Analyst, Peter Smith, evaluates a fixed income portfolio. There are two bonds in the portfolio, bond A and bond B. He projects that probability of bond A downgrading on its rating is 60% within a year. The probability of bond B upgrading is 20%. Assume that a bond rating will either upgrade or downgrade within a year. The rating changes of both bonds are independent. Required:
Compute the probability of both bond A and bond B upgrading on their ratings.