Problem Solving (PS) | Re: Bonds rated B have a 25% chance of default in five years. Bonds rated

This sum can be solved using Bayes' Theorem

Lets point out different events.
The event that box B is selected is say A1.
hence P(A1)= 3/10

The event that box C is selected is say A2.
hence P(A2)= 7/10

let D be the event that default is selected in five years.

probability of default in bond B= P(D/A1) = 25%= 1/4
probability of default in bond c= P(D/A2) = 40%= 2/5

Now we are asked to find probability of choosing bond B when default is already selected.
i.e. P(A1/D)=?

According to Bayes's
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