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Consider the Following Hypothetical Transition Matrix: Which

question 25

Multiple Choice

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

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