2. (15 points) The table below is a one-year rating transition matrix.

Please answer the following three questions based on the data in the table.

a) At the end of the year, what is the percentage of A-rated bonds that were downgraded to Baa?

b) At the end of the year, what is the percentage of A-rated bonds that were upgraded?

c) You are analyzing an AA-rated bond. What is the probability that this bond will be downgraded over the next year?

Rating at End of Year A Baa Ba B C or D Total Rating at Start of Year 91.00 8.30 0.70 0.00 0.00 0.00 0.00 100.00 1.50 91.40 6.60 0.50 0.00 0.00 0.00 100.00 A 0.10 3.00 91.20 5.10 0.40 0.20 0.00 100.00