Consider the Following Hypothetical Transition Matrix: Which of the Following

question 61

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% 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% 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% 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% probability of being upgraded to a risk grade of 1.

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Definitions:

Continuous Carbon Chain

Organic chemistry term for a series of carbon atoms connected by single or multiple bonds without branching or forming rings.

Ethylpentane

A chemical compound that is a type of hydrocarbon, specifically an alkane with the chemical formula C7H16.

Methylhexane

A type of hydrocarbon with a branched-chain structure, used in organic chemistry and industrial applications.

Propylbutane

A hydrocarbon with the formula C7H16, representing one of the various structural isomers of heptane.