Question: 2. Consider the following one-year transition matrix. Initial Rating AAA 0 90.81 0.70 0.09 0.02 0.02 Rating at Year End %) BBB BB B 0.68

2. Consider the following one-year transition matrix. Initial Rating AAA 0 90.81 0.70 0.09 0.02 0.02 Rating at Year End %) BBB BB B 0.68 0.06 0.12 0 7.79 0.64 0.06 0.14 91.05 5.52 0.74 0.26 5.95 86.93 5.30 1.17 8.33 90.65 2.27 0.33 Default 0 0 0.06 0.18 A 0.01 0.12 BBB a. What is the likelihood that a bond will begin and end the year with an A rating? b. What is the likelihood that a bond will be downgraded from AA to A? c. What is the likelihood that a bond will be upgraded from BBB to A

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