medium · FRM Part 2 Credit Risk
A firm has a transition matrix M = beginpmatrix 0.95 & 0.04 & 0.01 0.10 & 0.80 & 0.10 0.00 & 0.00 & 1.00 endpmatrix.
If the firm is currently in State 1, what is the probability it is in State 2 after 2 periods?
- 8.00%
- 4.00%
- 7.00%
- 3.20%
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