I'm also getting an answer of t=2.  I've double checked for cancelling out an extra 10 and it seems correct to me.  Has anyone else come up with this answer? 

Thanks!

I get t=20.  I maximized the function -(200+10t)/40sqrt(t), which is the Z-value from the standard normal distribution representing the probability of being less than 0.

WF

Yes, Wangxy, I roughly agree with you, I am currently without excel, so i didnt get the optimal distribution, i had to use some website, which gave me 1.048 percent, but that falls in range with your 1.046%, so i would say that yes, i agree

and I also agree with Wolffollower, that to max t=20

I also got:

6 Months = .3982%
12 Months = 1.0461%
Maximum Prob when T = 20

However, It's probably a good idea to reword the last problem.  As it reads, it seems like the problem wants you to take into account if it goes insolvent inbetween time periods.  IE: The company would be insolvent if it went <0 during time 15 but then went >0 at time 20.  However, the way we are calculating it as a normal distribution - this would be counted as solvent. 

This could also be applied to part D, however it does say at the END of those time periods.  My suggestion is to remark somewhere that the company can only be determined insolvent at the END of the time period.

[NEAS: Yes, your re-wording is correct.]