from part(b) becomesworthless? Thatis, at least one of the mortgages defaults.