Explanation:
This scenario describes a binomial distribution because:
Why not the other options:
The binomial distribution is the correct choice for modeling the number of defaults (successes) in a fixed number of independent trials with constant probability.
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A fixed income portfolio manager currently holds a portfolio of bonds of various companies. Assuming all these bonds have the same annualized probability of default and that the defaults are independent, the number of defaults in this portfolio over the next year follows which type of distribution?
A
Bernoulli
B
Normal
C
Binomial
D
Exponential
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