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Determine the probability that a company currently rated A will never be rated B in the future

A First Course in Probability (10th Edition)

10th Edition

ISBN:9780134753119

Author:Sheldon Ross

Publisher:Sheldon Ross

Chapter1: Combinatorial Analysis

Section: Chapter Questions

Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...

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Question

The credit - worthiness of debt issued by companies is assessed at the end of each year by a credit rating agency. The ratings are A ( the most credit - worthy), B and ( debt defaulted). Historic evidence supports the view that the credit rating can be modelled as a Markov chain with one- year transition matrix: p= [0.92 0.05 0.03

0.05 0.85 0.1

0 0 1

Determine the probability that a company currently rated A will never be rated B in the future

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