Chapter 9.2, Problem 3MP

Refer to Matched Problem 1 in Section 9.1, where we found the following transition matrix for an insurance company:

$\begin{array}{l}\begin{array}{cc}L& L^{\prime }\end{array}\\ P=\begin{array}{c}L\\ L^{\prime }\end{array}\left[\begin{array}{cc}.98& .02\\ .78& .22\end{array}\right]\begin{array}{l}L=\text{low-risk}\hfill \\ L^{\prime }=\text{not low-risk}\hfill \end{array}\end{array}$