The Only Car Dealership in a Community Stocks Cars from Two

question 23

Short Answer

The only car dealership in a community stocks cars from two manufacturers, Fret and Cessy. The following transition matrix shows the probabilities of a customer purchasing each brand of car in the next year given that he or she purchased that car in the current year. $$\begin{array} { l c c c } \text { From } / & \text { To } & \text { Fret } & \text { Cessy } \\\hline \text { Fret } & & .7 & .3 \\\text { Cessy } & & .4 & .6 \\\hline\end{array}$$
Given that a customer purchased the brand Cessy in the present year (year 1), determine the probability that a customer will purchase Fret in year 3.

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Definitions:

Initial Recognition

The first accounting entry for an asset or liability, marking its introduction in the financial statements at its fair value.

Financier Lessor

An entity engaged in the business of leasing out assets, typically providing the finance to purchase the asset which is then leased to the user.

Lease Receivable

An asset representing the right to receive future lease payments from lessees under lease agreements, reflecting the value of the asset leased out.

Operating Leases

Leases in which the lessee obtains the right to use an asset for a short period of time, without assuming the risks and rewards of ownership.