homework4 - ORIE 361/523 Homework 4 Instructor: Mark E....

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ORIE 361/523 – Homework 4 Instructor: Mark E. Lewis due February 20, 2008 (drop box) 1. X n is a Markov Chain on state space { 1 , 2 , 3 } with transition probability matrix P = 0 1 0 0 1 / 4 3 / 4 2 / 5 3 / 5 0 . Estimate P ( X n = 1 | X 0 = 1) for large n . 2. In unprofitable times, corporations sometimes suspend dividend payments. Suppose that after a dividend has been paid, the next one will be paid with probability 0.9, while after a dividend is suspended the next one will be suspended with probability 0.6. In the long run, what is the fraction of dividends that will be paid? 3. A certain town never has two sunny days in a row. Each day is either classified as being either sunny, cloudy (but dry), or rainy. If it is sunny one day, then it is equally likely to be either cloudy or rainy the next day. If it is rainy or cloudy one day, then with probability 1/2 it will be the same the next day, and if it changes it is equally likely to be either of the two possibilities. In the long run, what proportion of days are sunny? What proportion of days
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homework4 - ORIE 361/523 Homework 4 Instructor: Mark E....

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