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There are two bonds in a portfolio, each with a market value of $50m.

There are two bonds in a portfolio, each with a market value of $50m. The probability of default of the two bonds are 0.03 and 0.08 respectively, over a one year horizon. If the probability of the two bonds defaulting simultaneously is 1.4%, what is the default correlation between the two?

A.

0%

B.

100%

C.

40%

D.

25%

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