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A junior fixed-income analyst at an investment management firm is evaluating the credit quality of a diversified bond portfolio consisting of bonds classified as investment grade, high-yield, or unrated. Upon observing that the expected return profile of a bond appears to be related to its classification, the analyst constructs a probability matrix to assign probabilities to different combinations of a bond's return profile and its classification. Which of the following correctly describes this probability matrix?
A
The probability matrix is a multivariate representation of a cumulative density function (CDF) which relates the outcomes of a bond's return profile and its classification.
B
The probability matrix is a tabular representation of the probability mass function (PMF) which relates the outcomes of a bond's return profile and its classification.
C
Each cell in the probability matrix contains the probability that a combination of three outcomes is realized.
D
The marginal distribution of a random variable in the probability matrix can be computed by multiplying the probability of the three classification outcomes.