A Bond Investor Has a 99% Chance of Receiving All

A bond investor has a 99% chance of receiving all of her promised payments on a particular bond issue in the first year of holding the bond, but only a 98% chance in the second year, and a 97% chance in the third year and beyond. What is the cumulative default probability over the first three years she holds the bond?

A) 3.75%
B) 4.24%
C) 5.89%
D) 6.85%
E) 7.33% 1 - [0.99 * 0.98 * 0.97] = 5.89%