10. What is the survival rate at the end of three years, if the annual default probabilities are 8 percent, 12 percent and 15 percent in the first, second and third years, respectively?

A. 68.8%

B. 39.1%

C. 99.9%

D. 65.0%

Correct answer is Afficeffice" />

A is correct: Survival Rate (SR) = 1 ? Marginal Mortality Rate = 1 ? Default Probability

For multi-period, SR     = (1 ? d1) X (1 ? d2) X (1 ? d3)

= (1 ? 8%) X (1 ? 12%) X (1 ? 15%)

= 68.8%

B is incorrect.

C is incorrect.

D is incorrect.