Consider Two Firms, Each of Which Has a Distance-To-Default of 1

Multiple Choice

Consider two firms, each of which has a distance-to-default of 1. The correlation of default of the two firms is $\rho = 0.5$ . Assuming bivariate normality, what is the probability that both firms default?

A) 4.50%
B) 6.25%
C) 8.75%
D) 10.25%