A . Suppose that a manager believes that credit spreads are mean reverting. Below are three issues along with the current spread, the mean (average) spread over the past six months, and the standard deviation of the spread. Assuming that the spreads are normally distributed, which issue is the most likely to be purchased based on mean-reversion analysis?

Issue Current Spread Mean Spread for Past 6 Months Standard Deviation of Spread A 110 bps 85 bps 25 bps B 124 100 10 C 130 110 15 B . What are the underlying assumptions in using mean-reversion analysis?