Consider the Following Hypothetical Transition Matrix: Which

question 25

Multiple Choice

Consider the following hypothetical transition matrix: Which of the following statements is true?

• A) A borrower with a risk grade of 2 at the beginning of the year has a 3 per cent probability of being downgraded to a risk grade of 3.
• B) A borrower with a risk grade of 3 at the beginning of the year has a 0.04 per cent probability of being upgraded to a risk grade of 1.
• C) A borrower with a risk grade of 2 at the beginning of the year has a 12 per cent probability of being downgraded to a risk grade of 1.
• D) A borrower with a risk grade of 2 at the beginning of the year has an 85 per cent probability of being upgraded to a risk grade of 1.

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Definitions:

Continental Congress

A series of legislative gatherings in the late 18th century where leaders from the Thirteen Colonies discussed and made decisions crucial to the fight for independence from Britain.

Articles of Confederation

The Articles of Confederation was the first constitution of the United States, ratified in 1781, creating a loose confederation of sovereign states and a weak central government.

Political Power

The capacity or authority to influence or control the behavior of others, especially in relation to the government or governance.

Equal Vote

The principle that every individual's vote carries the same weight in an electoral process, ensuring fairness and equality in democratic systems.