A fixed income portfolio manager currently holds a portfolio of bonds of various companies. Assuming all these bonds have the same annualized probability of default and that the defaults are independent, the number of defaults in this portfolio over the next year follows which type of distribution?
　　A. Bernoulli
　　B. Normal
　　C. Binomial
　　D. Exponential
　　Answer:C
　　The result would follow a Binomial distribution as there is a fixed number of random variables, each with the same annualized probability of default. It is not a Bernoulli distribution, as a Bernoulli distribution would describe the likelihood of default of one of the individual bonds rather than of the entire portfolio (i.e. a Binomial distribution essentially describes a group of Bernoulli distributed variables) A normal distribution is used to model continuous variables, while in this case the number of defaults within the portfolio is discrete.