Hi Suppose you are given initial condition P0, and the transition matrix, P representing annual transitions. If you are asked to calculate the outcome in year 2, is it correct to calculate P0*(P^2) or P0*P ? My guess is the P0*(P^2) because P0 is the initial condition and it makes sense cause P0*P represents the outcome in year one. Anyone with comments?
Yes that sounds sensible. It seems that intial is at time 0 here. (Sometimes it is at 1) If you want the probaility state after n periods you can use P0 * P^n (Linear algebra comes in useful here)
hehe Maybe they had wording to suggest one time period had passed, or simply a mistake in the question. Either way it seems like you know what to do, and hopefully the exam is clear and/or sufficient other students are like-minded with their interpretation to get "credit for alternative interpretations"