Hi All, For Question 9 (iv): Would it be correct to say that the prob = 1 - p(James staying with company A for the next two years) = 1 - 0.56^2? Thank you
Hello Not quite, that would be the probability that James doesn't stay with Company A for the next two years; however, it doesn't account for the possibility of James moving from say Company A to B and then from B back to A. We don't care who the insurer was in the calendar year 2019, only whether A was the insurer in calendar year 2020. So, we want 1 - PAA(2) where pAA(2) represents the two step transition probability from A to A. Another way to think about it is that 1 - 0.56^2 is 1 - P(A - A - A). We want 1 - P(A - Something - A). Hope this helps! Andy