Quantiles of Binomial Distribution – Solved Example
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LOS: Distinguish the key properties and identify the common occurrences of the Binomial Distribution. Characterize the quantile function and quantile-based estimators.
Question:
A portfolio contains $𝑛=10$ defaultable bonds, each with a probability of default of 20%. If the default of each bond in the portfolio is independent of other bonds, the median number of defaults and inter-quartile range are respectively equal to:
| A. | 2, 3 |
| B. | 2, 2 |
| C. | 1, 2 |
| D. | 1, 3 |