You are comparing two stocks. Stock X has an expected annual return of 8 percent every year with

no variability. Stock Y has an expected return of 8 percent as well, but a 1.6 standard deviation and five

years of the following returns, with the most recent return reported last: 6 percent, 7 percent, 8 percent, 9

percent and 10 percent. Under what conditions would you prefer stock Y?

A)

No conditions. Stock X and Stock Y are identical in preference.

B)

If the recent trend in returns was going to continue in the future, the expected return on X is likely

to decrease.

C)

If the recent trend in returns was going to continue in the future, the expected return on Y is likely

to increase.

D)

If the recent trend in returns was going to continue in the future, the expected return on Y is likely

to decrease.