QUESTION 5 The following table from Fitch Ratings shows the number of rated issuers migrating between two ratings categories for one year. Based on this information, what is the probability that an issue with a rating of A at the beginning of the year will be downgraded by the end of the year? (Hint: There are two possible cases of downgrading: The issue can be downgraded to BBB or Default.) Year 1 Rating Year 0 AAA AA A BBB Default Total Rating AAA 45 4 2 0 0 51 AA 3 30 4 3 2 42 A 2 5 40 2 3 52 BBB 0 1 2 30 1 34 Default 0 0 0 0 0 0 13.46% 13.44% 9.62% 3.85% 9.62% 9.62%

^^^^^^9.62% 9.62% trust me.