If the odds of default are 1:5, what is the probability of default?

Odds are the ratio between the probability of the occurence of an event to the probability that the event does not occur.

If odds are H, then p = H/(1 + H) and H = p/(1-p). In this case the odds are 1:5, or 1/5, therefore the correct answer is Choice 'a', equal to (1/5)/(1 + 1/5) = 1/6 = 16.67%. All other choices are incorrect.