Table 14-1 The Following Data Consists of a Matrix of Transition Probabilities

question 82

Multiple Choice

Table 14-1
The following data consists of a matrix of transition probabilities (P) of three competing companies,and the initial market share π(0) .Assume that each state represents a company (Company 1,Company 2,Company 3,respectively) and the transition probabilities represent changes from one month to the next.
P = π(0) = (0.3,0.6,0.1)
-Using the data in Table 14-1,determine Company 1's estimated market share in the next period.

• A)0.10
• B)0.20
• C)0.42
• D)0.47
• E)None of the above

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Definitions:

Tax Deductible

Expenses that can be subtracted from gross income to reduce the amount of income subject to tax.

Dividend Yield

A financial ratio that shows how much a company pays out in dividends each year relative to its stock price.

Constant Growth

Constant growth refers to a situation where a quantity or system experiences growth at a steady and unvarying rate over a period of time, often used in dividend growth models.

Required Rate of Return

The required rate of return is the minimum expected return an investor demands for holding a risky investment, compensating for the risk taken.