Steady state probability that the index return is negative

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Phuc loves investing but he does not like risky investments so he typically invests in low-risk assets. Phuc has been following the Vanguard Australian Fixed Interest Index Fund for years. He found that if the index return is positive in one year, there is a 75% chance that it will be positive the following year. If the index return is negative in one year, there is a 60% chance that it will be positive the following year. The index return is negative this year. What is the steady state probability that the index return is negative? Note: Write down your answer as a percentage (2 decimal places).

Reference no: EM133082269

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